Investment Banks and Private Equity Firms Battle for ‘Elite’ Junior Bankers

by PER-Admin 24. July 2014 14:06

Everyone wants a good junior investment banker these days. Unfortunately for any analysts and associates assuming that they’re hot stuff, both banks and private equity firms are only fighting to recruit and retain a select few.

Despite reports of rapidly rising pay for junior bankers and a red hot job market, there’s a huge amount of disgruntlement among analysts and associates in investment banks – largely centred around bonus payments.

While first year analysts are generally paid on a par with each other, second and third year analysts and associate level employees are divided into buckets dependent on their performance. According to recruiters and three analysts we spoke to, the top bucket is becoming an increasingly select band of people, while those who feel they’ve been underpaid is growing.

 

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Maintaining Momentum With Star Candidates

by Charlie Hunt - PER 18. February 2014 08:30

Charlie HuntIs the key to recruiting the best candidates a question of keeping up momentum and managing expectations? We’re often asked for advice on the best ways to run the recruitment process as many of our clients don’t recruit that often.  We’ll take most of the strain on their behalf so all that many of our clients have to worry about is turning up at the right time for the interview, and remembering to take the candidate’s cv along with them.

However, once a star candidate has been identified, the recruiter needs to understand that they are not the only one doing the ‘buying’ and they will need to ‘sell’ the fund. There’s no doubt that there’s a huge amount of talent looking for work now and it’s a great time to be hiring. The difficulty funds are still finding is that the strongest candidates are often the people that everyone wants to employ. It’s not uncommon that the person a fund wants to make an offer to will be lining up two or three other offers at the same time. Arguably, the best way of maximising the chances of landing the strongest candidate is to keep up the momentum during the interview process and to manage expectations along the way. Whilst it sounds obvious, it’s surprising how many funds let time drift for weeks at a time without arranging further interviews or making an offer.

Recruitment is understandably often pushed down the fund’s list of priorities. However, by setting a timeline for the recruitment process and making sure that the candidate is clear about the process along the way, then the candidate will remain enthused about the opportunity and start to feel like part of the team. The strongest candidates will take into account how clear the messages coming out of the fund are, and how the fund organises itself in respect of the interviews. Interviews that are continually cancelled, rushed, or lack focus rarely create a good impression. First mover advantage is also important when making an offer as candidates will start to imagine themselves in the role and have a warm disposition to who gets there first. If a fund makes an offer first then it can also keep in contact with the candidate whilst they consider their options and make them feel wanted.

Expectation management is also important because it means a fund avoids spending time interviewing people who are unlikely to accept a position. This will mean making the role and responsibility of the position clear, and being upfront about the likely package. There’s nothing quite like dampening the enthusiasm of a preferred candidate by offering 10% less than they were expecting. Managing the candidate’s expectations will ensure that the chances of securing their services is maximised. Candidates also bear responsibility here. They too must be open with you and advise you of where they are with others. It never ceases to amaze me when they announce at the 11th hour that they have another offer on the table. It’s a bad strategy by the candidate because it puts the fund on the back foot and doesn’t give the fund the opportunity to be creative about the role or package. We therefore encourage our clients to question the candidate about where they are with other interviews, and we too do our best to ensure both parties are kept up to date. 

It’s all part of your employer brand. Letting the process drift and offering below expectations is not a successful recruitment strategy. Maintaining momentum and managing expectations along the way will considerably enhance your chances of landing a star.

Look After Your Analysts

by Gail McManus 29. August 2013 13:24


I cannot stress enough how important it is at the moment to look at your star juniors and understand what motivates and drives them in order to retain them in your business.  Why?   Well we have seen not just a significant uplift in the volume of recruitment but also uplift in the requirement for experience.  The 2007/8 hiring days of ‘find us an extra pair of hands to do the modelling’ are gone.   An increasing emphasis in the majority of mandates is for private equity experience. And at the junior level this means someone who has not only got the skills but has also had the edges taken off, learned the ropes, seen some action.  Investment banking boot camp is no longer enough.  Now investment banking boot camp followed by private equity boot camp is going to be the popular request.

So if you run an analyst programme where you expect your juniors to leave you after a couple of years – then send them my way as we’ll have no trouble finding them a home.  But if you’ve got some stars in there and want to keep them then really think about how to do that.

We used to look for experience of completed deals on CVs but that’s no longer realistic – your analysts who joined in the last 2 years may never have experienced one: your firm may not have completed one since they joined. But they’ve probably worked in the portfolio, they’ve got a sense of what private equity really is, they’ve learned the model, they’ve started to talk the talk and walk the walk.  And someone else will be prepared to pay for that.

So look out, if you can’t give your juniors some challenge, some interest and some excitement – they’re not going to have too much trouble finding a new home.  Make sure that’s your choice and not theirs.

Gail McManus - PER

Intuition, Interrogation and Body Language: how you know if a candidate really wants to work for you?

by Oliver Gilkes - PER 11. May 2013 14:58

Most firms have experienced this at some point: the candidate looks great on paper, they interviewed well, had all the right skills and seemed to fit in well with the team. But a few months down the line, you realised their heart wasn’t really in it. So they leave, or lose motivation then leave or lose motivation and stay (which can be worse) – leaving you in the lurch for months before you find a replacement.

Oliver Gileks - PERIn this economic climate, search firms and employers need to be especially diligent in finding candidates with the right motivation for joining them. At the moment there are candidates who are more likely to want any job, rather than specifically the job with your firm. 

So how do you find a “Mr or Mrs Right” – how do you hire the right candidate who really wants to work for you (for the right reasons) and will stay with you?

There are a number of ways in which you can screen for the right candidate. 

 

If you are working with a search firm, it is massively helpful to allow the Consultant working on your role to meet with at least one member of your team. This enables the Consultant to find candidates

·          whose long term career goals or aims are approximately aligned with those of your firm

·          with a close fit in terms of the skills required to do the job

·          and with the desired personality traits which are likely to fit into your company culture. 

When you start interviewing candidates, there are a number of questions you can ask to ascertain whether candidates truly want to join you.

Example question 1: ask the candidate “If you were offered a role with company A, company B or company C, which would you choose and why?” Make sure that one of the companies is similar to yours. If the candidate states that the company they would prefer is the one that is most similar to your firm, then this is a positive sign. If the candidate hasn’t heard of company A, B or C, it’s an indicator that they may not be committed to private equity as a career. 

Example question 2: ask the candidate  “Which other firms have you applied to and which have you interviewed with?”  If they don’t want to disclose the names of the companies, ask them what other types of roles they are considering. If the candidate says that they are also considering a wide range of other roles (such as equity research, teaching, advertising), then dig deeper to understand their motivation behind each choice. They need to have good reasons behind their choice of private equity.

Example question 3: ask the candidate what they know about your firm and why they want to work for you. Ask them who your competitors are. How is your firm different or similar to others?  

A lack of detail when answering such questions can be a giveaway that the candidate has not done much research on your firm and the role, and hence is less interested in it/you. A slight caveat here is that if your firm publishes little or no information about who you are and what you do, and generally keeps a low profile, then a lack of detail in a candidate’s answer can be understood, to a degree. 

Example question 4: ask the candidate where they want to be in five years time.

If the answer is “I want to run my own business”, for example, then dig deeper, they are less likely to stay with your firm, and could potentially be distracted by other projects.

A note about body language: If you ask the candidate why he or she wants to work for your firm, it’s worth noting their body language. Look out for whether their body language is congruent with the words they are saying. For example, if a candidate says in an upbeat tone of voice “I would love to join your firm”, but is leaning back in their chair, slightly slumped, he or she might be tired or have a back problem, but it’s more likely they didn’t really mean it.  Bear in mind that when reading body language the context needs to be considered; just because someone scratches their mouth or touches their face after saying something, doesn’t necessarily mean they are lying – they could just have an itch. Natural introverts may not display enthusiasm in such an animated way when compared to someone more outgoing. Take the context into account. 


Look out for gestures that are incongruent with what the candidate says.
Specialist interrogators use a technique called “baselining” whereby they observe someone’s natural behaviour (ie ‘natural’ clusters of gestures displayed by a person in certain situations) and look for deviations from this.  Whilst we don’t recommend you go this far, you might, for example, observe how they react and the level of enthusiasm they display when talking about their personal interests and compare this with their reaction to questions about their motivation to work for you. Trust your intuition or gut instinct about whether a candidate truly wants to join your firm for the right reasons. You will unconsciously pick up signals when a candidate is being honest about his or her motivation and if they are right for your firm.

     

The Hitchhiker’s Guide to Case Studies

by Gail McManus 17. April 2013 16:00

Don’t be put off using case studies by the amount of work needed to prepare them there is an easy way. We have several clients putting together assessment centre timetables for final interview rounds with candidates. Most of these include a case study and this has become an increasingly common tool for analyst and associate recruitment. We would recommend it for the final few candidates and everyone we work with is in universal agreement that these are a great tool in identifying the person that they would like to hire.

The case studies are telling in that they are the closest you will get to simulating life in the office.

·         You get a feel for how the candidate approaches problems – are they an organised thinker with a framework for reviewing large amounts of information or take a more casual approach

·         Do they think about the practical, commercial issues surrounding the business under review or take a high level generalist view

·         Can they quickly identify the issues critical to business success or do they miss the key points

·         Have they got an understanding of the basic principles of private equity or do they talk to you like an adviser selling you a deal

They also allow you to hold a conversation which would be pretty much like the ones you would have in the office on a daily basis

·         Can they support their opinions or do they change their minds with every bit of new information

·         Do they listen to what you have to say or are they dogmatic in their own view

·         Are they clear and concise or woolly and long-winded in their comments

·         Are they good humoured, relaxed and easy to talk with or is the whole conversation a bit of a trial

By the end you’ll know who you want in your team.

And if you’ve been put off from using case studies because of the work involved in preparing them, then you’ll be pleased to hear of a new trend in case study material which conveniently reflects an evolution in the associate or analyst’s job and makes your life a lot easier in putting a case study together.

Gone are the days of removing all names or signing NDAs to protect anonymity. The new trend in case study material is to identify a business you know well – usually from your portfolio - and get the candidates to review the business from the material they can find on the internet.  The questions you might ask might include their view on the company’s position in its market and what its future strategy might be. If you want them to value it then you may have to give them some extra financial information.

We have devised many case studies and can give you some good ideas on the material you might use and the questions you might ask to ensure that this is an effective tool in your hiring decision without being a drain on your time to produce and implement.

What A Difference an HR Professional Can Make

by Gail McManus 22. March 2013 09:01

We’ve seen an increasing number of skilled HR professionals join private equity businesses. And what a difference they can make.  At PER we first meet them during a recruitment process. And from our perspective, having a well informed, organised coordinator for recruitment is a fantastic benefit.  But for the private equity team itself it can make a huge difference to the success of a recruitment programme. 

The HR professional can sit with the investment team to scope out the requirements, assess current team members for potential internal moves, beauty parade recruiters, ensure value for money in recruitment costs, promote the firm to candidates, participate in and coordinate the assessment process, manage remuneration negotiations and deliver a great induction programme for the successful candidate when they join.

And those are just the benefits in the recruitment process.  We’ve seen talented HR professionals play a major role in many facets of the business such as developing its people, improving the management skills of the senior team, enhancing internal communication, streamlining comp and benefits and driving some major organisational structural changes through.

So when does a private equity firm decide to add an HR professional to its team? Usually when the growth of the business has begun to highlight weaknesses in the organisational structure. Perhaps some key people have departed, succession issues are looming, there are too many people now for the business to be run informally by the founder and  everyone has a different job title and a different pay scale.

The costs of adding this key person are soon outweighed by the benefits if star performers are retained, recruitment costs are managed and the investment team’s time is optimised.

There is now a body of experienced HR professionals who understand private equity and its nuances and know how to make a difference.  And I don’t know of any team with an HR professional on board who would go back to the good old days when they did all that ‘people stuff’ themselves.

Use a Star to Catch a Star

by Gail McManus 3. March 2013 15:44

A couple of recent interviewing incidents reminded me about a comment in Jeff Grout's book  Recruiting Excellence. To paraphrase Jeff, he basically said there are many reasons why recruitment interviews fail to be effective: lack of preparation, lack of structure, instinctive decision making to name but a few – but all of these are outclassed by having the wrong person interview in the first place.

Sure, interviewing skills can be taught. But making sure you put the right person in front of the candidate is a crucial strategic decision.  From the candidate’s perspective, the interviewer is the organisation.  And the interview process is a reflection of the organisational abilities of the firm. If the interviewer is unprepared, disinterested or uncommunicative or the interview process is badly managed with long delays in giving feedback, then the star candidates will not be attracted to the firm. 

So what could have gone better this week: a client who thinks that being aggressive in an interview is a great way to attract the best people; a hasty 20 minute discussion down the pub; the role being filled without us or the candidate knowing so they go to great lengths to slip out of work only to be told there is no job to interview for; a two hour wait in reception; a meeting scheduled one afternoon for the next morning only to be cancelled with one hour’s notice and endless interviews where we’re still chasing feedback to give the candidate.

But just to redress the balance, we also had: a star candidate who totally changed their perspective of the firm once he met the people; a candidate who got a second shot at a case study because he had been travelling non-stop for work and was too tired to do his best (he was offered the job and said yes without hesitation); several candidates who said the team they met was inspirational; a client who created a new role to play to the candidate’s strengths and numerous candidates who came out of interview and said ‘that would be a great place to work’.

I think private equity firms generally get it right in terms of creating the right impression. So, if you can match the qualities you are looking for in your candidates with your choice of interviewer – use a star to catch a star – and then make sure you give us some feedback on the interview as quickly as possible, you’ll attract the right candidates and leave a fantastic impression in the market place about your firm, your process and most importantly, your people.

Out For Lunch

by Gail McManus 20. January 2013 08:37

As you may have noticed, times have changed.  Today’s private equity market has evolved into a very different creature from what it was. But has your team evolved in the same way?

You might be one of those managers who is looking at your team, thinking you don’t have the right people, and as such is ready to introduce new people at the expense of others.  But these measures may not be the right way forward.

In all likelihood you have the right people for the job right there in front of you.  It’s just that some roles need to be changed.  In the words of Eric Morecambe, you’re playing all the right notes but not necessarily in the right order. 

Now’s the time to take stock of what you have in house, to identify the talent you have available and to match it with the competencies you need to succeed.  You’re probably already focusing more on portfolio management, investor relations or business development and you may need to shuffle your pack a little.  Assessment and redeployment is a useful exercise and will leave your business better equipped to tackle today’s tough market.

Many firms use techniques such as psychometric profiling, which is a useful tool in identifying people’s behavioural strengths and weaknesses.  But it’s no substitute for speaking to your people and finding out what makes them tick.

Dialogue is an essential part of the audit process.  I recommend taking each person out to lunch!  In a more informal environment you can ask them about their hopes and ambitions, their concerns and motivations, as well as find out where they think their strengths lie.  You might be surprised at what you learn, and you might learn you already have the right people in the team.

Now’s a great time to roll the dice.  A shake-up of the talent you have can invigorate the team and help people develop new skills that will benefit the firm tomorrow.  So don’t be afraid to speak to your people and find out what role they think they can play going forward.  Check your diary and get those lunches booked.

Welcome to PER's Blog

Gail McManus, PER Blog

The PER Blog contains my observations on the world of private equity and its people.  Every day I meet and speak with people from across private equity giving me a broad view of the challenges and issues that they face in managing their businesses and their careers.  And it allows me to understand and help resolve some of the human issues that affect the sector.  

I hope you enjoy the PER Blog and that you’re able to take away one or two tips for getting the best out of yourself and the people around you. Let me know what you think, I look forward to your comments and feedback. 

Gail McManus

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