The current Morgan Stanley CEO took his job in 2010. The company was struggling badly coming out of the 2008 recession, during which Morgan Stanley’s share price had sunk to $14. After taking a year to fully understand the nature of the business, he announced in early 2012 that “the path we are on is simply not sustainable.” He went to work by first axing Morgan Stanley’s proprietary trading desks and shrank its bond trading operations, the source of repeated blunders. He sold an oil tanker fleet and a half-finished casino, remnants of a freewheeling culture that once ruled Wall Street.
One of the more controversial things the Morgan Stanley CEO did was slash bonuses which, you can imagine, was received quite poorly by the employees. On the other hand, he wanted to make sure people understood the seriousness of the problem. In a television interview, when asked about those slashed bonuses, he indicated that “if a Morgan Stanley employee is really unhappy, he or she should just leave!” This comment quickly made the rounds within Morgan Stanley’s trading floor and it did cause some key people to exit. On the positive side, those committed to fixing Morgan Stanley were highly motivated by the comment.
In an offensive move, the Morgan Stanley CEO doubled down on wealth management, a steadier business. The purchase of Smith Barney made Morgan Stanley the country’s largest retail brokerage. Its 16,000 brokers and 600 offices now contribute more revenue than any other group. They do so without taking the kinds of risks that worry regulators and investors.
All these moves have had a dramatically positive impact on Morgan Stanley. That low $14 share price is now $54. Morgan Stanley is more valuable on paper than Goldman Sachs, once Wall Street’s undisputed king. Profit margins in 2017 were 26%, more than double those during the trouble periods when he took the job.
So what do you learn from this amazing turnaround by Morgan Stanley? The answer is that you realize sticking to the basics can pay off if you do it in a disciplined way. Here are the three fundamentals:
1.) Study the Situation Carefully – You have to do your homework and truly get in the trenches and see what is and is not going well.
2.) Develop an Impactful Plan that Will Make a Significant Difference – Don’t waste your time tweaking things. That simply won’t get the result you are after.
3.) Put Good People Into The Key Jobs – Face the music and terminate those that aren’t with you and elevate those that have a great track record of success and are clearly behind your cause in turning things around.
Hats off the Morgan Stanley. They are really on a roll now and its impressive what they have accomplished.