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.
When it comes to fund raisers, well the key is the deepness and relevance of their network, their understanding of the product and their flexibility to travel and/or be on the road most of the time. In addition to in-house fund raisers, we generally find these people in placement agents, institutional sales teams within banks and asset managers and sometimes private bankers.
And, they have to be someone you trust, want to work with and are happy spending hours in an airport lounge with. You will probably spend more time with the lead members of this team than with any individual on your investment team.
Today more than ever an IR team has become a core asset. Successful teams are more structured, reporting more detailed and contact with investors more regular. Funds are hiring more experienced fund raisers, people with a distinctive track record and network fully relevant to their strategy. In 2009, over 20% of PER placements were IR professionals from associates to principals, and signs indicate that the trend will continue well into 2010.
If you feel your IR or fund raising team needs reinforcement or you are building one for the first time, don’t hesitate to give us a call.
Debbie Eidelman - PER
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.
In 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.
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.
Is 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.
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.
We place a lot of people. We take a lot of references. But when people have already left their role, whether redundancy, resignation or under a compromise agreement, it always raises questions – well one question anyway: Why? It’s inevitable that leaving in these circumstances gets treated with suspicion. And when the person under scrutiny is perhaps the only team member leaving or one of a small number, the level of suspicion increases. Many firms have a restrictive reference policy and any formal reference request will be responded to with basic employment data. Many firms also have a policy of not allowing their team members to give personal references. And under most compromise agreements a reference statement is pre-agreed. Even if you talk to the decision maker regarding the redundancy they’re going to stick to their agreed line. After all it is probably what they told the candidate. They aren’t going to say we’ve chosen you for redundancy because we couldn’t stand working with you. They might say it’s because they were in the poorest performing group, or that they were involved with an investment that went sour – but I doubt it. Would you? What would you say? You’d say that you had to reduce costs and unfortunately he or she was in a team that was of less interest in the current climate so inevitably some hard choices had to be made in that team etc etc. Still, there are always rumours and gossip to fill in the gaps! From the candidate’s side, they will always have their list of referees prepared. But can these referees be trusted? Well, I would say, in general, yes. Most people in and around our industry give their honest and usually balanced view of the person – but remember it’s from the perspective that they have known the candidate. And when the referees are advisers or CEOs of investee businesses, they’ve usually been chosen because they were in a successful process. So their perspective is inevitably positive and maybe the candidate will be a source of more investment / more fees in the future if they help them get this job. Would the story be the same if the investment hadn’t happened? So, what can you do and what should you look out for. You should look out for consistent messages. Before you speak to anyone, look at the CV. Is this the first time the candidate has been selected for redundancy, or does it seem to happen every couple of years? It may be bad luck, it may be something else. Find out the candidate’s story for each situation and check it out. And when you find out the candidate’s story – ask them for it more than once. Do they tell a consistent story? Beware the story that changes in the telling. When taking references, talk to enough people to triangulate the story and look for consistency in the references: if three people tell you the candidate caused problems in the office then listen carefully. And if three people tell you that he or she always went the extra mile to get things done, well there’s something in it. But don’t forget the self interested perspective of the referee. At the end of the day, references can give pointers to likely behaviour. But you have to have your own opinion – and a probationary period. The last defence against a poor hiring decision. We hope it won’t come to that. I’ve just interviewed Henry Pugh of Risk Advisory Group – http://www.riskadvisory.net/ a professional reference taker and investigator of buy-out teams. He reckons on average one in ten investments don’t go ahead after reference taking. The full transcript of his interview is coming up.
I heard a thought provoking talk the other day from Jeff Grout, former UK managing director of Robert Half International and now a well thought of advisor and commentator on recruitment issues. Jeff was talking about the importance of the employer brand in the recruitment process.
You may wonder if this matters very much in private equity as it’s such a niche area - but it matters a lot. If great candidates don’t want to interview with you because of your reputation then you restrict your candidate pool to those who are less knowledgeable about the market. And make the recruitment process much more difficult. Phrases like ‘You’ll never have a life if you work there’ or ‘I’ve heard it’s a revolving door’ are just two of the common retorts we get. The frustrating thing is - often it isn’t actually true - it’s just the perception that has got around the market. And it means you’re starting any recruitment from the back foot.
Before each search we do a quick and dirty survey of typical candidates to see what they think of the firm. It can be very revealing. It’s particularly important in the analyst / associate market place where star candidates will choose which firms they interview with and then which offer they take based on very little knowledge and an awful lot of hearsay. This affects the small group of analysts and associates who get multiple offers - and who are the ones you want - but the final choice is in their hands. And it isn’t just money that speaks. Their choice is based on all sorts of other things such as the degree of involvement in the investment process, training, career development, how much financial modelling they’ll have to do and the people they’ll work with.
So how can you make sure you have candidate appeal or a great employer brand? The more attractive you are to potential employees the more likely you are to get the best talent.
Jeff Grout, in his book ‘Recruiting Excellence – an insider’s guide to sourcing top talent’ recommends starting by finding out what you have to offer and what people think by doing some basic research:
• Ask new joiners why they joined • Ask people who stay why they stay • Ask people who leave why they leave • Ask people externally what their perception is of you
And as you start to understand your candidate appeal you’ll become increasingly conscious of managing your employer brand - a brand which conveys the personality and character of the organisation to the outside world. And if it’s a good brand, it will underpin your recruitment and help you secure the best talent for your business.
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.
Finding out what makes your people tick is easy if you ask the right questions. And you might learn a few things about them which will help you manage them better. So when you sit down with them, ask the following questions in a non-threatening way.
What do you want to get out of this job? Make sure you cover three perspectives: financial, the role itself and a personal perspective.
Everyone is motivated financially, but to varying degrees. For many, job satisfaction is equally important and for some people at some stages during their career, being able to manage family matters can dominate. Try to understand what gets them up in the morning. And what would stop them wanting to bound into the office with energy and enthusiasm.
How do you see this changing in the medium and long term? Priorities change in people’s lives and many people will already be thinking ahead. Talk to them about how they see the future and the changing requirements they expect to have. You’ll find that a number of them will have been keen to talk to you about something but haven’t found the right moment to do it. Presenting them with the opportunity to talk will help them as well as you.
How are you finding your work/life balance in the current market? Some people are wholly career orientated and others value their home life more than they do their working life, but the majority of people would prefer to strike a balance between the two. It’s important to ensure that everyone is able to strike this balance. In the long run you’ll benefit from a team member with a stable home life even if you lose a few workplace hours along the way.
What can we do to help you achieve your aims? You may not be able to deliver on all of their suggestions, but there are almost always one or two small things you can do immediately which will make a big difference: for example it might be as simple as leaving a bit earlier on Fridays or working from home occasionally.
You might also find that by talking to each person about where they see their own strengths, you can redeploy or reallocate tasks based on their areas of interest and skills.
So how might you unearth hidden talents? Again, by asking the right questions.
Where do you think your strengths lie? Everyone will have a clear picture of their own strengths and weaknesses. They will tend to be over modest as it is a natural reaction to seek praise. Give it if it’s due.
Where could you extend your impact on the business and add further value? It is helpful if they identify the areas they would like to expand into. Do their thoughts coincide with yours?
What do you think helps you to work at the best of your ability? Ask questions about their preferred working style. Some people like to work as part of a team whereas others prefer to work solo, some are good problem solvers, and others are strong negotiators, some creative, others systematic in approach.
It may be worth running some simple exercises so that you can assess people’s strengths in a team environment. You will be able to identify who takes the lead, who is the natural project manager, who looks after the team, and who is the maverick. We can help you with these.
You may think that the place for all of this is annual appraisal and professional review process. But there’s a place for the informal route as well – you’ll probably learn more and it will be perceived as a less risky environment. So try it out on one or two people. They’ll think it’s great. After all, who doesn’t like to talk about themselves?
So you’ve arranged a one to one with each of your team. Opening and maintaining lines of communication with the team can engage your people while at the same time gaining a new, fresh perspective on the issues you face. You might also find you have people with skills and ambitions that can offer a valuable contribution in other areas of the business.
But how do you start the ball rolling?
Here are a few key questions designed to elicit the information you need.
Before you start asking the questions, let the person know that this is a no risk conversation and that you have three main aims:
1. to find out a bit more about them and what’s important to them, 2. to get some honest feedback on the firm and 3. to hear their ideas about the future direction of the business.
What first attracted you to the firm? Their answer will probably fall into two areas: values and environmental factors. It’s important to make sure that the values that attracted the person to the firm when they joined are still perceived to be there. Many things may have changed with current market conditions and businesses constantly need to evolve. Whereas this is healthy and necessary, you need to make sure that you don’t lose sight of the core values that brought people to the company in the first place.
Where has the company lived up to or fallen short of your expectations? Assessing where the company has met, exceeded or indeed fallen short of an individual’s expectations, can identify what aspects of the business need fine tuning. You’ll also discover more about your people and their goals and aspirations.
What do you think the main hurdles are that the firm must clear? You probably have a pretty good idea of what the problems are from your perspective, but it can only serve you better to find out what the people on the ground think. Seeking their opinion will also assure them that they are a vital component in the machinery of the company. Further still, ask them how they would go about tackling the issues – you may find you unearth one or two expert problem solvers.
How do you think you can contribute best to the firm going forward? It’s helpful to understand how each person sees their contribution, strengths and weaknesses. In this way you can best align career expectations with your needs. When team members have a clear understanding of their career path, they acquire a sense of direction and can focus on achieving their goals.
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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We are delighted to announce that we have won the Private Equity News “Recruitment Firm of the Year Award” for the second year running.
This award reflects the continuous effort that PER places in delivering excellence.
2009 has been a challenging year and we have remained committed to ensuring we deliver the best service to our clients and candidates. We are proud of the recognition in the industry for our efforts and are grateful to the Private Equity industry for supporting us.
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