What do you think 2010 will bring?

Put your money where your mouth is and predict the outcome of some of the year’s leading economic and private equity indicators whilst supporting the Private Equity Foundation PEF **.

Should you employ some form of psychometric profiling in your recruitment process? I think it’s useful. The first point to be clear about is that the profiles are structured personality questionnaires which map behaviours. They aren’t skills or aptitude tests. They give an indication of characteristics such as attitude to work, ability to get on and empathise with others, levels of self–motivation and ambition, determination and so on.

So you won’t know if someone is good at something – rather how they will tend to behave in a work situation. In that sense there are no right or wrong answers. However, there will be a right or wrong profile for your firm. It is hard to know what this might look like unless you first of all map the behaviour of high performers in your firm. So whether you use a highly trained profiling expert or a quick and dirty online test (and there are lots of these), be sure to make your high performers at the right level in the organisation do it first. And study their results. Getting the level right is important – no point in using your highly entrepreneurial chief executive as the calibration point if the hire is going to be an analyst. So if you have to get everyone to do it for appearances sake make sure you separate the less successful performers from the stars – and you should get some useful feeling for why they aren’t performing so well.

In order to get the best out of the profiles you should be looking for patterns that match the characteristics of the job. For example in recruiting for a private equity role, you will tend to find highly data rational people (remember, it’s behaviours not skills that you are profiling so it doesn’t mean they’re any good at numbers – just that they like playing with them). If you then match this with a behaviour that shows they are a very cautious decision maker, then you may not have an ideal pairing of behaviours for private equity as you need them at some stage to exercise some judgement.    More...

As we approach the end of the first quarter, we have noticed that M&A advisors are back in action and business is reactivating. Banks are adjusting to the new tax regulations and are dealing with the fact that they lost or let go of many people last year. Now they are recruiting again and are feeling the stress of the shortage of people.

We have seen evidence of this in the significant increase of base salaries, especially for the associate pool. Many banks have readjusted their base salaries to guarantee a minimum fixed income. We were surprised to see increases of 23% to 75% for 1^st year, 2^nd year and 3^rd year associates, respectively.

The bonus range has also increased at this level. Associate bankers are receiving bonuses from 90% up to an unprecedented 230%. Of course the range varies from bank to bank, but the reality is that they are trying to make sure that their associates do not suffer from the new tax regulations and are not only readjusting the base salaries, but also bonuses.

The way bonuses are structured is also changing. We are finding out that some banks are paying partly in cash and partly in long-term stocks at the associate level, which we had previously seen only at more senior levels. The cash component ranged between 65% to 75% and the stocks had a vesting period of 3 to 5 years.

Interestingly, associates acknowledge that they are an asset that is now scarce, especially the good ones. And even though their bonuses were part in stock, they are feeling very pleased about their new compensation levels.   More...

Did you know that women represent half of all professionals entering finance, but by VP level the proportion has dropped substantially?   Is this the same for private equity?   The answer is yes – but from a lower entry base so the problem is magnified.    We’ve done some counting and whilst approximately 25% of junior private equity professionals are female* this proportion reduces to 10% by investment director and above.   You might ask - does it matter?   Well it should.

There are sound economic arguments for maintaining a good diverse mix within your team.  But the issue here is not so much accepting that diversity matters, which I think most people do, but focusing on the lack of upward movement or fall out that happens before the senior levels are reached.   Arguably you are losing some of your well trained skill base before you can really capitalise on all that input you gave in those early years.  And it is not all to do with leaving to have children.  It’s a bit more complicated than that.  There are real issues of women leaving to have families and then not being able to get back on the ladder. There also seem to be issues related to promotion and progression within the firm.

And the issues lie on both sides – the employer and the employee. 

For the private equity employer that wants to retain and promote its female staff the sorts of issues that it may need to tackle include:

·         Those difficult to eradicate unconscious biases and under the surface issues where unspoken and unconscious prejudices still exist.  For example an unconscious bias that might inhibit the promotion of women is how work is allocated to them.   Do you put your female team members on the most visible, promising investments? Or is there an unconscious bias that pushes them towards less high profile projects that might need a lot of attention but are not so well recognised when it comes to considering who makes it up the greasy pole

·         In order to recruit more women and retain them in the business you may have to positively discriminate – but a positive discrimination culture is not easy to achieve. It means saying things like it is ok for the main child carer in a family (usually the woman) not to participate in so much travel but that this opt out is not acceptable for other team members with children 

·      It requires real recognition of the struggle to juggle home and work and the support that is needed from the employer to do that without falling into the trap of unconscious bias or discrimination More...

The most common intangible request for personality style or characteristic that we see and hear is – we want a team player.  But what does it mean?  Is it another of those we’ll know it when we see it characteristics or is it something we can measure and objectively look for.  Here is a Google inspired definition of a team.  Teamwork is a joint action by two or more people, in which each person contributes with different skills and expresses his or her individual interests and opinions to the unity and efficiency of the group.

I take issue with the requirement for a team of different skills in private equity – it might be a good idea but we rarely see it in practice.  Most of the people that we hire for private equity firms are pretty much the same as everyone else in the firm – same background, same style, same outlook.   So they aren’t often bringing different skills and whilst they have a view, their opinions are probably pretty much the same as everyone else’s in the team.  And three times out of four when we are asked to recruit from a different background to bring some balance, you still revert to the same profile you’ve always gone for.   Why? Because you can better judge the usual profile than a different one and fit doesn’t usually feel as good. So, as a general rule, I don’t think that our clients are hiring for difference, but for fit.  More...

Throughout 2009 we experienced a visible increase in the demand for IR professionals, fund raisers and placement agents.  Our clients were keen to strengthen their IR teams and bring the right people and skills on board to manage the tougher and more demanding investor landscape.

For many GPs the IR team carries a wide range of responsibilities from fund raising to reporting as well as PR and marketing. These wide ranging elements of the role demand an almost endless list of skills; from extensive contacts and networks and great communication skills to high levels of attention to detail and accuracy.   Thorough understanding of the industry and investors demands, ability to write reports to tight deadlines, preparing PPMs and marketing documents, delivering smooth running road-shows and high quality investor meetings … Oh and if they have liaised with PR agencies, can write a great press release and get the managing partner in to see a few Middle East families – well that would be great too! and the list goes on…

But there are really two distinctive functions we see within IR teams and before deciding to recruit, it is important to understand which you really need. Do you need to focus on existing investors? Or do you need to raise new funds?  Or is it both?  Can one person do it all?  Generally the skills required for these two important tasks are different and you may need to decide which is your priority.

To manage existing relations, you need to look for someone with strong communication skills particularly written skills who is also numerate and can understand the investment process. They will spend a lot of time producing and updating reports and presentations.   These candidates generally have excellent project management skills, are detail oriented and accurate.   They may come from client services, marketing or RFP teams within asset managers, financial PR firms, project management teams at a placement agent or other IR teams.    More...