Canadian Investment Review

Dutch Pension Fund Learns From Google

Written by Ashby Monk on Monday, December 12th, 2011 at 10:20 pm

internet search computerHow can a public pension or sovereign fund design an effective talent management plan to attract, incent and retain the necessary human capital to meet their objectives? I’ve asked this question many times, but I’ve never thought to answer it in the way Dutch pension fund APG has sought to answer it. At APG, there is a sense that if you can’t satisfy a person’s self interested pursuit of money (which is always tough in the public sector), perhaps you can satisfy a person’s sense of curiosity and possibility. I refer you to this brochure entitled “People, Ideas, Results”, which details APG’s Innovation program and how it fits into the organization’s human resources strategy. First, here’s a blurb that describes the program in general:

“Determined to maintain its position as an innovative asset manager, APG Asset Management has earmarked 2% of its assets under management for investment-related innovation. Anyone in the APG organisation who comes up with a good idea in the investment field can apply for funding and support to put it into practice…In setting up the innovation structure, APG Asset Management wanted to make the best possible use of the company’s resources. That meant deploying APG Asset Management’s 450 investment specialists and other experts in related fields (unlike many other pension investors, APG Asset Management has a wealth of in-house knowledge and expertise).”

I have to say, 2% of AUM is a lot of money! In APG’s case, it’s something in the range of $7.5 billion! This thus begs the question: What’s APG trying to achieve with this creative policy?

  1. APG wants to stay ahead of other asset managers by seeking out new investment areas and products.
  2. APG wants to motivate staff; the innovation project offers unique opportunities for staff to take on extra challenges and develop personally.

So the Innovation program is about, well, innovation. But it’s also clearly about talent retention. Think of it this way: The innovation policy offers a mechanism to satisfy the needs of highly talented and motivated individuals (by giving them a creative outlet). And, if all goes to plan, it will also lead to some very profitable products for APG in the future.

If all this is sounding sort of familiar, it’s because APG isn’t alone in using ‘innovation’ as a way of retaining talented staff. The most frequently cited example of this strategy is the “20% time” policy at Google. Indeed, engineers at Google are encouraged to take 20% of their time to work on something that they are personally interested in that is company related. The hope for Google is that it will retain some talented engineers all the while getting some interesting products out of it. And, significantly, 20% time has been wildly successful, resulting in GMail and Google News among many other products. Also, in terms of talent attraction and retention, Google routinely ranks first (!) in terms of being an “ideal employer”.

In short, APG is in good company with this type of Innovation policy. It will help the fund hold on to talented staff for longer. And, perhaps more importantly, it may result in some wildly successful innovations.

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