When we started Smead Capital Management in Seattle in 2007, we knew we had a solid investment team. The five of us had nearly 80 years of experience at Wachovia Securities and other large broker-dealers and investment firms.

Bill Smead, our CEO/CIO, is a highly respected portfolio manager who's a regular on CNBC, Bloomberg and other media outlets. His value-oriented investment philosophy has been successful, and it's relatively easy to explain to clients. In a nutshell, we seek investments in undervalued companies that we want to hold for the next 10 years.

But, as breakaway RIAs, we also knew that our business would not survive on investment acumen and our new independent business model alone. We knew that our operations could make-or break-our dreams.

WHY OPS?

Why were we so concerned with operations? After all, our clients don't generally notice the operations side of the business. They seem to think that we magically remember their regular cash needs, produce reports, keep track of their investments and other financial information, and easily roll out client updates. They don't want to pay for all the overhead that we need, either for our planning and investment functions or for regulatory compliance.

But the minute that something goes wrong operationally, then our clients are very aware of our operations. Based on my 24 years on the operations side of the business, I've seen that a breakdown in operations is more likely to lose a client's trust than a poorly performing investment. Clients understand that investments are risky and that the unexpected can happen. But they definitely don't want the unexpected to happen on the issues we can control, such as updating their records, keeping their private information secure and staying in contact on a regular basis.

We decided to take advantage of being a newly independent firm-but with experienced leadership-to implement a system that was efficient, integrated and automated right from the start. We hoped to avoid some of the inefficiencies that inevitably creep into larger, older organizational structures, but which don't improve client service.

We're now three years into building our investment management firm. Our staff of five professionals serves 240 clients who have placed about $160 million under our management. Recently, we've started moving up the client acquisition ladder, targeting new clients with accounts of at least $2 million. We have launched the Smead Value Fund, which has about $40 million in assets.

Smead Capital has big ambitions, and we're off to a promising start. However, we don't think we are close to realizing our potential. We do believe that sticking to our operating principles will be the key to our future. We set out a few principles to guide our operations:

* Be paperless.

* Automate when possible.

* Share information internally.

* Don't ever sacrifice client service.

BE PAPERLESS

You've heard about the paperless office for at least five years, and you probably think that it's about as likely as free healthcare, but we are living a nearly paperless existence. More than 80% of our clients communicate with us solely by email, and their records are held securely in cyber space. We use Constant Contact to distribute our newsletters and our blog updates, instead of costly printed mailings. Our office walls are lined with empty file cabinets.

When paperwork comes in from a client, we use a system called DYMO File to scan the document directly into the client's folder on the network. Once scanned, the document is shredded. Tamarac's Advisor View performance reporting system creates our quarterly reports, which are currently emailed to clients directly.

We will soon be taking our paperless communications to another level when we roll out a private web portal that will allow clients to access their financial information, as well as educational material that we have developed, and to communicate with us securely. We will manage the portal through the Advisor View functionality on Tamarac's Advisor X software platform, which we've been using since we started the firm.

Because we handle so many functions through technology, we did not have to hire a staff person for filing, managing client mailings and tracking client information. It's probably saving us $50,000 per year.

Being paperless has another significant benefit. It enables each of us in the company to share information without having to find it in those (empty) file cabinets. In fact, our paperless system makes everything so easy that Brenda Larson, our director of operations, manages the rest of us in Seattle from a home office in Oklahoma City.