Why a conservative mutual fund company loves corporate social media

How does a conservative company like The Vanguard Group find itself on the forefront of corporate social media and enterprise 2.0 communication tools? It's all about the client.

The Vanguard Group Inc., the mutual fund giant with some $1.4 trillion in assets under management, considers itself a conservative company.

"We have not adopted business-casual at work yet," said Abha Kumar, principal for IT at the Valley Forge, Pa.-based investment management company. "We are very, very risk averse."

And yet, the company has embraced corporate social media and Web 2.0 tools as an integral part of its business model. Vanguard was early among mutual fund firms, according to industry trackers, to launch a public blog. The company has staked a claim on the major social networking platforms, with a Facebook page, a LinkedIn presence, a Twitter account and the Vanguard Channel on YouTube.

Vanguard has more than 3,800 wiki pages, and collaboration sites are proliferating. IT staff, for example, can work on projects internally and from outside the company's four walls via collaboration sites on the "IT Hub." Vanguard employees interested in learning more about exchange-traded funds, or ETFs, a relatively new area for the company, can tap into a collaboration site to consult with experts and get information.

So, why is a non-casual-Friday investment management firm in a heavily regulated industry a leader in corporate social media communication and collaboration tools?

"Our strategy is that if we try it internally and we know we can meet all the regulations, then we can start to expand it externally," said Kumar, who presented the company's use of social media and Web 2.0-type tools at last month's Catalyst conference in San Diego.

The push to use social media tools, Kumar explained in a follow-up phone call, is actually part of a three-pronged E2.0 [enterprise 2.0] agenda at Vanguard for "enabling robust collaboration, increasing mobility and enriching communications."

"We really do want to stay true to our "Old Age" investment principles, but we want to employ New Age media communication tools," Kumar said. "The way we think of our E2.0 agenda is that if we can do those three pillars internally, we can take those same tools that we tried out internally to use externally as well."

As part of its effort to increase mobility for its employees -- or crew members, as they are called -- Vanguard has broken with a longstanding policy to restrict the use of its company-issued BlackBerrys to allow only the use of email, and gradually is opening up such features as instant messaging, as well as the smartphone's Global Positioning System and Camera features.

In June, Vanguard launched a pilot program allowing 60 of its 12,500 crew members to access company email through their personal iPhones and Android-based phones.

This is just the beginning. For example, Kumar now can get to her Vanguard accounts from her iPhone. That's a feature Vanguard would like to offer its clients. The company also hopes to use smartphones to communicate with and educate its clients on its investment principles.

"We need to continue to adapt to the times. Different media is used by different generations. It really is about the message remaining the same but the media is different. And the best way we found to get better at communicating using this media is [enterprise 2.0]," Kumar said.

The company also is making heavy use of video conferencing for e-meetings. This year crew members and their families will be able to manage their benefits from their home computers and eventually from their mobile devices, with the understanding "that we are in a highly regulated industry, are extremely risk averse and can't let data outside of our four walls," Kumar adds quickly.

According to Jonathan Penn, who covers security at Cambridge, Mass.-based Forrester Research Inc., the main challenge for companies is that employees are bringing in social media and using it faster than the company policies and security groups can keep up with. For that reason, "a lot of companies are disallowing use of social media, even when there is a business need," he said.

Gartner Inc. analyst Alice Wang, director with Gartner Consulting, is familiar with Vanguard's efforts. She has been impressed with the company's ability to harness social media tools that were built for the consumer market, she said.

"They are moving the enterprise to the 2.0 concept by leveraging these social tools, not only collaborating with employees but leveraging their customer base -- and they have a huge customer base," Wang said.

CIOs and their companies considering the use of social media tools should have a long-term social media strategy in place, including risk analysis and management, and should  treat social media as a program, not a project, Wang advised. "There should be proper governance, policies, training and awareness, security, and success metrics put in place in order for the enterprise to realize the full benefits of leveraging social tools within the enterprise,” she said.

Our strategy is that if we try [a social media tool] internally and we know we can meet all the regulations, then we can start to expand it externally.

Abha Kumar, principal for IT, The Vanguard Group Inc.

After her Catalyst presentation, Kumar was peppered with questions about success metrics, policies and security, particularly in regard to the company's personal smartphone pilot. As for security, IT staff can delete information from a crew member's phone if the device is lost or compromised, she explained.

Moreover, IT is not going it alone in the implementation of social media and collaboration tools, Kumar said. The strategy is set by an "E2.0 committee" whose members are senior people from the company's legal, HR, IT compliance and security departments, as well as all division heads. "Our policy is 'involve early, involve often,'" she said. The big concerns related to IT are third-party product integration, data encryption, data storage and even "something as simple" as network bandwidth to ensure performance, she added. And, of course, for heavily regulated financial service firms such as Vanguard, e-discovery becomes "much more complex" when social media tools, like wikis and blogs, are part of the mix, she said.

Worrying about ROI later

The biggest question on the minds of the audience, however, was not about IT concerns but about how Vanguard is paying for all this and which metrics it's using to determine the value the company is deriving.

Kumar has not had to hire additional IT staff to oversee the iPhone email initiative because the department created an application to streamline the compliance department process, she said. Also, the only thing that Vanguard supports on an employee's smartphone is access to email. Employees have been told they need their own data plan. Plus, BlackBerries are free to employees but they are a significant cost to the company.

"You would think that everyone would say, 'Just give me a BlackBerry,'" Kumar said. Instead, employees are "so excited" they can use their iPhone to get into company email that, at this point the company has decided "not to worry about ROI," she added.

Nor is IT terribly concerned with at this point with developing metrics for measuring value, Kumar said. The potential gains in employee productivity -- derived from their having greater mobility or being able IM on the company BlackBerry, for example, to get an answer to a client more quickly -- thus far seem worth the risk. "We felt that if we started to worry about metrics, prior to implementation we would never get there," she said.

Let us know what you think about the story; email Linda Tucci, Senior News Writer.

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