We head toward yearend. For almost everybody, that means a welcome break and the upcoming holidays. For many in finance, it means something else: yearend reviews, budgets, evaluations, appraisals, last-moment client meetings, deal closings, balance-sheet and P&L assessments, forecasts for next year, and, yes, speculation about bonus payouts.
For many, yearend is hectic, busy, frantic, and exhausting. Approach most people in finance in December, and they will hint (a) they need a break and will get it in January and (b) they don't want to add anything more to an already suffocating schedule.
Yearend is also a time for finance professionals, MBA students, and MBA alumni (including those affiliated with the Consortium) to reflect and ponder what's next. Where do they want to go from here? What does next year bring? Is it time to make a move? Is it the right moment to approach managers about how they feel about career paths, expected promotions and compensation? Is it time to devise personal strategies to follow through in the upcoming year?
Consortium students, alumni and others in finance are contemplating a lot these days. They sort through opportunities and options, and they struggle to figure out whether we are really over the hump headed toward an economic and markets recovery.
What's on the minds of many this yearend?
Consortium Students
1. Some continue to assess whether investment-banking, trading or investment management is still what they want. A few have even decided to take a different path or turn down lucrative offers to accept similar positions in finance in industrial companies or in business strategy, where there are opportunities to get promoted fairly, work-life balance, and hands-on experience in operations. They have learned and decided they can do corporate finance or M&A at places like GE, Pepsi, or Eli Lily.
They are making the tough decisions to bypass what they may have gone to business school to attain, yet they are comfortable and excited about veering off the original track.
2. On the other hand, some are deciding go head-strong into investment banking, private banking, and investment research or management. That was a primary reason for going to business school, and they are hopeful and confident that the opportunities, deal flow, and rewarding experiences will continue.
Consortium students will be joining firms like Goldman Sachs, JPMorgan, Citigroup, Deutsche and Barclays in the year to come. They know, too, they will benefit from spending the next few years in a grueling, in-depth apprenticeship in corporate finance or investment analysis.
Many prefer to pursue private equity or venture capital and have tried. To get there, however, has been hard and puzzling, because those firms recruit erratically or informally. Students realize it takes contacts to get inside for the few spots that open up. Not surprisingly, some haven't given up.
3. Some Consortium students went to business school with one objective in mind, but discovered another more interesting path once they got there. Hence, they've decided to try something new and different. For example, a few have decided to pursue opportunities in energy, community banking or microfinance. One wants to return to his hometown one day and help boost the family business. And they are enlivened by decisions.
4. Many Consortium students have an exceptional opportunity to study abroad or work as interns in another country during the spring. They cherish the experience and discover when they graduate they want to start out or eventually work in a foreign country. Consortium students last year worked or studied in Peru, South Africa, Tanzania, China and many other countries. One recent graduate decided to accept a banking position, where he is in training in Singapore and will work full-time in Ghana.
5. A few students returned to their second year with meaningful summer internships, but now know they won't return or are no longer interested. Internships served a different purpose. It helped them decide what they don't want to do.
Those second-year students are now back at the starting point drafting a new, better post-grad strategy. Time is of the essence, as they try to find a good offer before they graduate, before they no longer have access to their school's career-advisory resources. And they are trying to avoid a panic situation. But improvements in markets and the economy, they aren't panicking yet.
6. Today's Consortium students lived and worked through the crisis and gladly returned to school. While times are slightly better and opportunities slowly open up, memories of the crisis, the collapse of markets and the aura of a debilitating downturn still linger. Thus, many students are making decisions that would insulate them from another big collapse or downturn, even if the likelihood is low.
They may choose to avoid certain banking jobs, knowing that hints of a downturn will spur managers to lay off new associates. They consider areas where they can focus on learning a new role and gaining maximum experience without having to worry who's the next to go.
Consortium Alumni and Others
1. Consortium alumni today, more than ever, know the value of being ready--being ready for the next opportunity, the next door that opens. Alumni today keep their resumes' up to date, join networking groups, update their skills and are watchful of ugly trends or signs of things not going their way. Long gone are the days when alumni joined a major financial institution two weeks after business school and settled into what might be a 25-year career.
2. Many MBA alumni have wrestled with the difficult decision of whether to add another credential, degree, or certification. To add it requires time and money. They are asking themselves whether they need it to set themselves apart, to add something notable to the resume' or to amass more knowledge in a certain field.
One Consortium alumnus added an MS in quantitative finance this year, and it likely made a difference as a explored roles in start-up finance and private equity. Many others are considering the CFA, and it's not unusual for many Consortium students and alumni to have studied for and passed Level 1. Yet others say an MBA is sufficient and more learning or credentialing should occur in actual experience.
3. Like some students, some alumni have decided to leave traditional banking or positions in finance. They are re-examining their careers and exploring less-conventional fields or less-confining career paths. They still want to use their finance skills. Many say they want one more chance to pursue something that they can be passionate about, regardless of compensation--something about which they would enjoy waking up and doing.
They appreciate the exposure, the experience and the live transactions and client contact in a current role, but they are ready for something more interesting, more dynamic.
4. Alumni, no matter where they are on a finance career path, make tough decisions about family, priorities, values and reality. Alumni in recent years have endured crises, industry upheavals, dot-com crashes, and market turmoil. They have reason to remind themselves of what comes first or what might interfere with their values or priorities.
5. Consortium alumni appreciate and are happy with the contacts, knowledge, skills and confidence that comes with the MBA and are always inclined to put it to work.
7. Alumni are constantly assessing what it takes to move to the next level, get promoted, get noticed and make meaningful contributions. Having come from top-notch schools with rigorous preparation, they tend to set high standards for themselves and push themselves to the next step.
Or they see the success stories of alumni a few years ahead of them and decide they want to follow behind. Hence, they often ask mentors and each other questions about what does it take to advance, how much preparation is necessary, whom to know, or what learning or experience is required.
It's 2010, about to be 2011; students and alumni are asking these questions and reassessing where they are, where they want to be, where they deserve to be, and whether it's time to make a move in some way.
Tracy Williams
Sunday, December 12, 2010
Wednesday, December 8, 2010
What's Around the Corner in 2011?
Will 2010 be memorable in finance circles? There was no major institutional collapse, no memorable moment, or no defining memory. There were financial reform and confirmed regulation, but they had been contemplated the year before. There were no notable financial-institution mergers.
There were occasional scares from European debt markets and the struggle for certain European countries to get their finances in order. There were, as there are always these days, ripple effects all over the globe. There were continual worry about another recession, unemployment trends that never got better, and non-stop chatter about China.
There are worries in municipal markets, as people fret about the deficits and debt among states and local governments. There are faint signs of a revival among those in private equity and venture capital.
The year didn't bring threats to the financial system, an imminent collapse in capitalism, or a demise in hundred-year-old institutions. For many, that was a good thing, signs of times getting better.
As 2011 looms, what can we expect? Or what do we hope for? Where do Consortium students and MBAs wish to be? What career paths do younger finance professionals yearn to plan? Will 2011 bring more of the same--long debates over tax structures, disagreements over whether the recession is over, and little progress in unemployment trends?
What might happen in 2011?
1. Banks are still coming to grips with financial reform and regulation. But the rules of the road are not clear or well-defined. They will adapt institutionally and structurally. But they worry reform and regulation will narrow profit margins and reduce returns on equity. They will, therefore, look for novel, clever ways to boost profitability (new businesses, higher prices to customers, expansion abroad, etc.). The efforts to do so, however, won't be easy.
Restructuring or re-situating themselves while trying to maintain profitability might be enough challenge for big banks--enough to keep them focused inward, instead of outwardly eyeing possible acquisitions. Some might look to acquire smaller institutions if it means getting a quick boost in revenues and if it can be done without exorbitant costs.
2. Everybody is hopeful for continued economic recovery. But everybody--markets, job-seekers, businesses, consumers--has grown fatigued waiting for a sustained upturn, not the quarterly teasers or hints they observed in 2010 or a recovery empowered by government stimulus. Hurdles still exist; perhaps 2011's second half will be the start of the real thing and for the long term.
3. Business-school students in 2011 will have been through rough waters from crisis times. Students will go through school with a different, more realistic mindset. They will still ponder or dream of careers in consulting and investment banking. But they will be more open-minded, will consider broad options, and will be interested in exploring something different. It may no longer be just about the money. Having a life, making a difference, making a contribution and trying something new will count for something, too.
B-schools, including the Consortium 17, continue to attract young professionals as students, and they try hard to convince enrollees that the two years away from job markets will make them better off in the long term--especially those who are in career transition.
4. Banks, financial institutions, and funds will still attract the hardcore finance types into corporate finance, trading and markets. Those who enjoy and are entranced by financial models, quantitative analysis, firm valuation, mergers and acquisitions, and the vagaries and phenomena of capital markets will still head toward banks and funds to be bankers, traders, researchers, investors, and analysts.
5. Presidential politics will gear up in full swing by mid-2011. Market watchers, economists, businesses and traders will look to see which direction political winds might blow in 2012. Will there be more reform and regulation? Will a lackluster recovery justify more stimulus or government intervention? Will new advisers in Obama's economics circle step up and have a voice? Will a Republican majority in Congress overwhelm those who might have novel ways to spur employment?
6. Municipal-bond markets are fluttering; the year to come could be a pivotal one for municipalities struggling to make ends meet and avoid accumulating more debt. And no one has a catch-all solution to how states and cities will grapple with deficits while still trying to support social programs, pensions, schools and universities. A collapse or a default by one large state could have a detrimental ripple effect across other debt markets.
7. European debt markets have sputtered, too, the past year. Every few weeks a country slips into a precarious fiscal state and dominates the news (Greece, Spain, Ireland and others in 2010). And so in 2011, we'll continue to hear discussion, fuss and debate about the value and meaningfulness of the Euro and a European Union.
8. Derivatives trading and derivatives clearance will be better defined, even if it's done among private-sector participants (exchanges, banks, funds, etc.). Financial reform tried to kick-start efforts; more derivatives activity (at least basic, simple trading) will migrate to exchanges, but progress will be slow and deliberate because private-sector participants don't want to risk losing profits or reducing profit margins from trading amond the top dealers. And they must decide who will or should do what and how.
What about the expansion of carbon trading and the market's efforts to put a real price on pollutants and emissions? That, too, will be slow, deliberate, almost a crawl, in part because Congress and Presidential politics never seem to get around to providing the jolt this specialized market requires.
9. Private-equity firms, venture-capital firms and financial sponsors will dare to be aggressive or adventuresome in 2011. They came out of hiding in 2010. With too much capital not doing much at all, many of these firms will decide it's time to put that money to work and take meaningful, measured risks.
As 2011 looms, nobody is predicting surges and booms; nobody is hinting a doom and collapse. A cautious confidence is on the horizon.
Tracy Williams
There were occasional scares from European debt markets and the struggle for certain European countries to get their finances in order. There were, as there are always these days, ripple effects all over the globe. There were continual worry about another recession, unemployment trends that never got better, and non-stop chatter about China.
There are worries in municipal markets, as people fret about the deficits and debt among states and local governments. There are faint signs of a revival among those in private equity and venture capital.
The year didn't bring threats to the financial system, an imminent collapse in capitalism, or a demise in hundred-year-old institutions. For many, that was a good thing, signs of times getting better.
As 2011 looms, what can we expect? Or what do we hope for? Where do Consortium students and MBAs wish to be? What career paths do younger finance professionals yearn to plan? Will 2011 bring more of the same--long debates over tax structures, disagreements over whether the recession is over, and little progress in unemployment trends?
What might happen in 2011?
1. Banks are still coming to grips with financial reform and regulation. But the rules of the road are not clear or well-defined. They will adapt institutionally and structurally. But they worry reform and regulation will narrow profit margins and reduce returns on equity. They will, therefore, look for novel, clever ways to boost profitability (new businesses, higher prices to customers, expansion abroad, etc.). The efforts to do so, however, won't be easy.
Restructuring or re-situating themselves while trying to maintain profitability might be enough challenge for big banks--enough to keep them focused inward, instead of outwardly eyeing possible acquisitions. Some might look to acquire smaller institutions if it means getting a quick boost in revenues and if it can be done without exorbitant costs.
2. Everybody is hopeful for continued economic recovery. But everybody--markets, job-seekers, businesses, consumers--has grown fatigued waiting for a sustained upturn, not the quarterly teasers or hints they observed in 2010 or a recovery empowered by government stimulus. Hurdles still exist; perhaps 2011's second half will be the start of the real thing and for the long term.
3. Business-school students in 2011 will have been through rough waters from crisis times. Students will go through school with a different, more realistic mindset. They will still ponder or dream of careers in consulting and investment banking. But they will be more open-minded, will consider broad options, and will be interested in exploring something different. It may no longer be just about the money. Having a life, making a difference, making a contribution and trying something new will count for something, too.
B-schools, including the Consortium 17, continue to attract young professionals as students, and they try hard to convince enrollees that the two years away from job markets will make them better off in the long term--especially those who are in career transition.
4. Banks, financial institutions, and funds will still attract the hardcore finance types into corporate finance, trading and markets. Those who enjoy and are entranced by financial models, quantitative analysis, firm valuation, mergers and acquisitions, and the vagaries and phenomena of capital markets will still head toward banks and funds to be bankers, traders, researchers, investors, and analysts.
5. Presidential politics will gear up in full swing by mid-2011. Market watchers, economists, businesses and traders will look to see which direction political winds might blow in 2012. Will there be more reform and regulation? Will a lackluster recovery justify more stimulus or government intervention? Will new advisers in Obama's economics circle step up and have a voice? Will a Republican majority in Congress overwhelm those who might have novel ways to spur employment?
6. Municipal-bond markets are fluttering; the year to come could be a pivotal one for municipalities struggling to make ends meet and avoid accumulating more debt. And no one has a catch-all solution to how states and cities will grapple with deficits while still trying to support social programs, pensions, schools and universities. A collapse or a default by one large state could have a detrimental ripple effect across other debt markets.
7. European debt markets have sputtered, too, the past year. Every few weeks a country slips into a precarious fiscal state and dominates the news (Greece, Spain, Ireland and others in 2010). And so in 2011, we'll continue to hear discussion, fuss and debate about the value and meaningfulness of the Euro and a European Union.
8. Derivatives trading and derivatives clearance will be better defined, even if it's done among private-sector participants (exchanges, banks, funds, etc.). Financial reform tried to kick-start efforts; more derivatives activity (at least basic, simple trading) will migrate to exchanges, but progress will be slow and deliberate because private-sector participants don't want to risk losing profits or reducing profit margins from trading amond the top dealers. And they must decide who will or should do what and how.
What about the expansion of carbon trading and the market's efforts to put a real price on pollutants and emissions? That, too, will be slow, deliberate, almost a crawl, in part because Congress and Presidential politics never seem to get around to providing the jolt this specialized market requires.
9. Private-equity firms, venture-capital firms and financial sponsors will dare to be aggressive or adventuresome in 2011. They came out of hiding in 2010. With too much capital not doing much at all, many of these firms will decide it's time to put that money to work and take meaningful, measured risks.
As 2011 looms, nobody is predicting surges and booms; nobody is hinting a doom and collapse. A cautious confidence is on the horizon.
Tracy Williams
Wednesday, December 1, 2010
Where Do We Go From Here?
The times are peculiar. Here we are, two years beyond the collapse of Lehman Brothers and the near collapse of the financial system of the fall of 2008. The system--thanks in part to bailouts and quick marriages of top firms--picked itself up, and a slow recovery ensued.
Yet we haven't returned to the euphoria of pre-2007, where deals proliferated, trading indices surged steadily and bankers could be choosy about what they wanted to work on and which clients they wanted to work with. Two years after the tumultuous fall, 2008, everybody acknowledges the end of the crisis. But few will admit times are booming in finance (or in certain sectors of the economy). And if there are faint signs of a sharp upturn or a flurry of new deals, transactions, and upward-moving markets, everybody treads carefully, as if to always prepare for the worst.
MBA recruiters in finance continue to knock on the doors of business schools, make elaborate, impressive presentations to first-year students. They try to lure students and impress them. But they recruit and hire with caution--with a steady peek at markets and business in the year ahead to assure themselves they won't stockpile their banking teams with associates only to be forced to downsize shortly afterward.
Still, post-crisis, there are deals to be done, investments to be analyzed, portfolios to managed, clients to be wooed, and business objectives to be met. New bankers, associates, and analysts are necessary to get it all done. Nonetheless, in the back of the minds of senior management at banks, insurance companies, investment firms, and funds is a lingering question: Has the tide turned for sure? The dark memories of 2008 continue to haunt.
Because of financial reform (including recent legislation and Basel III guidance), banks are treading most carefully. They must restructure vast parts of their businesses and are deeply entrenched in strategy sessions figuring out how to do it--how to conduct business, do trades, and make investments with a constrained balance sheet, with increased capital requirements and with rules that don't permit them to trade for their own accounts.
They must respond to questions: What do we do with our proprietary-trading desks? What do we with businesses that invest in new ventures and hedge funds? How do we make loans, underwrite securities, or trade derivatives when new rules that limit how much we can do or what we can do? And who will do it? How many are necessary to do it? For new MBA graduates or more junior finance professionals, what career paths will there be? And how do we attract top talent into a profession besieged by much uncertainty?
Meanwhile, financial institutions are pressured to show stable profits, revenue growth and business expansion. They ask: In the new environment, where will revenue growth come from? From a renewed focus on retail activities? From international expansion? From new products? From investing in businesses and products to boost market share?
Some have begun to take those first steps. JPMorgan announced expansion in international sectors earlier this year. Other big banks (including BoA-Merrill, JPMorgan and Credit Suisse) have begun to emphasize corporate banking more. Just about everybody wants to grow their private-banking and investment-management groups.
Because they must graple with these tough, strategic questions, financial institutions become hesitant about hiring too swiftly and too much. They are careful about making lateral hires, adding experienced talent or opening their doors to large numbers of new MBA graduates until they are sure the business opportunity is there or the returns on capital are sufficiently achievable. And until some of them figure out how to weave through the regulatory requirements.
Some are being forced to shed parts of their businesses (proprietary trading, hedge-fund-like activities, etc.). But even that's not easy, as they tenderly extract the parts (assets, people, systems, software, etc.) and then sell them or spin them off. That will take time, while they figure how to do it and to whom to sell. Some must decide what they want to be and do (Be a regulated bank? Be a pure brokerage outfit? Be a prop-trading fund?). That, too, will take time, as they weigh input from various stakeholders (shareholders, employees, the board, senior managers, etc.).
And some have decided that the best strategy is to become what they once were: a commercial bank with basic deposit and lending businesses, a brokerage firm without trading or banking units, an investment bank with no brokerage and lending units, an insurance company with no ties to banking and brokerage, etc.
Most will contend current times are better than crisis times--that financial institutions are hiring, not reducing staff significantly; that they are doing business, not tending to emergencies or trying to save themselves, and that they are generating profits and satisfactory returns, not hunkered down to pare down losses. Nevertheless, there is still a feeling we're on the hump, just not yet far over it.
Tracy Williams
Yet we haven't returned to the euphoria of pre-2007, where deals proliferated, trading indices surged steadily and bankers could be choosy about what they wanted to work on and which clients they wanted to work with. Two years after the tumultuous fall, 2008, everybody acknowledges the end of the crisis. But few will admit times are booming in finance (or in certain sectors of the economy). And if there are faint signs of a sharp upturn or a flurry of new deals, transactions, and upward-moving markets, everybody treads carefully, as if to always prepare for the worst.
MBA recruiters in finance continue to knock on the doors of business schools, make elaborate, impressive presentations to first-year students. They try to lure students and impress them. But they recruit and hire with caution--with a steady peek at markets and business in the year ahead to assure themselves they won't stockpile their banking teams with associates only to be forced to downsize shortly afterward.
Still, post-crisis, there are deals to be done, investments to be analyzed, portfolios to managed, clients to be wooed, and business objectives to be met. New bankers, associates, and analysts are necessary to get it all done. Nonetheless, in the back of the minds of senior management at banks, insurance companies, investment firms, and funds is a lingering question: Has the tide turned for sure? The dark memories of 2008 continue to haunt.
Because of financial reform (including recent legislation and Basel III guidance), banks are treading most carefully. They must restructure vast parts of their businesses and are deeply entrenched in strategy sessions figuring out how to do it--how to conduct business, do trades, and make investments with a constrained balance sheet, with increased capital requirements and with rules that don't permit them to trade for their own accounts.
They must respond to questions: What do we do with our proprietary-trading desks? What do we with businesses that invest in new ventures and hedge funds? How do we make loans, underwrite securities, or trade derivatives when new rules that limit how much we can do or what we can do? And who will do it? How many are necessary to do it? For new MBA graduates or more junior finance professionals, what career paths will there be? And how do we attract top talent into a profession besieged by much uncertainty?
Meanwhile, financial institutions are pressured to show stable profits, revenue growth and business expansion. They ask: In the new environment, where will revenue growth come from? From a renewed focus on retail activities? From international expansion? From new products? From investing in businesses and products to boost market share?
Some have begun to take those first steps. JPMorgan announced expansion in international sectors earlier this year. Other big banks (including BoA-Merrill, JPMorgan and Credit Suisse) have begun to emphasize corporate banking more. Just about everybody wants to grow their private-banking and investment-management groups.
Because they must graple with these tough, strategic questions, financial institutions become hesitant about hiring too swiftly and too much. They are careful about making lateral hires, adding experienced talent or opening their doors to large numbers of new MBA graduates until they are sure the business opportunity is there or the returns on capital are sufficiently achievable. And until some of them figure out how to weave through the regulatory requirements.
Some are being forced to shed parts of their businesses (proprietary trading, hedge-fund-like activities, etc.). But even that's not easy, as they tenderly extract the parts (assets, people, systems, software, etc.) and then sell them or spin them off. That will take time, while they figure how to do it and to whom to sell. Some must decide what they want to be and do (Be a regulated bank? Be a pure brokerage outfit? Be a prop-trading fund?). That, too, will take time, as they weigh input from various stakeholders (shareholders, employees, the board, senior managers, etc.).
And some have decided that the best strategy is to become what they once were: a commercial bank with basic deposit and lending businesses, a brokerage firm without trading or banking units, an investment bank with no brokerage and lending units, an insurance company with no ties to banking and brokerage, etc.
Many, too, must patch up their reputations post-crisis and determine how to present themselves to the mass market--to consumers, to corporate clients, to trading counterparties, to regulators, and to the media and politicians. That hasn't been easy, because 2008's near collapse can is tied to--among many factors--behavior and activities from some financial institutions.
Financial institutions, too, continue to try to figure out the compensation puzzle--how to pay people handsomely, how to attract smart people to the profession, but how to do it in a way that will not irk shareholders and the public or draw gnawing attention from the media. How do they assure themselves they can show up at top business schools and attract eager, motivated students to join their institutions? What can they do to ensure that top mid-level talent (the deal-doers, the traders, the investors, the salespeople, the researchers, the operations experts) will not flee for other options?
With so much to figure out, so much soul-searching and so much trying to visualize what they want, can and need to be, they proceed or plod with caution. So instead of hiring 100 new MBA associates as they might have done in 2005, they settle for 50 or 75. Instead of bring aboard 20 new experts or professionals to take on a new product, new venture or new client base, they show restraint and start out with just 5 or 10--just in case the new business doesn't take off or regulation and balance-sheet constraints force them to grow slowly.
Most will contend current times are better than crisis times--that financial institutions are hiring, not reducing staff significantly; that they are doing business, not tending to emergencies or trying to save themselves, and that they are generating profits and satisfactory returns, not hunkered down to pare down losses. Nevertheless, there is still a feeling we're on the hump, just not yet far over it.
Tracy Williams
Thursday, November 18, 2010
Now That You Are Manager....
You've just been appointed manager of your business team.
This is your first official role managing professionals. Your team includes four analysts, three associates and others who until now have been your peers. It might be a trading desk, a client-relationship team, a product sales group, an investment-research unit or a banking team focused on deals and corporate finance.
You have little managerial experience. You might have led the finance club in business school, directed special projects within your firm or supervised interns the previous summer.
What do you do? How do you recruit, hire, fire or transfer employees? How do you evaluate performance, promote talent, or encourage exceptional people to go elsewhere to reach their own goals? How do you articulate expectations and objectives?
How do you get the most out of team members day in and day out? How do you manage people, processes, business activity and operations to ensure all goals are exceeded?
Financial institutions are notable for not grooming management talent. They expect MBA associates to hit the ground ready to contribute significantly to deals, trades, investments, analysis, client relationships, product sales, risk management, business growth, and new client relationships. The pressure to win the deal, bring in more clients, or book the big block trade supercedes the firm's desire to help associates become competent, successful managers of business teams or larger units and sectors.
Analysts and associates spend several years in the trenches doing deals and winning business. They seek to build an inhouse reputation of being an outstanding trader, deal-doer, researcher, investment analyst or salesperson. And then one day, the firm appoints the associate to a vice president spot. Soon afterward, the one-time associate with little experience leading an organization is asked to manage a team of finance professionals.
Some institutions and companies have known track records in preparing people to be business managers and leaders from the day they start. We've heard about them and may have studied them in business school. Many are familiar with Jack Welch's management and leadership sessions at GE or the company's obsession with management depth charts and grooming those who will be division heads in the years to come.
Senior managers at GE or other large companies with deep management bench strength spend enormous time and resources identifying management potential. Recognizing and developing management talent is a priority.
Some big banks, singularly attentive to the next big deal, the next big trade, or the new big client, haven't always developed management talent sufficiently. They haven't devoted resources to help star deal-makers and client managers transition into critical business-management roles. Some know they have more work to do, but just don't get around to it.
Yet because of business demands, fierce competition from others in the industry, business mishaps or financial crises, or perhaps because of regulation, reform and pressing demand to develop new products, providing guidance to associates to become strong, effective managers and shrewd leaders is not necessarily a priority.
What can you do in your new management role, with a staff, a budget, and tough expectations about what you must accomplish? How do you motivate your team? When thrust in this new role, how do prepare without having to revert to old b-school texts in organization management, organization behavior, management accounting, or business leadership?
1. First, set team goals, objectives, and expectations. Define them and share them with all.
Get input on them. Review progress toward goals regularly. Be prepared to adjust goals and objectives if business conditions change.
2. With the team, be tough about those goals and expectations. Be serious about them, but be fair, flexible, and understanding of how people will reach them.
3. With staff members and employees, listen, be attentive, and be patient.
They have their ears to the ground. They understand markets, models, clients, operations, processes, and operations. They know people, have experience, and know how to get things done--whether responding to clients, regulators, internal auditors, or senior managers.
4. Communicate clearly, regularly and consistently. Provide constructive, prompt, logical feedback. Evaluate individual performance by evaluating goals, expectations and career next steps. Evaluate and provide feedback on an ongoing basis.
The team should never be confused or befuddled about priorities, expectations, and objectives. The team should not misunderstand how it has performed, where it fell short, or where it is making noteworthy progress.
5. Support employees' own desires to grow, get promoted and reach the next level. Support their efforts to develop, network, and increase knowledge in a specific topic or area. But do so within the framework of daily work responsibilities, project deadlines, client requests and other urgencies.
6. Show poise, be in control, and be calm. Speak sternly when necessary, but never in a rage, in a disrepectful way or in a profane way.
7. Professionals want to be respected and acknowledged. Show respect, be courteous, don't ridicule or be condescending. Don't taunt, talk down, threaten or instill fear.
8. Have confidence in the team and what members can do and accomplish. Boost confidence in those who have potential and talent, but are not sure of themselves.
9. Give team members a chance to have input, feel empowered, be accountable and feel like an important participant. Encourage others to speak up or insert their views without repercussion.
10. Let employees, staff members, colleagues and even those senior to you know that you are serious about what the overall mission is. Be serious about deadlines, projects, targets, goals, and tasks, but be readily available and helpful in all efforts to meet and complete them.
11. Professionals want to be well-compensated. Take compensation seriously, and strive to be fair and have a methodical, logical approach to it.
Professionals, too, like attention when they do well. Highlight publicly the importance of individual roles, notable accomplishments, good deeds, or special efforts. In other words, reinforce good behavior or exceptional performance.
12. Be comfortable and secure with letting team members have the attention, headlines or honor, if they deserve it.
13. Accept constructive input or new ideas, take them seriously and implement the best ones at once and with your strong endorsement. Informed, constructive feedback--even from staff members--leads to constructive progress and also new ideas, new products, and efficiencies.
14. When team members show progress, give their best or are developing steadily, show and express your commitment to such development. Be their champion or best advocate enthusiastically.
15. Be comfortable with allowing outstanding performers to depart and move on to the next level, if that is the only way they will continue to progress or if they prefer to be challenged differently.
16. Showcase and focus on the strengths of individuals. Provide support and assistance to manage weaknesses.
________________
The best managers appreciate, recognize and nurture the talent from the team that works around them. They allow the team to support and inspire them in the overall effort to lead.
Managing people, a team, group, sector, or the entire company is complex. By focusing on goals, objectives, and the strengths and talents of people, it can be rewarding.
Tracy Williams
This is your first official role managing professionals. Your team includes four analysts, three associates and others who until now have been your peers. It might be a trading desk, a client-relationship team, a product sales group, an investment-research unit or a banking team focused on deals and corporate finance.
You have little managerial experience. You might have led the finance club in business school, directed special projects within your firm or supervised interns the previous summer.
What do you do? How do you recruit, hire, fire or transfer employees? How do you evaluate performance, promote talent, or encourage exceptional people to go elsewhere to reach their own goals? How do you articulate expectations and objectives?
How do you get the most out of team members day in and day out? How do you manage people, processes, business activity and operations to ensure all goals are exceeded?
Financial institutions are notable for not grooming management talent. They expect MBA associates to hit the ground ready to contribute significantly to deals, trades, investments, analysis, client relationships, product sales, risk management, business growth, and new client relationships. The pressure to win the deal, bring in more clients, or book the big block trade supercedes the firm's desire to help associates become competent, successful managers of business teams or larger units and sectors.
Analysts and associates spend several years in the trenches doing deals and winning business. They seek to build an inhouse reputation of being an outstanding trader, deal-doer, researcher, investment analyst or salesperson. And then one day, the firm appoints the associate to a vice president spot. Soon afterward, the one-time associate with little experience leading an organization is asked to manage a team of finance professionals.
Some institutions and companies have known track records in preparing people to be business managers and leaders from the day they start. We've heard about them and may have studied them in business school. Many are familiar with Jack Welch's management and leadership sessions at GE or the company's obsession with management depth charts and grooming those who will be division heads in the years to come.
Senior managers at GE or other large companies with deep management bench strength spend enormous time and resources identifying management potential. Recognizing and developing management talent is a priority.
Some big banks, singularly attentive to the next big deal, the next big trade, or the new big client, haven't always developed management talent sufficiently. They haven't devoted resources to help star deal-makers and client managers transition into critical business-management roles. Some know they have more work to do, but just don't get around to it.
Yet because of business demands, fierce competition from others in the industry, business mishaps or financial crises, or perhaps because of regulation, reform and pressing demand to develop new products, providing guidance to associates to become strong, effective managers and shrewd leaders is not necessarily a priority.
What can you do in your new management role, with a staff, a budget, and tough expectations about what you must accomplish? How do you motivate your team? When thrust in this new role, how do prepare without having to revert to old b-school texts in organization management, organization behavior, management accounting, or business leadership?
1. First, set team goals, objectives, and expectations. Define them and share them with all.
Get input on them. Review progress toward goals regularly. Be prepared to adjust goals and objectives if business conditions change.
2. With the team, be tough about those goals and expectations. Be serious about them, but be fair, flexible, and understanding of how people will reach them.
3. With staff members and employees, listen, be attentive, and be patient.
They have their ears to the ground. They understand markets, models, clients, operations, processes, and operations. They know people, have experience, and know how to get things done--whether responding to clients, regulators, internal auditors, or senior managers.
4. Communicate clearly, regularly and consistently. Provide constructive, prompt, logical feedback. Evaluate individual performance by evaluating goals, expectations and career next steps. Evaluate and provide feedback on an ongoing basis.
The team should never be confused or befuddled about priorities, expectations, and objectives. The team should not misunderstand how it has performed, where it fell short, or where it is making noteworthy progress.
5. Support employees' own desires to grow, get promoted and reach the next level. Support their efforts to develop, network, and increase knowledge in a specific topic or area. But do so within the framework of daily work responsibilities, project deadlines, client requests and other urgencies.
6. Show poise, be in control, and be calm. Speak sternly when necessary, but never in a rage, in a disrepectful way or in a profane way.
7. Professionals want to be respected and acknowledged. Show respect, be courteous, don't ridicule or be condescending. Don't taunt, talk down, threaten or instill fear.
8. Have confidence in the team and what members can do and accomplish. Boost confidence in those who have potential and talent, but are not sure of themselves.
9. Give team members a chance to have input, feel empowered, be accountable and feel like an important participant. Encourage others to speak up or insert their views without repercussion.
10. Let employees, staff members, colleagues and even those senior to you know that you are serious about what the overall mission is. Be serious about deadlines, projects, targets, goals, and tasks, but be readily available and helpful in all efforts to meet and complete them.
11. Professionals want to be well-compensated. Take compensation seriously, and strive to be fair and have a methodical, logical approach to it.
Professionals, too, like attention when they do well. Highlight publicly the importance of individual roles, notable accomplishments, good deeds, or special efforts. In other words, reinforce good behavior or exceptional performance.
12. Be comfortable and secure with letting team members have the attention, headlines or honor, if they deserve it.
13. Accept constructive input or new ideas, take them seriously and implement the best ones at once and with your strong endorsement. Informed, constructive feedback--even from staff members--leads to constructive progress and also new ideas, new products, and efficiencies.
14. When team members show progress, give their best or are developing steadily, show and express your commitment to such development. Be their champion or best advocate enthusiastically.
15. Be comfortable with allowing outstanding performers to depart and move on to the next level, if that is the only way they will continue to progress or if they prefer to be challenged differently.
16. Showcase and focus on the strengths of individuals. Provide support and assistance to manage weaknesses.
________________
The best managers appreciate, recognize and nurture the talent from the team that works around them. They allow the team to support and inspire them in the overall effort to lead.
Managing people, a team, group, sector, or the entire company is complex. By focusing on goals, objectives, and the strengths and talents of people, it can be rewarding.
Tracy Williams
Tuesday, November 9, 2010
Yet Another Ranking of B-Schools?
Yet another elaborate ranking of business schools? Like all others, does this provide the most comprehensive and useful assessment of business schools around the world? Or with the growing numbers that claim ranking authority, do they confuse prospects, professors and alumni all concerned about the value of MBA degrees? Do they help or undermine prospects' efforts to decide whether they should pursue an MBA and where they should attend?
The Economist magazine recently announced its latest rankings in a publication called ("Which MBA?"). (See www.economist.com/whichmba.) Its rankings are not new. The magazine has been at it for nine years. This year, however, they may rankle those who care about lists and rankings, because of the substantial shifts among schools in its top 10 and top 25.
As with many who dare to provide top 10 or top 50 lists, criteria matter. The magazine altered criteria significantly enough to produce a demonstrative change in its rankings. Critics will ask: Do business schools change that much from year to year to alter rankings that much? Or supporters will respond: Should criteria change whenever appropriate to ensure that business schools are emphasizing the right objectives or serving the most useful purpose?
CFN addressed concern, apprehension and usefulness in rankings in a May, 2009, blog (,http://consortiumfinancenetwork.blogspot.com/2009/05/rankings-take-peek-but-be-cautious.html) and provided guidelines on how to use them or when to ignore them. Numerous publications (BusinessWeek, USNews, WSJ, et. al.) produce their lists with fanfare and contribute to confusion and panic about which schools are tops and which schools are lagging.
Still, rankings proliferate, and those who read, study and perhaps care about them have gotten used to, say, a Dartmouth being no. 1, no. 5, or no. 11. All depends on who ranks and when. Eighteen months later, the advice is probably essentially the same. Take a peek at the rankings, but don't get obsessed by them.
Notwithstanding The Economist's latest rankings (where Consortium schools Dartmouth and Cal-Berkeley rank no. 2 and 3, respectively, on a global stage), it makes sense to review criteria. It focuses less on GMAT scores of entering students and evaluates schools based on the job they do to get students employed and get them into high-paying, meaningful positions (meaning, MBA-level jobs, where they use MBA-learned skills and are on a rapid MBA-influenced pace). It gives this a 55% weighting.
It also tries to measure the extent to which alumni networks can help spur an MBA graduate's career. Some b-school alumni become indifferent to or removed from their b-school experiences for many reasons. The Economist's criteria measure the efforts b-schools make to reach out and manage alumni networks for the benefit of students. The criteria suggest schools should spur alumni to want to turn back and assist recent graduates.
GMAT scores and a school's ability to attact smart students are acknowledged, but not weighted significantly. Starting compensation is weighted more heavily, although it understands that schools (especially international schools) that attract older, experienced students will likely produce graduates with higher starting salaries.
Business schools, of course, do teach courses, offer classroom instruction, promote inquiry, sharen knowledge in many business disciplines and sponsor invaluable research. The Economist understands how all that contributes to a high-quality graduate. But it is unapologetic when it says that these factors count less in its rankings. Hence, the prospect assessing a school based on the quality and depth of research in finance, accounting or operations or the experience of faculty wouldn't pay much attention to these rankings. And The Economist even says so.
As with many rankings, the familiar schools appear in "Which MBA?", even if the order or rank is different from list to list. Consortium schools fare well in this ranking and in many others. Sometimes there is no pattern in rankings from list to list.
In The Economist's sub-categories, Dartmouth, Cal-Berkeley, USC and Virginia are top-10 schools in helping students transition to new, different careers. Cal-Berkeley and USC are top-5 schools in presenting networking opportunities to graduates.
If actual order of rank is not obsessed over, rankings can be useful. They provide information or highlight schools that might not otherwise be known or might deserve more attention. If obsessed over, they detract from the major objectives of going to b-school or the experiences and knowledge that can be attained from attending.
Tracy Williams
The Economist magazine recently announced its latest rankings in a publication called ("Which MBA?"). (See www.economist.com/whichmba.) Its rankings are not new. The magazine has been at it for nine years. This year, however, they may rankle those who care about lists and rankings, because of the substantial shifts among schools in its top 10 and top 25.
As with many who dare to provide top 10 or top 50 lists, criteria matter. The magazine altered criteria significantly enough to produce a demonstrative change in its rankings. Critics will ask: Do business schools change that much from year to year to alter rankings that much? Or supporters will respond: Should criteria change whenever appropriate to ensure that business schools are emphasizing the right objectives or serving the most useful purpose?
CFN addressed concern, apprehension and usefulness in rankings in a May, 2009, blog (,http://consortiumfinancenetwork.blogspot.com/2009/05/rankings-take-peek-but-be-cautious.html) and provided guidelines on how to use them or when to ignore them. Numerous publications (BusinessWeek, USNews, WSJ, et. al.) produce their lists with fanfare and contribute to confusion and panic about which schools are tops and which schools are lagging.
Still, rankings proliferate, and those who read, study and perhaps care about them have gotten used to, say, a Dartmouth being no. 1, no. 5, or no. 11. All depends on who ranks and when. Eighteen months later, the advice is probably essentially the same. Take a peek at the rankings, but don't get obsessed by them.
Notwithstanding The Economist's latest rankings (where Consortium schools Dartmouth and Cal-Berkeley rank no. 2 and 3, respectively, on a global stage), it makes sense to review criteria. It focuses less on GMAT scores of entering students and evaluates schools based on the job they do to get students employed and get them into high-paying, meaningful positions (meaning, MBA-level jobs, where they use MBA-learned skills and are on a rapid MBA-influenced pace). It gives this a 55% weighting.
It also tries to measure the extent to which alumni networks can help spur an MBA graduate's career. Some b-school alumni become indifferent to or removed from their b-school experiences for many reasons. The Economist's criteria measure the efforts b-schools make to reach out and manage alumni networks for the benefit of students. The criteria suggest schools should spur alumni to want to turn back and assist recent graduates.
GMAT scores and a school's ability to attact smart students are acknowledged, but not weighted significantly. Starting compensation is weighted more heavily, although it understands that schools (especially international schools) that attract older, experienced students will likely produce graduates with higher starting salaries.
Business schools, of course, do teach courses, offer classroom instruction, promote inquiry, sharen knowledge in many business disciplines and sponsor invaluable research. The Economist understands how all that contributes to a high-quality graduate. But it is unapologetic when it says that these factors count less in its rankings. Hence, the prospect assessing a school based on the quality and depth of research in finance, accounting or operations or the experience of faculty wouldn't pay much attention to these rankings. And The Economist even says so.
As with many rankings, the familiar schools appear in "Which MBA?", even if the order or rank is different from list to list. Consortium schools fare well in this ranking and in many others. Sometimes there is no pattern in rankings from list to list.
In The Economist's sub-categories, Dartmouth, Cal-Berkeley, USC and Virginia are top-10 schools in helping students transition to new, different careers. Cal-Berkeley and USC are top-5 schools in presenting networking opportunities to graduates.
If actual order of rank is not obsessed over, rankings can be useful. They provide information or highlight schools that might not otherwise be known or might deserve more attention. If obsessed over, they detract from the major objectives of going to b-school or the experiences and knowledge that can be attained from attending.
Tracy Williams
Wednesday, October 27, 2010
Can Leadership Be Taught?
The debate is probably as old as commerce itself. Can competent business leadership be taught? Is it something inherited? Is it an inborn trait? Or can it be developed, taught, groomed, or nurtured? Can business schools teach students to develop habits, skills, practices, knowledge and analysis to become strong senior leaders of major corporations?
The Consortium's IN Magazine (online at http://www.inmagazine.cgsm.org/) permitted two Consortium alumni to tackle the same questions. They hold their "debate" in the latest issue. Alumni Michael Carson and Christopher Earley each take sides and go at it--of course, in a respectful, business-like way. There are no easy answers to the question, no matter if some think so. Carson and Earley recognize that in their analyses.
There are some skills, experiences and background senior managers and strong leaders must have. They aren't necessarily born with them. On the other side, some people have natural tendencies to manage complex organizations, convince constituencies of their points of view, and execute business strategy (or "make things happen").
In the leadership of global financial institutions, skills, background and knowledge are a necessity to lead and run complex organizations. Even the best bank CEOs of global banks can't run their organizations without a sufficient understanding of capital markets, market and credit risk, bank products, systems and technology, and financial regulation. More and more, they also need to understand global cultures, politics and economics.
But if all else is equal (meaning, if we assume among top-tier managers, knowledge and skills are equal), will the best leader be the one who learned leadership in school, learned along the way to becoming senior, or simply has an inherent ability to manage, execute, visualize and inspire?
When evaluating leadership, performance (based on such widely known metrics as return-on-equity or percentage increase in stock price or market value of the firm) counts for much. Performance will typically be the first benchmark in determining who is a good leader or who is mediocre and drifted up the ranks with good luck in hand.
The ability to execute counts, too. The best leaders--despite what might be happening on the bottom line--manage to overcome obstacles and resistance to get things done. That can be projects, acquisitions, expansions, and innovation. It can also be managing through disaster, catastrophe, or regulatory hurdles. Often, execution and performance are correlated
Charisma counts, too, although it's hard to define or describe. Strong leaders are able to inspire employees, get the best and most from them, and harbor a culture where people want to be there and want to contribue. They have that something special to win over clients, squash bureaucracy and inefficiencies, and encourage boundless innovation. They get others to follow them, because others believe the creed, understand the mission, or enjoy the culture within which they work.
The debate above is really then about whether these qualities and abilities can be learned in business school or developed along the path to senior management.
Business schools, we know, can't hand over a platter with a to-do menu that shows the budding executive how to be a strong leader. They can, however, study and assess strong leadership in the past and show how leaders were effective in numerous circumstances, business situations, or industries. They can show how they fared in financial difficulty or how they might have overhauled an organization through bankruptcy. They can show how they envisioned and pushed for expansion, innovation, or new ideas and products. They can show how they re-engineered companies, directed them into new businesses or products, or boosted performance by cutting costs without killing the enterprise.
In finance, over the past several years, assessing strong leadership has been tricky. Those who were described as powerful, effective leaders a decade ago were being blamed for the financial crisis years later. In 2005, few could be found who might have said the leaders of Merrill Lynch, Lehman Brothers, Wachovia, and AIG were incompetent, clueless or out of touch.
At Merrill, CEO Stanley O'Neal rode the coattails of a senior mentor, but proved himself along the way to be smart, detailed-oriented, meticulous, and extraordinary astute about cost-cutting and boosting Merrill's returns. He had a reputable background in investment banking and spent time as CFO.
Once the crisis came about, O'Neal was suddenly regarded as aloof, unaware of the risks the firm had been taking throughout its product lines, unfamiliar with the nuances of mortgage products and securitization, and incapable of gaining a full grip of the risk-management role.
Former Merrill CEO John Thain was considered one of the brightest, young leaders at Goldman Sachs during his rise there. He moved on to be the vital force that led the New York Stock Exchange out of the dark ages of sort by expanding the organization, taking it international, welcoming its electronic transition and revolutionizing how it oversaw stock trading around the world. Yet at Merrill, he is considered the one who never fully grasped the deep problems at Merrill or never successfully disclosed the extent of them to outsiders.
At Lehman, Richard Fuld for years was considered its heart and soul. He was the link to the old-boy Lehman, the senior banker who brought Lehman back from its early 1990s ashes (when it was owned by American Express) and marched it back to its prestigious bulge-bracket status by the mid-2000s. It was his leadership, many said years ago, that willed Lehman back into solvency in the late 1990s' financial crisis, when rumors about its liquidity problems almost sacked the firm.
Today, many consider Fuld (along with Bear Stearns' Jimmy Cayne) an example of senior leadership without a clue of how the complicated organization below him was run or with no understanding of the risks of mortgage products and high leverage on the balance sheet.
At Goldman Sachs and at the U.S. Treasury, Robert Rubin was considered a stalwart, bright leader. The history books say Goldman Sachs separated itself from the pack under Rubin's leadership. These days, some want to blame the financial woes of Citigroup on him, when he was a senior insider at the bank and observed much of the decision-making that led to disastrous results during the crisis.
The lesson here is that those who assess competent leadership shouldn't be so quick to attach labels. Or they should develop more careful, thoughtful criteria and assess leadership not over the span of a few momentum years, but the span of a long career. They should assess leadership in the face of many scenarios, circumstances and benchmarks.
This doesn't, however, address the original question: Are the best leaders born that way? Some are born with or develop traits that contribute to outstanding leadership: passion, confidence, enthusiasm, intensity, etc. Many, however, learned the trade along the way, mastered their industry or function, established networks and relationships, and sprouted from a foundation of skills they learned long ago (while in business school?). The best leaders combine skills and natural abilities: They combine accounting and finance skills with passion and intensity, for example.
There is no easy answer. Carson and Earley in their own essays tackle the topic and deserve a hearing. Some things can't be dismissed, however. If you plan to become a strong leader in finance or plan to lead a bank or financial institution, you can't do it without a competent appreciation and understanding of accounting, finance, capital markets, economics, marketing, organization management, financial regulation, and business policy--skills you can, for certain, pick up in business school.
Tracy Williams
The Consortium's IN Magazine (online at http://www.inmagazine.cgsm.org/) permitted two Consortium alumni to tackle the same questions. They hold their "debate" in the latest issue. Alumni Michael Carson and Christopher Earley each take sides and go at it--of course, in a respectful, business-like way. There are no easy answers to the question, no matter if some think so. Carson and Earley recognize that in their analyses.
There are some skills, experiences and background senior managers and strong leaders must have. They aren't necessarily born with them. On the other side, some people have natural tendencies to manage complex organizations, convince constituencies of their points of view, and execute business strategy (or "make things happen").
In the leadership of global financial institutions, skills, background and knowledge are a necessity to lead and run complex organizations. Even the best bank CEOs of global banks can't run their organizations without a sufficient understanding of capital markets, market and credit risk, bank products, systems and technology, and financial regulation. More and more, they also need to understand global cultures, politics and economics.
But if all else is equal (meaning, if we assume among top-tier managers, knowledge and skills are equal), will the best leader be the one who learned leadership in school, learned along the way to becoming senior, or simply has an inherent ability to manage, execute, visualize and inspire?
When evaluating leadership, performance (based on such widely known metrics as return-on-equity or percentage increase in stock price or market value of the firm) counts for much. Performance will typically be the first benchmark in determining who is a good leader or who is mediocre and drifted up the ranks with good luck in hand.
The ability to execute counts, too. The best leaders--despite what might be happening on the bottom line--manage to overcome obstacles and resistance to get things done. That can be projects, acquisitions, expansions, and innovation. It can also be managing through disaster, catastrophe, or regulatory hurdles. Often, execution and performance are correlated
Charisma counts, too, although it's hard to define or describe. Strong leaders are able to inspire employees, get the best and most from them, and harbor a culture where people want to be there and want to contribue. They have that something special to win over clients, squash bureaucracy and inefficiencies, and encourage boundless innovation. They get others to follow them, because others believe the creed, understand the mission, or enjoy the culture within which they work.
The debate above is really then about whether these qualities and abilities can be learned in business school or developed along the path to senior management.
Business schools, we know, can't hand over a platter with a to-do menu that shows the budding executive how to be a strong leader. They can, however, study and assess strong leadership in the past and show how leaders were effective in numerous circumstances, business situations, or industries. They can show how they fared in financial difficulty or how they might have overhauled an organization through bankruptcy. They can show how they envisioned and pushed for expansion, innovation, or new ideas and products. They can show how they re-engineered companies, directed them into new businesses or products, or boosted performance by cutting costs without killing the enterprise.
In finance, over the past several years, assessing strong leadership has been tricky. Those who were described as powerful, effective leaders a decade ago were being blamed for the financial crisis years later. In 2005, few could be found who might have said the leaders of Merrill Lynch, Lehman Brothers, Wachovia, and AIG were incompetent, clueless or out of touch.
At Merrill, CEO Stanley O'Neal rode the coattails of a senior mentor, but proved himself along the way to be smart, detailed-oriented, meticulous, and extraordinary astute about cost-cutting and boosting Merrill's returns. He had a reputable background in investment banking and spent time as CFO.
Once the crisis came about, O'Neal was suddenly regarded as aloof, unaware of the risks the firm had been taking throughout its product lines, unfamiliar with the nuances of mortgage products and securitization, and incapable of gaining a full grip of the risk-management role.
Former Merrill CEO John Thain was considered one of the brightest, young leaders at Goldman Sachs during his rise there. He moved on to be the vital force that led the New York Stock Exchange out of the dark ages of sort by expanding the organization, taking it international, welcoming its electronic transition and revolutionizing how it oversaw stock trading around the world. Yet at Merrill, he is considered the one who never fully grasped the deep problems at Merrill or never successfully disclosed the extent of them to outsiders.
At Lehman, Richard Fuld for years was considered its heart and soul. He was the link to the old-boy Lehman, the senior banker who brought Lehman back from its early 1990s ashes (when it was owned by American Express) and marched it back to its prestigious bulge-bracket status by the mid-2000s. It was his leadership, many said years ago, that willed Lehman back into solvency in the late 1990s' financial crisis, when rumors about its liquidity problems almost sacked the firm.
Today, many consider Fuld (along with Bear Stearns' Jimmy Cayne) an example of senior leadership without a clue of how the complicated organization below him was run or with no understanding of the risks of mortgage products and high leverage on the balance sheet.
At Goldman Sachs and at the U.S. Treasury, Robert Rubin was considered a stalwart, bright leader. The history books say Goldman Sachs separated itself from the pack under Rubin's leadership. These days, some want to blame the financial woes of Citigroup on him, when he was a senior insider at the bank and observed much of the decision-making that led to disastrous results during the crisis.
The lesson here is that those who assess competent leadership shouldn't be so quick to attach labels. Or they should develop more careful, thoughtful criteria and assess leadership not over the span of a few momentum years, but the span of a long career. They should assess leadership in the face of many scenarios, circumstances and benchmarks.
This doesn't, however, address the original question: Are the best leaders born that way? Some are born with or develop traits that contribute to outstanding leadership: passion, confidence, enthusiasm, intensity, etc. Many, however, learned the trade along the way, mastered their industry or function, established networks and relationships, and sprouted from a foundation of skills they learned long ago (while in business school?). The best leaders combine skills and natural abilities: They combine accounting and finance skills with passion and intensity, for example.
There is no easy answer. Carson and Earley in their own essays tackle the topic and deserve a hearing. Some things can't be dismissed, however. If you plan to become a strong leader in finance or plan to lead a bank or financial institution, you can't do it without a competent appreciation and understanding of accounting, finance, capital markets, economics, marketing, organization management, financial regulation, and business policy--skills you can, for certain, pick up in business school.
Tracy Williams
Tuesday, October 26, 2010
CFN: Wrapping Up the Second Year
The Consortium Finance Network is nearing the end of its second year with over 480 members across the country.
We recently hosted our fifth in a series of webinars ("The CFA and the MBA"), continue to meet with students and alumni in finance, provide guidance to all wherever we can, and arrange connections among Consortium alumni and students. Discussion in our Linkedin group is lively and covers many topics. We update blog postings weekly.
As we wrap up 2010, we welcome feedback, ideas, and suggestions about where CFN can go from here. We encourage all to step up and support CFN in many ways. The Steering Committee meets often to assess ideas, plan and execute projects and contemplate where we go next.
We are considering forming an Advisory Board of experienced people in finance interested in CFN's objectives and interested in being continually involved. We welcome input on its formation.
We encourage all to contribute to the discussion in Linkedin. Tell us what's working and not working. Help lead projects, participate in Steering Committee meetings, or make meaningful suggestions. We'll all in this together.
In 2011, once again we hope to plan more webinars, networking events, and another first-year MBA guide. We hope to have a bigger presence at the Orientation Program and host a major alumni gathering (as we did in 2009 at the Federal Reserve).
We'll continue to pair students with experienced professionals and help them in any way possible (interview preparation, career coaching and strategies, etc.). And we want more input, involvement and enthusiasm from more members.
Within Linkedin or on the website, we encourage the exchange of ideas, experiences and viewpoints and the sharing of knowledge about any aspect of finance.
Share your ideas and feedback with us, and stay involved.
CFN Steering Committee
Tracy Williams
Rachel Delcau
Camilo Sandoval
We recently hosted our fifth in a series of webinars ("The CFA and the MBA"), continue to meet with students and alumni in finance, provide guidance to all wherever we can, and arrange connections among Consortium alumni and students. Discussion in our Linkedin group is lively and covers many topics. We update blog postings weekly.
As we wrap up 2010, we welcome feedback, ideas, and suggestions about where CFN can go from here. We encourage all to step up and support CFN in many ways. The Steering Committee meets often to assess ideas, plan and execute projects and contemplate where we go next.
We are considering forming an Advisory Board of experienced people in finance interested in CFN's objectives and interested in being continually involved. We welcome input on its formation.
We encourage all to contribute to the discussion in Linkedin. Tell us what's working and not working. Help lead projects, participate in Steering Committee meetings, or make meaningful suggestions. We'll all in this together.
In 2011, once again we hope to plan more webinars, networking events, and another first-year MBA guide. We hope to have a bigger presence at the Orientation Program and host a major alumni gathering (as we did in 2009 at the Federal Reserve).
We'll continue to pair students with experienced professionals and help them in any way possible (interview preparation, career coaching and strategies, etc.). And we want more input, involvement and enthusiasm from more members.
Within Linkedin or on the website, we encourage the exchange of ideas, experiences and viewpoints and the sharing of knowledge about any aspect of finance.
Share your ideas and feedback with us, and stay involved.
CFN Steering Committee
Tracy Williams
Rachel Delcau
Camilo Sandoval
Tuesday, October 12, 2010
Keeping Up: Basel III and "Capital Cushion"
Basel III is a term bantered about a lot these days, when people in finance ponder financial reform and try to list solutions to enormous risks banks took in the last decade. Basel III is no longer a proposal or a thesis of scholarly recommendations for how banks can clean up their crisis-torn balance sheets. Basel III is a set of risk-management guidelines that large banks are expected to follow. The leading nations (under the auspices of the "Group of 20") that help manage global economic and financial issues agreed Sept. 12 to implement Basel III.
Basel III, in its most basic form, provides capital and balance-sheet rules for banks around the world. The nations who agree to follow the guidelines also agree to enact, execute and enforce regulation within their own countries that adhere in principle to Basel III.
Basel III, of course, follows Basel I and II. Basel II never really got off the ground because its deadlines had not arrived. It was never fully enforced, because the financial crisis of the past few years interrupted. If Basel I and II couldn't minimize the severe impact of the crisis among banks, the logical goes, then a stronger, more effective Basel III could. Despite recent agreement among nations to roll out Basel III, it is not without critics, who believe Basel III might not be sufficiently tough enough to keep banks from accruing too much risk in the future or who believe its guidelines don't address the broadest set of banking and financial-system issues.
Basel whatever (I, II, or III) in spirit suggests that banks can protect themselves from unforeseen risks (bad loans, bad trades, market downturns and swings, interest-rate volatility, etc.) by having an adequate capital cushion. This is not about having capital to invest in business growth, new business or new acquisitions. This is about having capital as a balance-sheet cushion, a way to soften the blow when extreme risks or market catastrophe occurs--the kind we certainly experienced the past few years. The Basel guidelines offer a way to ensure that even unexpected losses will be bearable, a way to ensure that the banks' creditors, liability-holders, depositors, and lenders will be comfortable through a crisis (and be paid if debt is due).
Some global banks successfully endured the crisis because they managed risks carefully, avoided risky businesses and trading, and minimized losses. Other banks, despite heavy losses in mortgages and corporate loans, survived it well because they had ample capital--amounts far in excess of minimum requirements. The losses didn't hurt too much.
Whatever the capital requirements, banks manage business activity and growth around them. Given a level of equity capital, banks will determine the level of business they can conduct (lending, trading, brokerage, advisory, etc.) to ensure ongoing compliance. Other banks may approach requirements differently. They determine the amount of capital they need to do the business they seek to do. This assumes, of course, they will have access to markets to increase capital, if necessary.
(Some large banks manage capital requirements based on two guidelines: (a) minimum requirements based on Basel and bank regulation and (b) requirements based on their own calculations or perceptions of risk. They do this, in part, to capture activities that might occur in subsidiaries or entities not subject to bank regulation.)
Some finance experts argue that the greater the capital cushion, the better the bank can confront unsettling financial situations. Some, however, argue that while a capital cushion is necessary, there shouldn't be too high of a minimum requirement. Too much of a minimum cushion, they argue, stifles business growth and encourages banks to maintain balance sheets with large amounts cash reserves or liquid minimum-risk securities (U.S. Treasuries, e.g.) and not enough in consumer or corporate loans. Or it may discourage the bank from taking on incremental business.
Basel III, as before, requires banks to adjust all assets on a risk-adjusted basis and sum them up. (An unsecured corporate loan, for example, is not risk-adjusted, but collateralized loans or Treasury securities are "discounted" because of reduced risk.) Basel III requires banks to have a minimum amount of capital ("Tier 1 capital"), relative to the total risk-adjusted assets, based on new rules. The requirements will start from the existing 4% and step up eventually to 6% by 2015. Afterward, it will require an additional "buffer" of 2.5% by the end of this decade--more than doubling today's requirements by 2019.
Basel III also does something Basel I and II skipped. It will introduce limits on balance sheet leverage. In the past, a bank could have unlimited leverage if it chose, for example, to stockpile assets with risk-free Government securities. It will also penalize bank trading done away from central exchanges or risk-reducing clearing organizations.
The new requirements are outlined and quantified in painstaking detail. But what does this all mean? What are the implications to banks, bankers, and even those interested in working in financial institutions?
1. BALANCE SHEETS. Banks over the past decade have always been "balance-sheet sensitive." Basel III will make them more attuned to balance-sheet dynamics. Almost every large deal, trade, transaction, contingency, loan, or asset purchase or funding agreement will be analyzed to assess the impact on the balance sheet and capital requirements. More than before.
Before they do big deals or engage in large trading activities or expand into new businesses, banks today assess activity in "balance sheet/capital committees." They ask whether the new business is worth going onto the balance sheet or whether it will increase capital requirements.
Some impose internal balance-sheet or capital-usage penalties, hurdles or high-return requirements. The business unit receives a "penalty" cost or internal tax for using the balance sheet. Some banks call it an "asset tax." Some banks require extra "rewards" or returns for the incremental capital required. Banks have been implementing these penalties or extra requirements for the past two decades. But sometimes they overlooked these internal penalties when business surged.
With more stringent Basel III requirements, they will implement tougher requirements on business units and more "penalties" or "costs" for using capital or the balance sheet. Or they may require business units to justify harder why incremental business makes balance-sheet sense.
2. COMPUTING. Calculating assets (loans, trades, deposits, derivatives, reserves, securities, receivables, etc.) around the world, adjusting them for risk and doing so on an ongoing basis can be a systems and procedural nightmare for banks. As they had started to for Basel II, banks will devote more resources (including capital, ironically), personnel and technology to not only perform calculations and ensure compliance with requirements, but also to anticipate what they will be as business grows, changes and expands.
Over the past decade, calculating what goes onto the balance sheet for new banking products (derivatives, illiquid securities, infrequently traded securities, leveraged loans, etc.) has not been easy. Banks will seek to have a real-time system of knowing how much they are in excess of requirements at all times and in projecting the impact of new activity.
3. MARKET PERCEPTION. Banks have always managed to stockholders' expectations and will continue to do so. The market itself will have a view of banks' compliance with Basel III, even if (a) many large banks are already in compliance and (b) if the new requirements won't need to be met for years to come. Shareholders and equity markets will want to know if banks today can meet the eventual requirements and if banks have excess amounts even above the minimum for 2012 or 2015. Sending a signal to markets that a bank might have trouble meeting requirements or doesn't have excess could knock down the price of its shares. Banks know this and will manage to tomorrow's requirements, not what they need today.
4. MANAGEMENT. Especially those involved in corporate banking and trading, where activities have significant impact on balance sheets, bankers and traders will need to understand the impact of the rules more than ever. Sometimes in the past, a corporate banker, investment banker or trader relied on a compliance or regulatory colleague to worry about capital requirements. They booked trades or new loans, underwrote new securities, or accrued new activity until they were told to slow down or stop.
Going forward, they won't need to memorize the rules, but they'll need to have a keen awareness of the impact of complex business activity on the balance sheet. They will need to be more involved in bank-wide discussion of whether capital is being deployed in proper ways--to maximize returns and to ensure there is excess beyond the Basel III cushion requirement. These discussions can be complicated and political, especially if banks don't have procedures or methodology to address capital issues and requirements for new businesses.
Bankers most familiar with the guidelines and the impact of current or new business on balance sheets tend to fare well in these discussions or at least get their business points heard more clearly and logically.
They also tend to show senior management they are thinking along similar lines.
Tracy Williams
Basel III, in its most basic form, provides capital and balance-sheet rules for banks around the world. The nations who agree to follow the guidelines also agree to enact, execute and enforce regulation within their own countries that adhere in principle to Basel III.
Basel III, of course, follows Basel I and II. Basel II never really got off the ground because its deadlines had not arrived. It was never fully enforced, because the financial crisis of the past few years interrupted. If Basel I and II couldn't minimize the severe impact of the crisis among banks, the logical goes, then a stronger, more effective Basel III could. Despite recent agreement among nations to roll out Basel III, it is not without critics, who believe Basel III might not be sufficiently tough enough to keep banks from accruing too much risk in the future or who believe its guidelines don't address the broadest set of banking and financial-system issues.
Basel whatever (I, II, or III) in spirit suggests that banks can protect themselves from unforeseen risks (bad loans, bad trades, market downturns and swings, interest-rate volatility, etc.) by having an adequate capital cushion. This is not about having capital to invest in business growth, new business or new acquisitions. This is about having capital as a balance-sheet cushion, a way to soften the blow when extreme risks or market catastrophe occurs--the kind we certainly experienced the past few years. The Basel guidelines offer a way to ensure that even unexpected losses will be bearable, a way to ensure that the banks' creditors, liability-holders, depositors, and lenders will be comfortable through a crisis (and be paid if debt is due).
Some global banks successfully endured the crisis because they managed risks carefully, avoided risky businesses and trading, and minimized losses. Other banks, despite heavy losses in mortgages and corporate loans, survived it well because they had ample capital--amounts far in excess of minimum requirements. The losses didn't hurt too much.
Whatever the capital requirements, banks manage business activity and growth around them. Given a level of equity capital, banks will determine the level of business they can conduct (lending, trading, brokerage, advisory, etc.) to ensure ongoing compliance. Other banks may approach requirements differently. They determine the amount of capital they need to do the business they seek to do. This assumes, of course, they will have access to markets to increase capital, if necessary.
(Some large banks manage capital requirements based on two guidelines: (a) minimum requirements based on Basel and bank regulation and (b) requirements based on their own calculations or perceptions of risk. They do this, in part, to capture activities that might occur in subsidiaries or entities not subject to bank regulation.)
Some finance experts argue that the greater the capital cushion, the better the bank can confront unsettling financial situations. Some, however, argue that while a capital cushion is necessary, there shouldn't be too high of a minimum requirement. Too much of a minimum cushion, they argue, stifles business growth and encourages banks to maintain balance sheets with large amounts cash reserves or liquid minimum-risk securities (U.S. Treasuries, e.g.) and not enough in consumer or corporate loans. Or it may discourage the bank from taking on incremental business.
Basel III, as before, requires banks to adjust all assets on a risk-adjusted basis and sum them up. (An unsecured corporate loan, for example, is not risk-adjusted, but collateralized loans or Treasury securities are "discounted" because of reduced risk.) Basel III requires banks to have a minimum amount of capital ("Tier 1 capital"), relative to the total risk-adjusted assets, based on new rules. The requirements will start from the existing 4% and step up eventually to 6% by 2015. Afterward, it will require an additional "buffer" of 2.5% by the end of this decade--more than doubling today's requirements by 2019.
Basel III also does something Basel I and II skipped. It will introduce limits on balance sheet leverage. In the past, a bank could have unlimited leverage if it chose, for example, to stockpile assets with risk-free Government securities. It will also penalize bank trading done away from central exchanges or risk-reducing clearing organizations.
The new requirements are outlined and quantified in painstaking detail. But what does this all mean? What are the implications to banks, bankers, and even those interested in working in financial institutions?
1. BALANCE SHEETS. Banks over the past decade have always been "balance-sheet sensitive." Basel III will make them more attuned to balance-sheet dynamics. Almost every large deal, trade, transaction, contingency, loan, or asset purchase or funding agreement will be analyzed to assess the impact on the balance sheet and capital requirements. More than before.
Before they do big deals or engage in large trading activities or expand into new businesses, banks today assess activity in "balance sheet/capital committees." They ask whether the new business is worth going onto the balance sheet or whether it will increase capital requirements.
Some impose internal balance-sheet or capital-usage penalties, hurdles or high-return requirements. The business unit receives a "penalty" cost or internal tax for using the balance sheet. Some banks call it an "asset tax." Some banks require extra "rewards" or returns for the incremental capital required. Banks have been implementing these penalties or extra requirements for the past two decades. But sometimes they overlooked these internal penalties when business surged.
With more stringent Basel III requirements, they will implement tougher requirements on business units and more "penalties" or "costs" for using capital or the balance sheet. Or they may require business units to justify harder why incremental business makes balance-sheet sense.
2. COMPUTING. Calculating assets (loans, trades, deposits, derivatives, reserves, securities, receivables, etc.) around the world, adjusting them for risk and doing so on an ongoing basis can be a systems and procedural nightmare for banks. As they had started to for Basel II, banks will devote more resources (including capital, ironically), personnel and technology to not only perform calculations and ensure compliance with requirements, but also to anticipate what they will be as business grows, changes and expands.
Over the past decade, calculating what goes onto the balance sheet for new banking products (derivatives, illiquid securities, infrequently traded securities, leveraged loans, etc.) has not been easy. Banks will seek to have a real-time system of knowing how much they are in excess of requirements at all times and in projecting the impact of new activity.
3. MARKET PERCEPTION. Banks have always managed to stockholders' expectations and will continue to do so. The market itself will have a view of banks' compliance with Basel III, even if (a) many large banks are already in compliance and (b) if the new requirements won't need to be met for years to come. Shareholders and equity markets will want to know if banks today can meet the eventual requirements and if banks have excess amounts even above the minimum for 2012 or 2015. Sending a signal to markets that a bank might have trouble meeting requirements or doesn't have excess could knock down the price of its shares. Banks know this and will manage to tomorrow's requirements, not what they need today.
4. MANAGEMENT. Especially those involved in corporate banking and trading, where activities have significant impact on balance sheets, bankers and traders will need to understand the impact of the rules more than ever. Sometimes in the past, a corporate banker, investment banker or trader relied on a compliance or regulatory colleague to worry about capital requirements. They booked trades or new loans, underwrote new securities, or accrued new activity until they were told to slow down or stop.
Going forward, they won't need to memorize the rules, but they'll need to have a keen awareness of the impact of complex business activity on the balance sheet. They will need to be more involved in bank-wide discussion of whether capital is being deployed in proper ways--to maximize returns and to ensure there is excess beyond the Basel III cushion requirement. These discussions can be complicated and political, especially if banks don't have procedures or methodology to address capital issues and requirements for new businesses.
Bankers most familiar with the guidelines and the impact of current or new business on balance sheets tend to fare well in these discussions or at least get their business points heard more clearly and logically.
They also tend to show senior management they are thinking along similar lines.
Tracy Williams
Tuesday, October 5, 2010
The CFA: Where It Makes Sense
MBAs in finance will often ask about the benefits of a CFA designation. Does it make sense? Will it propel my career? Can I learn something that will give me an advantage on the job or in my career? Are more and more employers requiring it? Or if I'm in transition, will it make a difference in getting attention and gaining an offer? Is it all worth the time, effort, and costs?
There are pros and cons, advantages and disadvantages in pursuing the CFA, if you have an MBA in finance already. And within Consortium and Consortium Finance Network circles, some have debated each side.
To help all sides in the ongoing discussion, CFN hosted a webinar Oct. 5, "The MBA and the CFA," to address these questions, to explain in depth what it means to pursue the CFA and to present data that show trends, growing popularity and greater demand for those who have it. (Click here to download the recording or click here to view the slide deck.)
Charles Appeadu, Director of Sample Exam Development at the CFA Institute, was the featured presenter. "The CFA," he reminded webinar participants from across the country, "is regarded around the world." He added, "A lot of people think it's only about investments, but the content cuts across many fields. The content is deep and wide."
To prove the global reach of the CFA today, Appeadu said there are now over 99,000 people with CFA designations. About 67,000 are in the U.S., but a rapidly growing percentage of the total comes from other countries, reflecting the widespread regard for and attraction to the CFA from companies, investment funds, and financial institutions worldwide.
Appeadu said that once you have the CFA, "We (the CFA Institute) make sure you keep abreast of current knowledge and equip professionals with competence and integrity."
He presented statistics to show what those with CFAs do currently: About 22% are in portfolio managment, another 14% in securities analysis and research. About 4% are in investment banking. And 7% of CFAs globally are in C-level roles (CEO, CFO). More than a third are in positions that emphasize investment analysis, research or management in some form or another. In some of these roles, the CFA is either preferred or required.
Many CFAs, however, are in roles that may not require or may not have traditionally encouraged the CFA: consulting, risk management and accounting, for example. They have used the CFA not as a designation to meet requirements or to prove legitimacy in investment anlaysis, but as a knowledge base for other areas of finance.
Over 200,000 people are currently registered for the CFA--which means they are pursuing the CFA by preparing for one of the three levels of exams. Appeadu showed the trends of a growing number of registrants from foreign countries. (For now, most registrants are from the U.S.) Registrants have similarly expressed interest in a wide range of fields, indicating how they expect to use the CFA--from portfolio management to investment banking, corporate finance and consulting.
Webinar participants didn't hestitate to ask questions. Some wanted to know if there were scholarships to defray the costs of preparation (for the volumes of material required for study). There are, and many financial institutions support employees who express such interest. Some wanted to know whether the CFA Institute does or will ever provide an "MBA waiver," because of the overlap between MBA coursework and the CFA material. "No, but we get asked that question all the time," Appeadu said. One wanted to know if the CFA can be helpful in careers in commercial real estate.
Many wanted to know more about preparing for the three levels of exams. Appeadu said a candidate usually needs about 250 hours of studying for each exam, sometimes more. Candidates study the CFA-provided material, but they can seek and use supplementary sources. He emphasized the importance of preparing for the exams. On average for all three exams, the pass rate is about 42%, a rate that is fairly consistent among those who take it around the world and who have taken it over several decades. The same exam is given everywhere in English.
Appeadu, who has a Ph.D. in finance as well as the CFA, explained how the pass rate could be higher. Many candidates, he said, tend to be smart, well-educated and well-versed in finance and investments. They are also used to being successful and making swift progress in academics and careers. More confident than they should be, they, however, tend to underestimate the time and attention required to prepare for exams. "They sometime think they don't need to prepare as much," Appeadu said, "and then become overwhelmed."
In the exams, Level 1 focuses on knowledge. Level 2 is about analysis, and Level 3 is evaluation and synthesis. Levels 1 and 2 are multiple-choice questions (graded by computers). Level 3 includes essays graded by humans.
Registrants can take practice exams. Participants wanted to know if there is a relationship between performance on the practice exams and the real exams. There is a high correlation, but Appeadu reminded his audience there is no direct "causality," that if one does well in practice, then it doesn't mean he/she will do well on the exam.
For each exam, Appeadu explained, there is no consistent cut-off for the percentage number of questions an exam-taker must get correct. A committee of experienced experts each year determines what it thinks a "just qualified" candidate should know and how many a "just qualified" candidate should get right. That number can change from year to year, as exam questions and content change.
Because finance topics, issues and investment products evolve and get more complex, CFA content changes, too. The material covers ethics, risk management, new products, and may even cover topics such as Islamic finance.
Appeadu, who taught finance at Wisconsin-Milwaukee and Georgia State, lamented the small number of registrants and CFA charter-holders from under-represented groups. He said there is no accurate data about minorities who hold the CFA (among the 99,000) and who are in the process of taking exams (among the 200,000). But the numbers are low. "We want that to improve," he said. The CFA Institute has embarked on initiatives to spread the word by making similar presentations around the country, even speaking to undergraduates at HBCU schools.
Appeadu weighed the pros and cons of the CFA and the MBA. (The CFA Institute didn't have information on how many of the 99,000 have MBAs.) Some will ask whether an MBA should get a CFA; others will ask differently: Should one pursue the CFA and not bother with the MBA? He showed the MBA's advantages of networks, connections, contacts with professors and corporate recruiters and the broad business curriculum covering operations, marketing, accounting and policy. He showed the CFA's advantages of costs (relative to MBA tuition) and specialized knowledge and expertise.
In the end, he said he was a proponent of both. "The MBA is a degree," he said. "The CFA is a designation." In many ways, he showed, both are about a lifetime of learning, keeping up and maintaining networks and industry ties.
Tracy Williams
There are pros and cons, advantages and disadvantages in pursuing the CFA, if you have an MBA in finance already. And within Consortium and Consortium Finance Network circles, some have debated each side.
To help all sides in the ongoing discussion, CFN hosted a webinar Oct. 5, "The MBA and the CFA," to address these questions, to explain in depth what it means to pursue the CFA and to present data that show trends, growing popularity and greater demand for those who have it. (Click here to download the recording or click here to view the slide deck.)
Charles Appeadu, Director of Sample Exam Development at the CFA Institute, was the featured presenter. "The CFA," he reminded webinar participants from across the country, "is regarded around the world." He added, "A lot of people think it's only about investments, but the content cuts across many fields. The content is deep and wide."
To prove the global reach of the CFA today, Appeadu said there are now over 99,000 people with CFA designations. About 67,000 are in the U.S., but a rapidly growing percentage of the total comes from other countries, reflecting the widespread regard for and attraction to the CFA from companies, investment funds, and financial institutions worldwide.
Appeadu said that once you have the CFA, "We (the CFA Institute) make sure you keep abreast of current knowledge and equip professionals with competence and integrity."
He presented statistics to show what those with CFAs do currently: About 22% are in portfolio managment, another 14% in securities analysis and research. About 4% are in investment banking. And 7% of CFAs globally are in C-level roles (CEO, CFO). More than a third are in positions that emphasize investment analysis, research or management in some form or another. In some of these roles, the CFA is either preferred or required.
Many CFAs, however, are in roles that may not require or may not have traditionally encouraged the CFA: consulting, risk management and accounting, for example. They have used the CFA not as a designation to meet requirements or to prove legitimacy in investment anlaysis, but as a knowledge base for other areas of finance.
Over 200,000 people are currently registered for the CFA--which means they are pursuing the CFA by preparing for one of the three levels of exams. Appeadu showed the trends of a growing number of registrants from foreign countries. (For now, most registrants are from the U.S.) Registrants have similarly expressed interest in a wide range of fields, indicating how they expect to use the CFA--from portfolio management to investment banking, corporate finance and consulting.
Webinar participants didn't hestitate to ask questions. Some wanted to know if there were scholarships to defray the costs of preparation (for the volumes of material required for study). There are, and many financial institutions support employees who express such interest. Some wanted to know whether the CFA Institute does or will ever provide an "MBA waiver," because of the overlap between MBA coursework and the CFA material. "No, but we get asked that question all the time," Appeadu said. One wanted to know if the CFA can be helpful in careers in commercial real estate.
Many wanted to know more about preparing for the three levels of exams. Appeadu said a candidate usually needs about 250 hours of studying for each exam, sometimes more. Candidates study the CFA-provided material, but they can seek and use supplementary sources. He emphasized the importance of preparing for the exams. On average for all three exams, the pass rate is about 42%, a rate that is fairly consistent among those who take it around the world and who have taken it over several decades. The same exam is given everywhere in English.
Appeadu, who has a Ph.D. in finance as well as the CFA, explained how the pass rate could be higher. Many candidates, he said, tend to be smart, well-educated and well-versed in finance and investments. They are also used to being successful and making swift progress in academics and careers. More confident than they should be, they, however, tend to underestimate the time and attention required to prepare for exams. "They sometime think they don't need to prepare as much," Appeadu said, "and then become overwhelmed."
In the exams, Level 1 focuses on knowledge. Level 2 is about analysis, and Level 3 is evaluation and synthesis. Levels 1 and 2 are multiple-choice questions (graded by computers). Level 3 includes essays graded by humans.
Registrants can take practice exams. Participants wanted to know if there is a relationship between performance on the practice exams and the real exams. There is a high correlation, but Appeadu reminded his audience there is no direct "causality," that if one does well in practice, then it doesn't mean he/she will do well on the exam.
For each exam, Appeadu explained, there is no consistent cut-off for the percentage number of questions an exam-taker must get correct. A committee of experienced experts each year determines what it thinks a "just qualified" candidate should know and how many a "just qualified" candidate should get right. That number can change from year to year, as exam questions and content change.
Because finance topics, issues and investment products evolve and get more complex, CFA content changes, too. The material covers ethics, risk management, new products, and may even cover topics such as Islamic finance.
Appeadu, who taught finance at Wisconsin-Milwaukee and Georgia State, lamented the small number of registrants and CFA charter-holders from under-represented groups. He said there is no accurate data about minorities who hold the CFA (among the 99,000) and who are in the process of taking exams (among the 200,000). But the numbers are low. "We want that to improve," he said. The CFA Institute has embarked on initiatives to spread the word by making similar presentations around the country, even speaking to undergraduates at HBCU schools.
Appeadu weighed the pros and cons of the CFA and the MBA. (The CFA Institute didn't have information on how many of the 99,000 have MBAs.) Some will ask whether an MBA should get a CFA; others will ask differently: Should one pursue the CFA and not bother with the MBA? He showed the MBA's advantages of networks, connections, contacts with professors and corporate recruiters and the broad business curriculum covering operations, marketing, accounting and policy. He showed the CFA's advantages of costs (relative to MBA tuition) and specialized knowledge and expertise.
In the end, he said he was a proponent of both. "The MBA is a degree," he said. "The CFA is a designation." In many ways, he showed, both are about a lifetime of learning, keeping up and maintaining networks and industry ties.
Tracy Williams
Wednesday, September 22, 2010
MBAs: Second-Year Dilemma
Many Consortium MBAs in finance returned to business school this fall with a comfortable smile on their faces. They had productive summer internships at banks, corporations, investment funds, and private-equity firms. Many of them also had offer letters, permitting them to return after graduation in a full-time role.
But many of them have "exploding" letters, which require them to make a decision to accept or reject in a matter of weeks. If they don't, the offer is forfeited. The feel-good moments in the waning days of summer can turn suddenly into an anxiety period: Do I accept or reject this opportunity of a lifetime? Do I explore something else? Do I really like banking (or trading, investing, research or analysis)? Do I prefer to do the same at another firm? Do I give myself the well-deserved chance to shop around? Do I still look for that "dream role"? Or do I try to negotiate with the company to get more time to think this through?
Some companies apply pressure and request a final decision be made before a set date--sometimes as early as October 1. Second-year MBAs face a dilemma and must make tough decisions. Outsiders might suggest that in the current environment it's a dilemma they are fortunate to have, because they have a real opportunity and a real job at graduation.
How can second-years handle this special situation?
1. Objectives. It helps for them to understand their short-term and long-term career objectives. Many times, the offer in hand might fulfill a short-term goal (business, client, deal or trading experience, upward-sloping learning curves, extended networks, organization experience, and compensation). Does, however, the short-term goal permit you to reach the long-term goal (whatever that long-term goal could be)?
Outlining objectives and examining them thoroughly might permit the second-year to make the right decision, especially if the longer-term objective is most important.
2. Aptitude. Another approach is to understand what you want to do and what you can do. Many MBA graduates want to start in positions where they will thrive and do well. They want to launch their careers as success stories.
The second-year, therefore, may choose to delineate in detail
(a) what you want to do in that first job,
(b) what you know you can do well, and
(c) what you like to do day to day.
If all three overlap in some way, or if an MBA in finance wants to, can do, and will like doing the job, then it's likely he or she will do well starting out. When the offer presents a role where all three come together, then the MBA can't go wrong in accepting the job.
If the offer doesn't permit the three to intersect in a substantial way, then it might make sense to explore other opportunities.
It's not as easy as it appears here, because often you know you can do the job and wouldn't mind doing it, but it may be something you dislike or can't tolerate. But it may be the role that is a convenient stepping stone to a long-term objective. If the long-term goal is important and if you can do the job well, then you might rationalize accepting the offer.
These kinds of self-assessments can help guide in final decisions.
3. Options, Opportunities. Second-years in these times must survey what the opportunities and options are in finance. Uncertainty in markets and in the recovery will limit options. So they must be sincere with themselves about the implications of turning down an offer that's in hand.
Banks and other financial institutions turned up the gears in hiring in early 2010. There are hints now, however, they may slow down a bit, not because business has evaporated, but because they certainly will be cautious about over-hiring.
Second-years who want to explore options and opportunities are in the best environment to do so--on campus, where banks and corporations will continue to touch bases with business schools even if they may not be recruiting aggressively.
4. Mentors, Alumni, and Networks. Second-years would benefit from discussing their situations with others who have been through the same. They'll learn how others grasped and approached the decision and understand factors in those decisions. More experienced mentors and alumni will even acknowledge whether their decisions were wrong or bad and contemplate what they might have done, if they had the same decision today.
The second-year who still has doubts about the summer experience and is frustrated by an impending "explosion" from an offer might still ask for an extension from the hiring company. There are rules, but companies bend them. A follow-up discussion with the company might give the second-year a chance to see the company in a different way, speak to others to get more details about the position, or negotiate a move to a more satisfying or vibrant group.
At some point, decisions must be made. Most second-years will agree these decisions are tough (because they often involve relocation and personal commitment of about two years to the role), but this one may not be the toughest of all. Deciding whether to attend business school and choosing which business school might have been tougher.
Tracy Williams
But many of them have "exploding" letters, which require them to make a decision to accept or reject in a matter of weeks. If they don't, the offer is forfeited. The feel-good moments in the waning days of summer can turn suddenly into an anxiety period: Do I accept or reject this opportunity of a lifetime? Do I explore something else? Do I really like banking (or trading, investing, research or analysis)? Do I prefer to do the same at another firm? Do I give myself the well-deserved chance to shop around? Do I still look for that "dream role"? Or do I try to negotiate with the company to get more time to think this through?
Some companies apply pressure and request a final decision be made before a set date--sometimes as early as October 1. Second-year MBAs face a dilemma and must make tough decisions. Outsiders might suggest that in the current environment it's a dilemma they are fortunate to have, because they have a real opportunity and a real job at graduation.
How can second-years handle this special situation?
1. Objectives. It helps for them to understand their short-term and long-term career objectives. Many times, the offer in hand might fulfill a short-term goal (business, client, deal or trading experience, upward-sloping learning curves, extended networks, organization experience, and compensation). Does, however, the short-term goal permit you to reach the long-term goal (whatever that long-term goal could be)?
Outlining objectives and examining them thoroughly might permit the second-year to make the right decision, especially if the longer-term objective is most important.
2. Aptitude. Another approach is to understand what you want to do and what you can do. Many MBA graduates want to start in positions where they will thrive and do well. They want to launch their careers as success stories.
The second-year, therefore, may choose to delineate in detail
(a) what you want to do in that first job,
(b) what you know you can do well, and
(c) what you like to do day to day.
If all three overlap in some way, or if an MBA in finance wants to, can do, and will like doing the job, then it's likely he or she will do well starting out. When the offer presents a role where all three come together, then the MBA can't go wrong in accepting the job.
If the offer doesn't permit the three to intersect in a substantial way, then it might make sense to explore other opportunities.
It's not as easy as it appears here, because often you know you can do the job and wouldn't mind doing it, but it may be something you dislike or can't tolerate. But it may be the role that is a convenient stepping stone to a long-term objective. If the long-term goal is important and if you can do the job well, then you might rationalize accepting the offer.
These kinds of self-assessments can help guide in final decisions.
3. Options, Opportunities. Second-years in these times must survey what the opportunities and options are in finance. Uncertainty in markets and in the recovery will limit options. So they must be sincere with themselves about the implications of turning down an offer that's in hand.
Banks and other financial institutions turned up the gears in hiring in early 2010. There are hints now, however, they may slow down a bit, not because business has evaporated, but because they certainly will be cautious about over-hiring.
Second-years who want to explore options and opportunities are in the best environment to do so--on campus, where banks and corporations will continue to touch bases with business schools even if they may not be recruiting aggressively.
4. Mentors, Alumni, and Networks. Second-years would benefit from discussing their situations with others who have been through the same. They'll learn how others grasped and approached the decision and understand factors in those decisions. More experienced mentors and alumni will even acknowledge whether their decisions were wrong or bad and contemplate what they might have done, if they had the same decision today.
The second-year who still has doubts about the summer experience and is frustrated by an impending "explosion" from an offer might still ask for an extension from the hiring company. There are rules, but companies bend them. A follow-up discussion with the company might give the second-year a chance to see the company in a different way, speak to others to get more details about the position, or negotiate a move to a more satisfying or vibrant group.
At some point, decisions must be made. Most second-years will agree these decisions are tough (because they often involve relocation and personal commitment of about two years to the role), but this one may not be the toughest of all. Deciding whether to attend business school and choosing which business school might have been tougher.
Tracy Williams
Thursday, September 16, 2010
The MBA and the CFA: Part III
MBA students and graduates in finance, especially in current times when they seek an advantage of some kind, have wrestled with whether or not to pursue the CFA designation. They ask themselves: Is it worth the time, effort, costs, and uncertainty? Can it be used to propel a career? Some ask: Is there overlap with finance courses in business school? And many are now wondering: Does it make a difference in a career path? Or in pursuing a specific job spot?The Consortium Finance Network is helping to respond to some of these questions by sponsoring a webinar, "The MBA and the CFA," October 5 from 5-6:30 p.m.
The webinar will raise these same questions and address topics related to the CFA. Most MBAs know there are three levels of exams, but what do they entail? How much preparation is necessary? How can I prepare for the CFA while in a demanding job? What topics are covered? How can an MBA student choose certain courses in business school that will help prepare for the CFA? In investment management roles, do I really need the CFA to succeed?
Charles Appeadu (above), Director of Sample Exam Development at the CFA Institute, will make a presentation, followed by questions and commentary. Appeadu was a finance professor at the Univ. Wisconsin-Milwaukee and Georgia State Univ. before joining the Institute in Charlottesville, Va. He has a Ph.D. in finance from the Univ. Washington. Not only does he have a CFA, he also has certifications in FRM (financial risk management) and CAIA (alternative investments).
Appeadu will address some of these questions. He will describe what the CFA covers and what business schools don't and tell about other topics the CFA covers in the wake of the financial crisis.
Some institutions (funds, banks or investment managers) actually require the CFA for some spots. Others are encouraging it, even if it doesn't have a direct connection to the role. Others find the CFA gives them a knowledge advantage ("oneupmanship") in traditional banking roles.
CFN members, Consortium students and alumni and others interested in finance, investments and the lure of the CFA should join the webinar.
Tracy Williams
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For more on the MBA and the CFA, see:
http://consortiumfinancenetwork.blogspot.com/2010/05/mba-and-cfa.html
http://consortiumfinancenetwork.blogspot.com/2010/06/mba-and-cfa-part-ii.html
Register on the Consortium Finance Network Linkedin: www.linkedin.com
Finance Websites: Keeping Up, Sharing Knowledge
In finance, much of success is not just about who you know and where you work--although that surely contributes to much of it. Success (if measured by progress, advancement and promotions) is also about what you know, what you are learning, and how you are keeping up: Are you aware of trends, innovations and new products? Do you understand different perspectives or insights regarding markets, corporate finance or corporate industries? Are you up to date on regulatory issues, financial reform, or global expansion? Do you have an informed view of whether we are in a period of recovery or slipping back into a recession?
That's where informative, carefully prepared blogs and websites can be useful. And that's where a few Consortium students and alumni have stepped up.
Consortium student LaMarr Taylor announced this week his new website focusing attention on relevant issues in private wealth management (PWM). PWM is a popular career choice for many MBA students. For many financial institutions, it's a targeted area for growth in the next few years.
Taylor, a second-year student at Indiana, is set to work full-time next year in PWM at a major bank. In the meantime, he has assembled a website (http://www.lamarrtaylor.com/) devoted to addressing, reviewing and synthesizing topics in PWM. Viewers to the site get a synopsis of all issues relevant to bankers, investment managers, and financial advisers.
The site, for example, currently covers such issues as toxic assets, Basel III, and the possibility of double-dip recession--topics professionals in financial consulting ought to be familiar with or at least have a framed understanding. Taylor also summarizes a conference he attended, called InvestIndiana, which featured presentations of public companies based in Indiana or with a significant impact or presence there.
Taylor has an undergraduate degree in electrical engineering, and at Indiana, he is a member of the Investment Management Academy.
He is one of a handful of Consortium alumni and students who decided it would be worthwhile to aggregate information and tackle issues in particular finance areas.
Ken Alozie, a Michigan Consortium alumnus, continues with his site http://www.bankingorbust.com/, aimed at helping analysts and associates thrive (or survive?) at investment banks or in corporate-finance roles. The site offers a primer in all important corporate finance topics, provides updates on technical topics and current issues, and in some ways is a refresher for even the most experienced finance people.
The site helps new associates use b-school finance to be effective analysts or financial modelers in mergers & acquisition or leveraged finance. Now over 18 months old, the site even dares to explain the problems from subprime-mortgage securitization or the intricacies of credit-default swaps.
After Michigan, Ken earned an M.S. in finance and is now involved in private equity.
Consortium alumnus Rob Wilson provides regular updates on money management on his site http://www.robwilson.tv/. Wilson, who is a graduate of Carnegie Mellon, appears often on local television in Pittsburgh, offering advice on investments and retirement planning. Wilson also advises many professional athletes and entertainers.
In March, he sponsored his own version of March Madness by featuring a stock-picking contest similar to the NCAA basketball brackets.
Recent Indiana-Consortium alumnus Felicia Enuha is using her blog to chronicle her first year on the job after getting an MBA: http://www.thefarembalife.com/. A recent posting offers 10 helpful hints how to be effective in the midst of networks at the National Black MBA Conference.
Other postings describe the transition from business school to work life and her thoughts about how she'll take steps to reach her long-term career goals.
The advantage of sites like these and others is that while informing others (peers, colleagues, students and other graduates), they offer a special perspective, a Consortium view.
Tracy Williams
That's where informative, carefully prepared blogs and websites can be useful. And that's where a few Consortium students and alumni have stepped up.
Consortium student LaMarr Taylor announced this week his new website focusing attention on relevant issues in private wealth management (PWM). PWM is a popular career choice for many MBA students. For many financial institutions, it's a targeted area for growth in the next few years.
Taylor, a second-year student at Indiana, is set to work full-time next year in PWM at a major bank. In the meantime, he has assembled a website (http://www.lamarrtaylor.com/) devoted to addressing, reviewing and synthesizing topics in PWM. Viewers to the site get a synopsis of all issues relevant to bankers, investment managers, and financial advisers.
The site, for example, currently covers such issues as toxic assets, Basel III, and the possibility of double-dip recession--topics professionals in financial consulting ought to be familiar with or at least have a framed understanding. Taylor also summarizes a conference he attended, called InvestIndiana, which featured presentations of public companies based in Indiana or with a significant impact or presence there.
Taylor has an undergraduate degree in electrical engineering, and at Indiana, he is a member of the Investment Management Academy.
He is one of a handful of Consortium alumni and students who decided it would be worthwhile to aggregate information and tackle issues in particular finance areas.
Ken Alozie, a Michigan Consortium alumnus, continues with his site http://www.bankingorbust.com/, aimed at helping analysts and associates thrive (or survive?) at investment banks or in corporate-finance roles. The site offers a primer in all important corporate finance topics, provides updates on technical topics and current issues, and in some ways is a refresher for even the most experienced finance people.
The site helps new associates use b-school finance to be effective analysts or financial modelers in mergers & acquisition or leveraged finance. Now over 18 months old, the site even dares to explain the problems from subprime-mortgage securitization or the intricacies of credit-default swaps.
After Michigan, Ken earned an M.S. in finance and is now involved in private equity.
Consortium alumnus Rob Wilson provides regular updates on money management on his site http://www.robwilson.tv/. Wilson, who is a graduate of Carnegie Mellon, appears often on local television in Pittsburgh, offering advice on investments and retirement planning. Wilson also advises many professional athletes and entertainers.
In March, he sponsored his own version of March Madness by featuring a stock-picking contest similar to the NCAA basketball brackets.
Recent Indiana-Consortium alumnus Felicia Enuha is using her blog to chronicle her first year on the job after getting an MBA: http://www.thefarembalife.com/. A recent posting offers 10 helpful hints how to be effective in the midst of networks at the National Black MBA Conference.
Other postings describe the transition from business school to work life and her thoughts about how she'll take steps to reach her long-term career goals.
The advantage of sites like these and others is that while informing others (peers, colleagues, students and other graduates), they offer a special perspective, a Consortium view.
Tracy Williams
Tuesday, September 14, 2010
OFN: Taking the Lead in Community Development
There is an organization and network many in finance ought to know about, if they don't already and if they want to know about financing programs that make a difference and have immediate impact in communities. The Opportunity Finance Network, with programs, activities and funding relationships all over the U.S., acts in the hub of all of community-development finance.
"Our mission," says Donna Fabiani, OFN's Executive Vice President for Knowledge Sharing, "is to bring the whole industry (of community development finance) to scale." OFN (http://www.opportunityfinancenetwork.net/) is membership-based and connects investors and lenders to financial institutions and funds that finance low-income and low-wealth communities.
Today 180 Community Development Financial Institutions (CDFIs) are members and beneficiaries of OFN. Over 900 CDFIs exist in the U.S., many with a certification from the U.S. Treasury, based on critieria. CDFIs may themselves be small banks or funds with direct ties to the low-wealth community. OFN acts as an adviser or facilitator to CDFIs, who are funded by investors/lenders and, in turn, lend directly into the community.
With OFN's guidance, those who invest or lend (to CDFIs) may include investment funds, venture funds, larger banks, and other lenders. Some are unregulated; some regulated. OFN's role assists investors who seek to engage in "socially responsible investing." The funds and banks lend to CDFIs or make investments in them. Or they may arrange co-investments with CDFIs. OFN, since its inceptions, has arranged over $23 billion in financings with CDFIs.
CDFIs, in turn, use the funds to make loans to small businesses, consumers, or non-profit organizations or make loans to facilitate housing and microfinance activity.
Many of the funds that invest in CDFIs are non-profit organizations with goals to boost economic development in certain areas. Others have other objectives: achieving a target return on investment, providing job opportunities and growth in designated geographies, or (in some cases with banks) seeking CRA-related ("Community Reinvestment") credit.
OFN also manages a CDFI fund to make investments and loans to CDFIs. Thus, investors contribute to the fund, which invests or lends directly to the CDFI. In some ways, Fabiani says, OFN is a "fund of funds."
OFN's role extends beyond arranging financing and acting as the go-between that pulls it all together. It also greases the wheels to keep all participants informed, updated, and aware of policy and economic issues. It sponsors an annual national conference on community development where participants (investors, funds, banks, CDFIs, policy-makers, economists, and others) meet to discuss current topics, issues, lessons learned, current, pending legislation, and knowledge sharing.
OFN administers its own ratings system (CDFI Assessment and Ratings System or "CARS") to help investors and lenders decide which CFDIs they may want to finance. The ratings offer not just a financial assessment of the CFDI, but a community-development-impact assessment. The ratings help investors/lenders in managing investment risks and in determining determine whether the investment meets social-responsibility objectives.
This year, OFN's 26th annual conference will take place in San Francisco November 2-5 and will be one of the largest gatherings in the U.S. on community development, bringing together hundreds of important participants, including lenders, investors, CDFIs, and government agencies. At this year's conference, Federal Reserve Bank-San Francisco president Janet Yellen will be a keynote speaker.
In other sessions at the conference, OFN will outline a 15-year community-development (or "opportunity finance") strategy. There will be programs focusing on green finance, consumer finance, risk management, housing finance and small-business finance. Seminars or events on selected topics will be scheduled: e.g., CDFI board management, loan participations, social media and online funding, the disabilities market, and managing delinquencies.
Consortium MBAs and CFN members (including students, alumni and supporters) interested in community-development finance, socially responsible investing, microfinance, small-business lending, and housing finance should consider attending. They get the chance to connect with participants from all facets of the industry and learn about career opportunities. They can learn more about the funds or organizations that invest or the institutions that lend directly into the community.
OFN sponsors smaller, regional conferences. They, too, focus on important industry topics or programs and efforts to increase knowledge in a special topic or provide invaluable updates. The next regional conference will be in December in Dallas.
OFN is not yet a Consortium sponsor, but is interested in establishing ties with the organization, Consortium schools, students and alumni by acting as a conduit to community-development finance.
Those interested in following up or learning more can explore the website or contact Fabiani at dfabiani@opportunityfinance.net.
Tracy Williams
Friday, September 10, 2010
The FARE MBA Life: National Black MBA: Are You READY!!!!
"I will be attending the National Black MBA Association's Annual Conference which is being held in Los Angeles, California. I have only been as far west as Las Vegas so I'm super pumped about this trip in less than two weeks.
I have registered for the Leadership Institute and I'm super stoked to be attending as a member and participant of the conference for the first time. Shout out to my company for supporting what's important to me.... [continue reading]Consortium Alumna, Indiana University, Class of 2010
Sunday, September 5, 2010
Autumn: Conferences and Career Fairs
August is often a time of planning for the fall and the months thereafter. It's commonplace to slow down during the last weeks of the summer and defer projects until September and October or prepare for big events, big deals, big transactions, and big roll-outs of new strategies or business plans. Or attend big conferences, conventions and network gatherings. Professionals in business and banking roll up their sleeves and get back to trying to finish the year with a big bang.
In finance, there is an eye on the November elections. Many want to see who will emerge as victors in Congress and who will influence the follow-up steps in financial reform or determine whether there will be another round of Government stimulus.
And there is another eye on financial reform itself, as Congress hands off responsibility to many agencies and regulatory bodies to decide in detail what will happen to the structures and size of banks or the ways derivatives and other complex financial instruments will be traded and priced.
And there is another eye on financial reform itself, as Congress hands off responsibility to many agencies and regulatory bodies to decide in detail what will happen to the structures and size of banks or the ways derivatives and other complex financial instruments will be traded and priced.
It's an important time for recruiting at top business schools (including at the Consortium 17). Top companies, banks and firms head to campus in September and October to sell and show off the best of themselves to students--even if they aren't yet sure how many they intend to hire in 2011.
Right now there's buzz about the National Black MBA Association Conference in Los Angeles (Sept. 21-25) (www.nbmbaa.org). MBA students, alumni, and professionals turn out annually for the event. This year's event is practically in the backyards of Consortium schools USC and UCLA. Many banks and corporations make it a priority to participate in its career fair. (The Consortium, too, always has a presence at the conference.) This year's theme is "Blink--the speed of change."
The conference is an important networking event; over 12,000 are expected to attend a five-day series of events geared to MBAs of all interests--marketing and sales, finance, business management, and operations.
"National Black MBA" is not the only game going on this fall. The Opportunity Finance Network is hosting its annual conference in San Francisco Nov. 2-5. OFN (www.opportunityfinance.net) is a seven-year-old organization that facilitates financing to support low-income, low-wealth groups in the U.S. It arranges funding for community development financial institutions and now has over 170 members in its network. It has arranged over $23 billion in financings.
MBAs and finance professionals interested in community development in all phases and segments will want to attend or learn more about OFN's role. (Contact Fabiani at dfabiani@opportunityfinance.net to learn more about OFN. The Consortium Finance Network plans to highlight more about its programs and financings in the periods to come.)
Amidst a brisk conference season, don't forget the National Society of Hispanic MBAs (www.nshmba.org). Its annual conference will be in Chicago October 21-23. Its agenda will include several professional-development seminars, including some finance-focused. A highlight of the conference is its CEO speaker series. CEOs from Humana, Campbell Soup, and State Farm are scheduled to appear. The Consortium will make appearance in Chicago, as well.
For young entrepreneurs and those interested in the next earth-shaking startup, there is the "Lean Startup Machine (New York)" : www.theleanstartupmachine.com. Says Kyle Kelly, a co-founder of the New York group, "for an early-stage start-up, the idea is to build something that people want."
The organization hosted a conference for budding entrepreneurs in New York in July. Its next event is in Chicago November 6.
It emphasizes developing a product or service based on what a customer specifically wants and doing so before reaching out to investors for funding. Kelly described the methodology as a "customer discovery process," where entrepreneurs learn what the customer wants and analyze feedback during product development. The entrepreneur uses an iterative feedback to design and tailor the product to a customer base. In the end, when the product is fully developed, a known market already exists.
LSM intends to teach and spread its principles at weekend sessions (like the one in July) and hopes to lead more sessions elsewhere. At the events, experts and entrepreneurs show how the principles lead to a defined market base, funding, and business success.
The principles are based on methodology developed by Eric Ries, an advisor for many technology startups and venture-capital firms and a co-author of books on entrepreneurship. He shares his experiences and lessons learned in his own blog (www.startuplessonslearned.com).
Tracy Williams
The organization hosted a conference for budding entrepreneurs in New York in July. Its next event is in Chicago November 6.
It emphasizes developing a product or service based on what a customer specifically wants and doing so before reaching out to investors for funding. Kelly described the methodology as a "customer discovery process," where entrepreneurs learn what the customer wants and analyze feedback during product development. The entrepreneur uses an iterative feedback to design and tailor the product to a customer base. In the end, when the product is fully developed, a known market already exists.
LSM intends to teach and spread its principles at weekend sessions (like the one in July) and hopes to lead more sessions elsewhere. At the events, experts and entrepreneurs show how the principles lead to a defined market base, funding, and business success.
The principles are based on methodology developed by Eric Ries, an advisor for many technology startups and venture-capital firms and a co-author of books on entrepreneurship. He shares his experiences and lessons learned in his own blog (www.startuplessonslearned.com).
Tracy Williams
Wednesday, August 25, 2010
Consortium MBA's: Back to School
In a matter of days, Consortium students and MBA's across the country return to campus. There is no reprieve or period of easing into the intense environment. Students hit the ground running the first day. First-year students learn right away that recruiting and the grinding effort to secure the internship they dreamed about starts the minute they register for core courses.
Consortium second-year students return to campus after a productive summer of internships. Many earned offers of full-time employment when they graduate. In finance, Consortium interns earned full-time offers at such places as JPMorgan Chase and Barclays Capital.
Indiana-Kelley's classes have started already. First-year students have gone through orientation, and Indiana has introduced a new program to make sure its students will be ready when banks and corporations come to Bloomington. The new program, called Me, Inc., aims to advise students on career selections, strategies and preparation and coach them on recruiting techniques, interviewing and self-branding. Hence, students are counseled before the race gets going.
No doubt, other business schools will observe and replicate Kelley's program, if they don't have a similar program in place already.
__________________________________
A return to campus shifts the focus of the b-school experience back to courses, classes, classmates, professors, and deans. And it reminds all how much the experience has evolved over the decades. Business schools today are significantly different from the way they were in the mid-1980's, or even the 1990's.
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The differences?
1. Recruiting is now a full-time job for first-year students. Long ago, students started worrying about internships in early January. They spent much the fall immersed in accounting, finance and marketing and didn't have to develop strategies, attend corporate presentations, prepare for informational interviews, and do what they can to get on interviewers "A" lists.
Today, students are more perceptive, aggressive, and better coached about what they need to do to get the right offer.
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2. Business schools today are attentive to rankings and popular opinion about their roles, purpose, and value. They've step out beyond their academic niches and are committed to making themselves continually relevant.
They pay attention to their constituencies: students, recruiters, and corporate donors. If those constituencies make recommendations to improve, they consider them and deploy new programs, courses, campuses, and experiences as soon as funds permit them to do so.
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3. B-schools today pay attention to matters and skills beyond the old-fashioned case studies or the legendary finance and accounting texts. They focus more on ethics, conflicts, organization dynamics, communications, branding, teamwork, partnerships and other soft skills. They imbed these values in all aspect of instruction, even if they know they may not always do so successfully.
B-schools also prefer and encourage students to be engaged, active and collegial.
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4. B-schools today have pushed hard to emphasize global business, foreign cultures, and opportunities in other economies around the world. They don't merely teach it on campus; they facilitate experiences in foreign countries: e.g., semesters abroad, spring-break trips to Tanzania or China, internships in Peru, Dubai or Indonesia, or ties to institutes on emerging markets.
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5. Perhaps more than some corporate environments, b-schools are more appreciative and committed to diversity. They trip over themselves to ensure that all groups are represented, that the student body has significant representation from internationals, women, people of color, and people of many interests, career aims, and past experiences.
They know, too, diversity helps attract top students and professors and fosters creative ideas and exciting discussion about global business.
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6. Today, students have different long-term career strategies. Most know it's no longer about the 15-20-year climb up the corporate ladder. Long ago, an MBA graduate might happily join a Fortune 500 firm as a financial analyst and happily take each step up the rung that gets him or her closer to the CFO's office.
Students now know they can't rely on that kind of career plan, even if they want it. That Fortune 500 firm today will likely reinvent itself many times in the next decade, because of mergers, new products, acquisitions, expansions, or (sorry to say) bankruptcy, restructuring, or product obsolescence.
Today, students know they must focus on long-term networks, contacts, transitions, preparing for changes and downturns, reinventing themselves or ensuring the learning curve maintains a positive slope.
____________________________________
Similarities? Some things, however, haven't changed or may not ever.
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1. Accounting, finance, marketing, capital markets, operations research, and policy have always been mandatory core courses and--in some form or another--will continue to be so. Within the colorful, comprehensive MBA experience, b-schools understand they have to tend to the basics, the canon of business instruction.
_________________________________
2. Investment banks and consulting firms, years ago, were the top choices among graduates at top schools. Commercial banks, advertising firms, manufacturing and consumer-products companies followed behind. To a certain extent, they are all still popular choices.
But today there are numerous other opportunities that weren't readily apparent years ago: technology firms, Internet start-up companies, entrepreneurship, hedge funds, venture capital, private equity, non-profits, and whatever might be the next new thing. Students today won't hesitate to look beyond the traditional.
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3. In the 1980's through the mid-2000's, compensation was king. Compenation packages counted for much, drove recruiting or attracted students who wouldn't otherwise have headed in that direction. Many headed to investment banking, not because they adored corporate finance, but because of sign-on bonuses and promises of big first-year payouts.
Compensation still counts for much, because MBA students look for a return on their school investment. However, most now add another important variable: work-life balance. If the balance doesn't make sense, then the compensation might not matter.
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4. The media years ago always described MBA students as "conceited" or "entitled" or filled with unusual expecations. The media (including blogs, books, and online sites) still offer the same descriptions.
As they did years ago, that might result from students who, having worked in a suffocating, sometimes overwhelming academic environment, want to apply what they have learned and see a pay-off from their efforts.
Unlike years ago, however, many students don't necessarily harbor visions of becoming a Fortune 1000 CEO in five years. Many aspire to get experience and then consider venturing out to do their own thing in their own ways.
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Nothing wrong with that.
______________________________
Tracy Williams
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