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

And for the female team member there are also a number of fundamental issues they have to deal with when taking a maternity break or aiming for high level promotion

·         The psychological contract with their employer needs managing - they may feel they have to choose between a career sacrifice if they want to manage a family or a home life sacrifice if they want to manage a career (recognising that many men in the workplace have to make home life sacrifices to succeed).

·        There is a lack of confidence in dealing with the issues – it is easier to just quietly go away than fight a culture which will judge them – whatever their choice.

Can any of this be dealt with?

Well I think the best phrase I heard recently to answer this was

“If you do what you’ve always done you’ll get what you’ve always got”

The traditional approach to dealing with these issues on both sides has been to try to minimise them –  ie sacrifice your home life if you want a long term career in this industry and hide the struggle to juggle. But by changing perspective to recognise the differences that your female workforce represent rather than trying to suppress them can achieve positive long term results.

If you can be prepared to: 

·          Embrace the differences in the workforce not try to minimise them

·          Positively discriminate,  differentiate and change your approach

·          Bring issues out into the open and discuss them

·          Create some guidelines and communicate them

·          Think about how you staff high profile projects

·          Use the appraisal process objectively for promotion management and career development and

·          Provide peer-to-peer and mentor support

You can retain that lost talent and gain a committed, loyal and efficient senior member of the team.

It’s not easy – but there is a lot of talent going to waste – and with a general shortage of highly talented people – that seems a shame.  

*We did a web based count focusing on the larger private equity employers and looked at their team profiles by gender

Gail McManus - PER

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. 

So I found another definition which I find more appealing for private equity:  a person who can function effectively as part of a group of individuals sharing information and striving towards a common goal. I like this better. One of a group of individuals.  Most work in private equity is done as an individual – you have to work on your own - even when contributing to a deal team you will be doing your bit on your own.  Rarely does the whole group work together on something.  And to work effectively as individuals – you need a common goal or there would be chaos. The common goal is crucial and comes right back to leadership and communication within the business.

So how do we find these individuals who can work on their own towards a common goal?   We look for evidence of working effectively on their own and communicating with others, whether in the work place or in team activities such as sport.  In the work place they are going to be the high performers – that usually means they achieve as an individual and stand out from their peers.  So how can we then tell that they aren’t just single minded operators who achieve alone – or even at the expense of others?  Understanding their interests can help here. Team sports are good – and rowing and rugby are probably the most common sports on the CVs of those people we see hired.     What I like about all serious sports people is that they have had to dedicate time and commitment away from their main daily activity to succeed.  It helps show that intangible characteristic of ‘going the extra mile’.  So whether a team sport, a marathon runner, or grade eight piano - it takes effort.   But what I like about team sports such as rugby above marathon running is the confrontational element of the sport.  You have to take people head on and not waver in your resolve.  A good character strength for negotiation.  And what do I like about rowing?  Well, you have to get up early in the morning for a start and you compete against yourself as well as others with a firm resolve to win on both occasions.   And in both sports, not only is there a common goal but communication of your intention with others is key.  In most sports you have to take some personal pain whether physical or in terms of commitment and that makes a strong set of characteristics for the individual team sport of private equity.  

Gail McManus - PER

I’ve been reading a book called Know What You Don’t Know by Michael A Roberto and it made me think about some particularly good parallels in the recruitment process.  Firstly, trusting your instincts.  On the negative side it is often tiny signals that can set small alarm bells ringing.  But it is often hard to pinpoint what the signal was - that ‘couldn’t quite put my finger on it’ thought.   Rarely are those thoughts unfounded – and to keep things simple it is easy enough just to drop someone from the recruitment process because they don’t ‘seem’ right.  But clarity and understanding is preferable to an unidentified gut feeling.  And, on the positive side, going with a candidate because they felt right, when you weren’t sure why they seemed to be a good fit also needs some explanation.

I was trying to think about how to get better at analysing those subjective reactions to candidates when Michael Roberto gave a useful steer – break down what you know into

·          the facts

·          what you’re unclear about and

·          your assumptions. 

When you have a list of the areas you are unclear about – then you can think about how to get clarity.  When you have really focused on your assumptions, you can then do something to test them.   Just the discipline of thinking through what you think you know and what you actually know is a great step towards determining what those little niggles in the back of your mind are. 

This is particularly important in this market where there are a number of candidates who are under pressure to find a new role.  And while we haven’t seen many people lying, not telling the full story by omission is more commonplace.

The most common area for being unclear about the facts and making assumptions is not just why people left their last role, but when.  We’ve been caught out in a few cases ourselves for example

·          where CVs haven’t been updated for the end date on the current job

·          where the full story revealed long periods of gardening leave on CVs rather than actual work

·          where candidates are in discussions to leave their current role but do not reveal it.

What can we all do?   We can ask some basic questions.

·          Who are you currently working for?

·          When did you begin your employment with them?

·          Is your employment ongoing or does it have a termination date?

·          Why do you want to leave?

·          If you have already left, what are the circumstances surrounding your departure?

·          When is / was your last day in the office?

·          What are the terms of your notice or gardening leave?

·          Are you subject to a non-compete restriction and if so until when?

·          Who can we talk to in your previous firm to reference you?

There is no need for people to tell us these things unless we ask. So let’s focus on getting our facts clear and leaving our assumptions behind. It is a tough market and we all need to get the recruitment right if we are to be successful in the future.

The Financial Times this week www.ft.com has some major comments on the upturn in banking sector recruitment – headlines such as ‘Headhunters set for wave of mandates’ and ‘Goldman bucks trend with hiring spree’ give optimistic messages to would be recruits.  Some commentators believe that the teams were pared back too much and that they will need to re hire.  This all fits in with the trends we have been seeing for star banking analyst and associate level candidates.  But not so much with more experienced professionals.  The demand for experience seems to be at a low. This seems a shame as there is some super experience out there in people who would contemplate a more flexible way of working.  And you could benefit from their skills in a time efficient and cost effective way.

We see experienced investors contemplating a number of opportunities

The least likely outcome for these people seems to be more of the same. And most of the experienced investors we see rarely want more of the same and are looking for a new set of challenges. They consider with relish the prospect of working with an investment house that focuses on smaller deal sizes - it takes them back to what they used to do and why they came into private equity in the first place. You could access their experience in a full time partner role, use their track record in fund raising and strengthen the senior group or use them on a part time or advisory basis.

This serial role route gives you opportunity to access resource on a project by project basis or as an advisor, mentor or investment committee member or to focus on a particular portfolio issue or opportunity.

There is a stunning amount of talent locked up in experienced investors which could be tapped into in so many ways to help your fund be more successful.  And yet so few funds take advantage of it.

I hope the private sector private equity community learns from this and grabs some of this extraordinary talent for itself.  There are some great professionals out there who can make a difference very quickly.

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.

Verbal references can be extremely helpful, particularly if you follow Six Simple Steps.  But first, please ask the candidate’s permission – it can cause a lot of problems if you ‘phone a friend’ who doesn’t know the candidate is considering a new role.  Recruiters can sometimes work around this to get some outline views, but the best source of information will be the current or a recent line manager. A recent line manager is a good way of getting a real feel for the candidate in the workplace without them revealing that they are thinking of leaving. And if you can do this before the final round you can check out any negative comments with other referees and with the candidate and you have a slightly easier get out if the references are not as good as you had hoped.  Post offer referencing can then focus on fact checking and not opinion.

The Six Simple Steps
1.  Timing – take informal verbal references before the last round of interviews
2.  Ask the candidate’s permission to speak to a current or recent line manager 
3.  Describe the job the candidate will be doing for you and the skills needed to be successful
4.  Seek the referee’s opinion on the candidate’s abilities for that job
5.  Discuss the candidate’s strengths
6.  Explore the areas where the candidate would benefit from further development or training

And the reference provides so much more than comfort on whether to make an offer of employment. It can also provide some great pointers on how to manage the new recruit in order to get the best out of them. For example, I recently took a reference on a junior candidate where the referee said the candidate had sound opinions but was sometimes reticent to voice them. Their new manager will now have this in mind and can work to build the candidate’s confidence.

But what about when the reference isn’t as glowing as it might be?   And this is where the timing of the reference taking can really help.  You and the referee are in a potentially tricky position if you have already offered the candidate and they have already resigned or told their current company they are leaving.   Do you tell them you are rescinding the offer because you received a poor reference?  If this is something factual, for example they have misled you about their employment or academic achievements, then your reasons are easy to justify. But if a referee has given an opinion that you don’t like the sound of, what are your options?  The candidate will want to know what was said and by whom, particularly if they have already resigned from their role. Do you tell them?  Do you withdraw the offer with no reason?  You can’t do this if you have already offered the role to them subject to references.  You are about to have some uncomfortable conversations, and we haven’t even started talking about the legal problems related to the giving and taking of references.

Everything is easier if you get the references before offer stage. First of all, you are less time pressured, if you receive some poor comments then you can take more references and check these out – triangulate them with others. You can focus on the areas of concern in your later stage meetings and use probing questions to enable you to make your own judgement on the issue. And if you decide to say no, you are still in your interview rounds so are under no pressure to reveal the details surrounding your decision.

So they maybe Six Simple Steps – but getting the first one right is the key to success.