Discovering Phi: Motivation as the Hidden Variable of Performance

Based on 18 months of research from May 2015 to October 2016, through in-depth interviews with more than 200 global industry leaders, the State Street Center for Applied Research and project partner CFA Institute set out to answer one fundamental question: How can we leverage motivation to achieve better financial outcomes?

We combined the qualitative statements from these interviews with the findings from a survey of nearly 7,000 respondents: 3,600 individual investors and more than 3,300 investment professionals across 20 countries. Through this effort, we discovered a previously hidden variable with a statistically significant relationship to long-term organizational performance, client satisfaction and employee engagement. As in quantum mechanics, where a “hidden variable” is an element missing from a model that leaves the system incomplete, we find the same situation in investment management, i.e., there seems to be an intangible factor that has not previously been quantified.

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