In this video Gail discusses best practice for benchmarking salaries for private equity funds and how to make sure you get your compensation plan and pay grades as accurate as possible.

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On the face of it, recruitment of a senior private equity professional follows a similar pattern to a junior hire: choose a search firm; set the criteria; draw up a shortlist; select your preferred candidate; negotiate a package and fix a start date.  If only it was that simple.

Firstly, let’s consider why the need exists. At junior levels, the recruitment is often triggered by the need for more execution resource. In the case of senior hires, the need is usually to add something new: a sector capability; geographic coverage; greater exposure to strategic relationships or enhance the team ahead of a fundraising.  And it can’t be filled by the preferred route of promotion from within which rewards performance, builds loyalty and re-enforces the firm’s culture or DNA.

The perceived risks of bringing someone in at senior level are high.  Senior appointments come in over the heads of mid level colleagues, risking frustration and resentment. The harshest judges of your new partner will often be those below them in the hierarchy. Making clear what the deliverables are for the new hire can help – but don’t set them up to fail.   

What can you do in the search process to get it as right as possible?

Finding the person with the right experience who will fit in is a subtle and complicated process.  It is worth investing time with your search partner to identify the core need that you are aiming to meet. Ask yourself the question - what should our new partner have delivered in their first twelve months and then in the first two years for us to know we made the right choice?  This will identify the skills and experiences you want to bring into your business.

Then overlay the key cultural criteria that will give the best chance of fit into the team. This will force you to think through and articulate your own culture and values and your search partner can help you with the best tools to test for these intangible qualities. 

Timing and package come next on the list of considerations. Many experienced candidates are established in funds, locked in with contracts and incentives and not actively looking for a new position. What cost are you prepared to bear and how long are you prepared to wait for your new partner to come on board?   More...

Despite the economic conditions, we saw a relatively stable recruitment demand across Europe in 2011 and increasing demand in some emerging markets. In Europe, we saw a shift in the types of roles recruited for rather than any increase in volume. In particular, there was increased demand for fund raising, investor relations and fund investing experience at all levels with more modest levels of hiring in the direct investment teams.

Nevertheless, the direct investment demand for associates soaked up a raft of 2009 bankers and by the end of the year European recruiters were struggling to put strong shortlists together from this depleted analyst pool. Looking forward, the 2010 bankers now have a bit more experience and they are starting to make their appearance on recruitment shortlists. The increased uncertainty experienced in the banks at the end of the year has resulted in some analysts and associates feeling increasingly threatened and thinking about their future. We saw their uncertainty reflected in increased enthusiasm for private equity roles.

We also saw mid-market private equity interest in big four lead advisors and financial due diligence managers throughout the year and we had a sense of improving quality from these backgrounds. More...

Greater than 50% of CEOs are unsuccessful in delivering a minimum of twice the investment; reports a study led by Professor Kaplan of University of Chicago School of Business. The million dollar question (or should I say billion dollar question?) for PE firms then becomes: How to ensure that portfolio companies are led by CEOs that are going to be successful?

The main characteristics identified in successful CEOs by Kaplan are: Pro-activity, Efficiency and Persistence. Whilst there are a number of ways of assessing the CEO’s competence in the area including psychometric profiling and interview, the use of a 360 degree feedback process proved to be an effective tool in detecting these three ‘golden’ traits, especially when used with employees up and down the organisation, customers and suppliers.  Using open-ended questions such as the ones that follow, enabled the interviewer to assess the CEO’s competence in these three areas.

• How does he/she achieve his/her objectives? What exactly does he/she do?
• What are his/her personal strengths? In which areas does he/she really excel?
• How would you describe his/her leadership style?
• Can he/she handle criticism? How does he/she react to it?

Private equity firms might listen out for answers that indicate their prospective CEOs More...

We started the year with fresh promise of increased deal flow and larger analyst classes within the investment banks.  Following a summer of discontent we were eager to see the impact on bonuses for analyst and associates on a summer cycle.  With rumours of yet further rounds of redundancies and growing pessimism in the markets, bonuses across the banking sector were sure to be heavily impacted.

Or were they?  Once again this summer, when many of the investment banking analysts got their annual reviews and bonuses, we have seen base salaries at or around the same level as 2010.  Bonuses however, have seen a little uplift on last year with a wider gap between different levels of ranking.

In some cases banks were awarding bonuses of up to 130% for top ranking second and third year analysts.  This is clearly the banks’ attempt to retain talent for longer as the wave of analysts and associates moving towards private equity was more apparent with the promise of greater deal exposure and a more a hands on experience. These bonus levels were only awarded to 3-5 top ranking analysts out of classes of circa 35 in the UK; further tightening the competition for that elusive bonus and upping the stakes for being a top performer. 

Do banks expect greater loyalty for the reward and is it impacting on analysts’ decision to move? 

The answer is yes, the healthier bonuses mean that analysts especially from the class of 2010 are thinking twice about making the transition so soon compared to their peers a year ago.  More...

Oh for a bit of enthusiasm!  I sometimes wonder where has all the passion gone?  When I started recruiting for venture capital and private equity more years ago than I care to remember there was a real excitement in the voice and demeanour of the candidates that we talked to.   Maybe it's just the increasing professionalization of the industry, but it’s a rare day when we see somebody coming through our door with a real fire and passion for our industry.

There is a huge pressure on young people to perform academically and career wise.   We expect them to have superior technical skills and outstanding academics. We want blue chip firms on their CVs and 'second tier' isn't good enough.  And in order to achieve and obtain the levels of excellence which we require they need to have been dedicated to high levels of academic attainment throughout their relatively young lives. They’ve committed large amounts of their personal time to gaining the results we want to see and they’re driven to succeed in our conventional terms of academic and career progression.  

We sometimes try to balance this by looking for evidence of wider achievement and more varied experience.  Perhaps it's sporting, perhaps it's music, perhaps it’s charitable, perhaps it's more entrepreneurial.  The balance is much harder to find – after all when do they have the time to achieve in these other areas - and a streak of entrepreneurialism an even rarer find. More...

It is now almost a year since we opened our office in Munich, headed by Rupert Bell. We would like to use this occasion to give you a brief update on our progress to date, including some of the placements we have made, and our thoughts on the market situation as we approach the final quarter of 2011.

What a difference a year makes....

The last 12 months have seen a pick up in market activity, with even large cap deals finding a match between buyer and seller as well. Direct deal activity has been cautiously growing in the buyout and growth space. Venture deals remain few and far between, though a number of strong exits have added momentum. We have seen considerably more activity in the secondary market, for both fund and direct holdings, as investors trade value for liquidity. Fund of funds strategies continue to attract investor support.

Until recently, debt funding was starting to come back into the market, though we heard mixed views on whether this is driven by more confidence in the economy or by the need for funds to deploy dry powder before the end of investment periods. However, in recent weeks the debt market has drawn back noticeably. Anecdotally, much of the mid sized and larger dealflow in the direct buyout market remains driven by secondary opportunities. More...

We’ve had a string of junior private equity investors with about three years experience through our door recently who were hired just before investing stopped and are now worried that they haven’t worked on a completed transaction.   And they don’t know what to do.  Should they move to somewhere where they’ll get more investment exposure or sit tight and hope it all comes right? They’re uncertain of the impact this will have on their career and are keen for reassurance. 

If you have people in your team who haven’t ‘done a deal’ then it’s worth spending a bit of time with them to ensure they understand the value in the experience they’ve had over the last few years and can focus on the opportunity ahead.

When they ask our advice – we’d usually suggest they stay put.  To be sure of access to more deal flow they will probably have to move to the lower mid market and this may not meet their future career aspirations.  And moving in itself is a risky option.  After all, their current team knows them, has a good sense of their ability and will be keen to see them succeed.  Moving means that all those relationships, that trust and their credibility has to be rebuilt in a new environment.  We also suggest that they adopt a pragmatic perspective and understand that there are real skills they can learn and experiences they can develop when they’re not investing.  The simple three point list that we give to junior professionals to focus on includes: More...