I ran into a good friend who is a hedge fund analyst in the lobby of my building. “Cannot talk, have to run to call some managers and get their updates. Let’s do lunch next week. See you.” Coming from a quant background, I am always interested how other analysts question managers. I get nervous that I am going to fall in love with the manager’s narrative if he is a good talker, that I am not going to ask the right question to extract their secret value, or that I am going to be turned-off by the poor speaker without truly hearing his message.

I read a recent Harvard Business Review article, “The Surprising Power of Questions” by Alison Wood Brooks and Leslie K. John, which may help with improving the quality of questions and conversation or at least provide context on some research in this area. This article only scratches the surface on this topic but provides some important tips for further discussion. Many may seem obvious, yet they serve as good reminders of what works.

My good conversation takeaways:

  1. Be a good listener – Ask more questions to hear what any manager has to say. However, being a listener does not mean being passive or allowing for a simple monologue. Directed conversation is different than just allowing the managers to drone on with their pitch. A good listener has a goal for the conversation.
  1. The follow-up question is critical – A good listener will be able to ask good follow-up questions and these questions are when important information is obtained.
  1. Realize there are types of questions – Conversations usually start with introduction questions, and then move to mirror questions that exchange similar information. There are transition questions that change the direction of the conversation and then there are follow-ups which dig deeper into a specific topic. Each plays a useful roll in a conversation.
  1. Use both open-ended and closed-ended questions – Moving between open-ended and close-end conversation is important. You may start with a simple question like “How was performance this month?” and then move to something specific, “I noticed that you are an outlier versus your peer group and there was a large dollar move which you did not think would continue based on our last conversation.” Closed-end question will lead to closed answers.
  1. Tone matters – Information will flow differently based on whether you have a casual or official tone. For example, negative information may not come if the tone sounds too official, yet being official may impart the seriousness of the conversation.
  1. Sequencing matters – Moving from open opened to closed questions will affect dynamics. Similarly, starting out with negative tough questions can have a big impact on responses. There may be a reason to be positive with questioning.
  1. Group dynamics – What is spoken in a group may be different than what will be shared in a private conversation. The marketer who is with a partner may not be as candid with his answers when he is having a private conversation.
  1. Shared versus private information – Realize that managers may want to keep information private and not share everything with you. Your job is to make sure that managers feel comfortable enough to share what they may not want to have the general public know. Investment mistakes are often viewed as private information.

Conversation with managers should be planned to extract the maximum information. Expect that the agenda of the manager will not match your desire for information. Hence, the choice of questions and how they are presented affects the answers received. This list is at a very high level and does not offer solutions to all the dynamics between manager and analyst, but it may provide a start for further thinking in this topic.