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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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...

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...

2010 was a busy year and 2011 has started well. We’re delighted that more than 100 of our candidates started in new jobs with our clients last year. And this year has started equally well with another eighteen taking up their posts in the New Year.

Our placement split by level has remained consistent with analyst and associates entering into private equity for the first time representing about 60% of our placements and the balance splitting roughly equally between mid level and senior hires.  We’ve seen some trends and also some fashions. The main trend has been towards growing investor relations and fund raising teams. There’s also been a significant shift in skill set for these teams, particularly at the junior and mid level. We used to search for communications professionals. That’s no longer the case with a definite trend towards numerate analysts who can also write good English and have the personality and style to contribute in an IR role. Our shortlists for an entry level IR role now look pretty much like our shortlists for an investment associate.

Fashions: well a strong requirement for Scandinavians came and went as demand was satisfied and Turkish speaking is now in vogue. As ever, associates need to be top ranked to succeed in the competitive recruitment market for private equity irrespective of language skills or cultural background.  Bankers made up 75% of our associate placements with consultants and professional service firm candidates representing only 1:4.  I’m not sure if this ratio will remain for 2011 as bankers, particularly at associate level, are pricing themselves out of the private equity market with big packages.  And whilst our sector continues to be inspirational for many people, the lure of associate packages in the banks may well mean we lose some off our shortlists – perhaps that is what the banks want!  So we may be looking further down the tree at more junior analysts or wider afield at more diverse backgrounds. More...

We’re delighted to let you know that we now have a permanent office in the heart of Munich. This is an important milestone in the development of PER and gives us a chance to work more closely with local private equity and venture capital clients as a specialist adviser on identifying, developing and retaining talent at all levels.

Rupert Bell joined PER in the summer and since September has been based full time in Munich. Rupert comes to us with a strong background over 13 years in mid-market investing in the UK, with firms including 3i, Sand Aire and Octopus. He trained as a chartered accountant in corporate recovery with Arthur Andersen, and then worked in the head office corporate finance team at the P&O Group in London for three years before moving into private equity in 1997. He speaks fluent German and French as well as English.

“Coming to Munich to develop PER’s European business is a great opportunity,” says Rupert. “The firm has had many great relationships in Germany and neighbouring countries for years, but being here on the ground full time just allows us to do so much more. The local market is recovering from the recession quite quickly and there is a clear market need for a specialist recruiter who can access high quality candidates from within Germany and outside. In addition, our direct experience as investors ourselves enables us to assess candidates critically at both technical and cultural levels: in a very real sense, we are private equity people for private equity people.”

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When you take on a new recruit, whilst on-the-job training is useful and is undoubtedly the best way to learn, it is also helpful to have some mutually agreed objectives that focus on strong performance.

Many studies show that if you pay more of the right kind of attention to employees, they work harder and smarter. Retention rates go up, your team is happier and more effective.

So, how do you set objectives for your new recruit? Following these nine rules will give you an edge.

1. Tell your new employee what your expectations are. For junior-level recruits, make sure you tell them your expectations in terms of dress code, working hours, lunchtime and breaks, use of the internet, when and if they can use social networking sites, take and make personal calls and so on. And with regard to their role make clear your expectations for delivery during the probation period. For instance how they should split their time between the different activities e.g. origination, screening, execution. Set some KPIs for example with origination, how many companies should they approach, number of meetings fixed and so on.

2. Learn from the best. Vince Lombardi, the legendary coach for American football team the Green Bay Packers, believed in giving every player a clean slate at the start of every game. This meant that “star” players did not rest on their laurels and felt compelled to continuously prove themselves in each game. You should have the same attitude towards new employees - they may have been a star performer in their last job at Goldman, for example, but you should expect them to continuously prove themselves in their new role.

3. Keep it simple. Keep the objectives simple and refer to them regularly. Objectives should be reviewed at least quarterly and performance levels checked at least monthly. Avoid overly complicated matrices as they are likely to bore employees and make them averse to the objective-setting process. Print out the objectives and put them up in a place where the new recruit will see them on a daily basis. Make sure all objectives are measurable and timed.

4. Push the boundaries. Learn from Henry Ford. The objectives, to an extent, should be mutually agreed between the new recruit and their manager, but should also push the new recruit significantly out of their comfort zone. Henry Ford used this approach of setting challenging objectives and achieved massive improvements in productivity on his factory shop floors. More...

We recently launched our crystal ball quiz where you have the chance to make some predictions about 2010 and donate to the PEF - a super cause.  Well, I’m going to make my own prediction for the private equity recruitment market for the rest of this year.  The war for talent is truly underway.  Private equity experience is now the most sought after skill set even for junior hires.

When we first started this blog I spent a lot of time thinking about spotting and keeping star performers.  Then the world changed and it didn’t seem so urgent.   I would never have thought it would change back so quickly. 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.
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