Knowledge base Featured

8:00pm EDT August 26, 2007

The best way for businesses to plan ahead is to revisit strategies that have been successful in the past, says Ric Dillon, CEO and chief investment officer of Diamond Hill Investment Group Inc.

With 35 employees, the Columbus-based firm provides investment management services to individuals and institutions seeking to preserve and build wealth. Dillon says his firm has successfully followed a strategic growth plan and has increased revenue from $2.8 million in 2004 to $31.9 million last year.

Smart Business spoke with Dillon about how he relies on past experiences to lead Diamond Hill Investment Group into the future.

Q: How can CEOs make good decisions regarding growth?

What we’ve tried to do is stay focused and disciplined. Those two words are as important as anything. We’ve stayed disciplined to our investment approach and focused on just a handful of offerings. We’re not trying to be everything to everybody, and we are true believers in the way we do it.

Q: How do you stay focused on offering your best?

Know what your own limitations are. I don’t know about a lot of the other different offerings, so how could I possibly offer them?

Know what you know, and know what you don’t know. Stick with your own experiences, and hire talented, focused, disciplined people — that’s vital to your success.

Q: How do you hire the right people?

I hire people that I’ve known or worked with for decades. Stick with what you know, and that includes people, too.

When you do that, there is a lot of trust immediately, and you can get more things done quickly. You know people’s strengths, and you can play to those strengths. You can set up a situation where those strengths can affect all of our equity strategies. You’ve got a knowledge base to work off of, and trust levels have built up so it’s a stronger team. I’m sure you can get there eventually with a bunch of strangers, but I think it’s going to take more time.

We also get to know people through the internship process. It gives us an opportunity to live with the person for a while and get a sense for the type of person that they are before making a decision. We’ve done that on several occasions, and it certainly works for us.

Jim Ware has taken some concepts from the Jim Collins book, ‘Good to Great,’ and applied them strictly to our industry. In the book, ‘Investment Leadership,’ Ware observed that successful firms in our industry tend to be made up of certain personality types, so hiring those types of people is what makes sense for us to do.

We value independent thinking, but our potential employee cannot think differently than us on the investment principles. I’m not saying there aren’t other approaches to investing; it’s just that we have an approach that we believe. We’re appraising business, and we want everyone who works for us to approach the job that way.

Q: What is the most important ingredient in a growth strategy?

A product or service that has genuine value to the end customer. When clients invest with us, they believe that the results they get in their account will be greater than if they chose an alternative strategy.

They’re going to base their belief on things like short-term performance — which is probably not the best way to do it — but that’s just human nature. Once they’ve become a client, we can educate them on what our value proposition truly is.

Q: How do you communicate that effectively?

You have to make an effort through documents that you write and opportunities to talk with potential clients. You have to educate them with a consistent message.

There will be times when a company’s results are below average, and that’ll happen frequently over a short period of time. If the message was implied that, ‘We’ll always be good,’ then eventually, the client will leave you for the same reason they came to you.

Q: What pitfalls can prevent a company from growing?

The first is arrogance. We believe that we can always get better at what we’re doing, and we’re always looking for ways to improve. Even when we’re having especially good years, we don’t sit back and say, ‘That was sure a good year.’ We say, ‘Where could it have been better, and how can we get better?’

And, the second pitfall is complacency. At a minimum, opportunities will be missed, and at a maximum, things won’t get fixed. When the improvement doesn’t come — and things go the wrong way — it becomes glaring and then you see the issue.

If you had been looking for it, you would-n’t have to wait until the problem made it painfully clear.

HOW TO REACH: Diamond Hill Investment Group Inc., (614) 255-3333 or www.diamond-hill.com