Monday, May 23, 2011

CFN's MBA Guide: Surviving First Year

Everybody needs a plan, so they say. Getting into a top business school (and earning membership into the Consortium) is an achievement. But it's a starting point for what's to come. Many Consortium students and other MBAs will acknowledge the starting point leads to an opening of flood gates. 

Business school starts in early September, in most cases. Students are bombarded with tasks, responsibilities, cases, assignments and meetings by the second day.  Many alumni admit later they knew b-school would be a challenge; they just never knew that the workload would be so overwhelming so soon. And there is the worrisome, looming task to get a summer job, even if the summer is nine months away.  Recruiting season, year after year, starts right before school and requires significant amounts of time and attention.

That's where the Consortium Finance Network's annual first-year guide can help.  For the third year in a row, CFN will distribute its guide for first-year MBAs in finance. It offers advice, guidance, and wisdom based on those who've been there before (students) or those who've been on the other side of the hiring process (alumni, recruiters, business leaders). The guide helps first-year students develop a game plan to manage the delicate, careful process of being an outstanding, diligent student, while looking for that meaningful summer internship.

The guide is based on input from alumni and recent students and is culled from commentary from the CFN Linkedin and blog sites. 

Summer is seldom a time to ease up for prospective business students. Many go away for a celebratory vacation or a respite between job and school. But a summer before b-school can also be filled with (Take your pick) pre-matriculation programs, boot camps sponsored by some institutions, orientation programs (including that of the Consortium), and other activities.  Many take advantage of these programs to ensure they get off to a blazing start once school starts and to absorb tidbits and tools that could make a difference later.

The guide offers advice on the summer before school:  How to develop a game plan to make the most of the first year and how to plan to get the internship.

The guide summarizes opportunities in finance, the short- and long-term outlook in primary segments. It tries to assist first-years who wrestle with gnawing career decisions. Should they pursue investment-, corporate- or private-banking? Are there opportunities beyond the popular b-school pursuits (community banking, non-profit activities, operations and technology)? Should they explore their passions, or should they purse opportunities based on their technical strengths or where openings will be when they graduate?

Mentors are crucial in helping students attain desirable positions in finance.  The guide discusses how to make the most of mentor relationships, how to develop long-lasting, rich relationships, or how to approach mentors who have little time or attention span.

CFN's guide addresses student concerns as they proceed during the school year. What should students worry about during the first weeks of school? How can they manage the time between adjusting to the pressing demands of school and planning for internships?  How can they arrange information interviews with alumni and mentors from out of town? Or how can they polish the resume', the elevator pitch, and the first-round interview? How can they prepare now for haunting technical interviews that come in January?

Handling dozens of b-school responsibilities with no spare time is already a chore, but students are also expected to keep up with topics in finance beyond the text and classroom:  the latest deal, the latest finance or economic trend, the latest regulatory proposal, the latest series of finance books that chonicled or analyzed the financial crisis, the latest movement in silver, gold, or oil prices, or the latest expectations about inflation.  The guide provides advice on how to keep up when there are midterms and class presentations to worry about.

Once students have learned how to manage time, take advantage of the wealth of offerings in seminars, activities, and speakers on campus, develop relationships with alumni and mentors, and perform well in coursework, the guide helps students get ready for summer internships.  Successful internships, as MBAs know, lead to full-time job offers in August before the second year.

Diversity, leadership and networking are important topics in schools and in financial institutions.  The guide reviews some of the latest discussion, including sharing lists of the best financial insitutions in diversity and the best in grooming leaders for the future and trends in diversity among senior ranks since the financial crisis.

The CFN guide will be distributed electronically to Consortium students who have indicated an interest in finance. It can be sent to others upon request.

Tracy Williams

Friday, May 6, 2011

Dimon's "State of the Industry"

Finance types everywhere are familiar with Warren Buffet's annual sermon to shareholders in the form of a letter in the annual report. It's seldom, if ever, a bogged-down analysis of company ratios and trends. More a colloquial finance lecture. Everybody knows the Buffet letter, an honest pontification on business, the economy and the financial system. Derivatives are, he once notably said, "weapons of mass destruction" (although Buffet's Berkshire Hathaway operating vehicle has used them adroitly from time to time).

This year, Buffet has other priorities and distractions. He has an internal crisis to manage. Top deputy David Sokol is under investigation for suspicious trading activity. Sokol reportedly bought an equity stake in a company before Berkshire announced it would purchase it. Buffet has publicly scolded Sokol, and Sokol, as expected, is no longer next in line to run Berkshile.

That thorny current issue undermines the message Buffet delivered from his shareholder-letter pulpit in 2011. Buffet's letter this year is, as always, his usual remarkable finance lecture--a mid-level MBA finance discussion, written in comfortable, flowing style. But you read it wondering about the ethics case that confronts the company right now.
JPMorgan CEO Dimon

That brings us to JPMorgan Chase CEO Jamie Dimon, who in recent years has stepped up to the plate to provide sharp insight from his Park Avenue pulpit.  His letter to shareholders, also colloquial and comfortable, often includes a frank diagnosis of the financial and banking system. It takes a four-prong approach during a period when much has gone wrong in the global financial system:  (a) What happened? (b) What went wrong? (c) How can it be fixed? and (d) Who's responsible for fixing it? (And oh, by the way, what do we do with those who were responsible for what went wrong?)

The 2011 letter, just distributed, follows the same course. As in previous years, the letter was eagerly awaited, widely anticipated. Analysts, shareholders, and market watchers wondered, "What would Jamie say this year?"-- in a year, not of turmoil, but one of mild recovery and impressive earnings among large financial institutions. Dimon, as usual, detects what's wrong and proposes a fix-it solution--whether you the reader, the politician or the stock analyst agree or not.

What did Dimon say in 2011?

Up front, he says he caved in and didn't like restoring the bank's high quarterly dividend. He says bluntly and does so on the broad finance stage, "(If) it were up to me personally, I would reinvest all capital into our company and not pay any dividend." But in deference to shareholders, he says, "(This) is not what most shareholders want." Shareholders will understand his sentiment and long-term view, but many wanted some upside after a few years of volatile stock performance.

In general, his message is upbeat, not like the financial death warnings he offered two or three years ago on the same pages.

On risk, he says:  "Five years ago, very few people seemed to worry about outsized risk, black swans and fat tails."  Five years ago, recall, it was 2006, when markets soared and deals of all kinds (leveraged deals, mergers and acquisitions and thinly documented financings) were getting done. After the crisis, he says, "Today, people see a black swan with a fat tail behind every rock." And he wonders if financial institutions might have been too strickened to take prudent levels of business risks today.

Dimon injects bits of humor. On work ethic, he states, "The American people have a great work ethic, from farmers and factory workers to engineers and businessmen." He adds, "Even bankers and CEOs."

Basell III and Dodd-Frank regulation are big issues at big banks these days. The behemoth banks aren't approaching financial reform with open arms and warm smiles. But they acknowledge the business of banking must be tweaked, and the effort to sustain returns on equity at certain levels will be an immense challenge.  Banks will need to divert some attention from normal business activity to implement changes and systems required under new regulation. They also operate with a veil of uncertainty. Many of the details of new regulation are still being written.

Dimon's message this year addresses regulation in depth. He isn't fighting it or arguing for repeal. He is resigned to banks adapting (and whispers that costs might be passed on to customers.) "A likely outcome of the new regulations is that products and their pricing will change," he writes. "Some products will go away, some will be redesigned and some will be repriced."

He devotes passages to the "unintended consequences" of regulation--that Government may have the right intent to propose and enact new legislation, yet the impact could lead to complex consequences--some good for the general public, some very bad for the institutions that must comply. "If a restaurant that sells burgers can't sell french fries (because of a new rule), it risks losing all of its customers."

Dimon relents:  "Like it or not, we will adjust...."

And like it or not, the relenting Dimon acceded to shareholders' requests that shareholders be entitled to much higher quarterly dividends.

Tracy Williams