Wednesday, January 25, 2012

Campus Updates: The Global Imperative

New Cornell dean Dutta: INSEAD import
For more than a decade, most top business schools have made it an important objective to "go global." They've incorporated international topics and issues in all phases of the curriculum.  They've encouraged or even required students to do internships or semesters of study in foreign countries. They've hired professors (full-time and adjunct) to teach courses that address business challenges around the world.  Some schools push students to master a foreign language and/or study abroad at a peer business school.  Students have eagerly embraced these opportunities. It's not unusual for MBA students today to spend a spring break in Tanzania observing corporate activity in East Africa, do a consulting project in Brazil and Peru, or do a summer internship in Indonesia, as some Consortium students did in the past three years.

Business schools, we know, evolve, reassess and reinvent themselves--from year to year. They also observe and dissect what is hip and try to determine what is critically important or what is merely a fad of the times. "Ethics" has been the imperative at business schools in the years after Enron's collapse. "Leadership," "technology" and "innovation" have been priorities at most schools.

"Globalization" continues to be a primary objective, among all.  The best schools want to attract talented foreign students and professors and want to implement programs that take on topics such as the impact of China, the fragility of Europe, and the sudden opportunities in Brazil. 

Cornell (Johnson) announced its new dean in 2011, Soumitra Dutta, and proved to the b-school world that to have global influence it must hire global.  The new dean was a professor of business technology at INSEAD business school in Europe and arrives in Ithaca with an agenda to push Cornell further down the globalization road.  Dean Dutta, educated as an undergraduate in India, received his Ph.d. from California-Berkeley. He was at INSEAD for 22 years.

"Poets and Quants" (, the popular site that chronicles what business schools are doing these days (under the guidance of Fortune magazine), named Virginia-Darden's Dean Robert Bruner its first "Dean of the Year."  It praised Dean Bruner for his globalization push in all phases of the school--from the composition of students to forcing students and professors to think in unconventional ways about international topics.

An App for That

Two professors from Consortium schools teamed up to produce a corporate-valuation app for the iPad and iPhone.  Does it mean financiers can discard elaborate cash-flow spreadsheets and complex valuations? Does it mean first-year associates no longer have to produce sheets with several scenarios and lofty projections? No.

But it's a handy tool that can be as simple as the user wants it or as a complicated as the user needs it (with all those necessary scenarios and assumptions).  The app, uValue, was developed because the professors claim "poor investment decisions start with poor valuations."

Anant Sundaram from Dartmouth-Tuck and Aswath Damodaran from NYU-Stern created the app and made it available for free. Damodaran writes a popular corporate-finance blog that analyzes corporate-finance topics, sometimes with lightweight humor: (He was also named by BusinessWeek as one of the 10 most popular business-school professors in the U.S.)

Most Satisfied MBA Students

In the business media, a cottage industry in ranking business schools has developed. Everybody wants to weigh in.  Many are critical of the randomness, carelessness and whimsy of rankings. Some deans are likely frustrated by them.  But they proliferate.

In mid-2011, Fortune magazine unveiled a variation of business-school rankings that rated MBA alumni satisfaction with the schools they attended. Consortium school Dartmouth was tops on that list. This month rival magazine Forbes rolled out its list of most satisfied b-school graduates, using its own set of surveys and criteria. It measures "satisfaction" based on quality of education, preparation for a career, and happiness in the current job.

In Forbes' ranking, Stanford emerged as no. 1. Five Consortium schools, however, appear in this version of the top 10.  They include Virginia, Carnegie Mellon, Yale, Dartmouth and UCLA.

In yet another ranking (whew), perhaps worth noting because of the importance of the topic, Virginia was selected as the top school in business ethics, because it most ensured the topic is well-embedded and sufficiently covered in the curriculum. Business & Society, an academic journal, prepared that list.

Tracy Williams

For more about Damodaran, see

For more about Fortune's satisfaction ranking of schools, see

Thursday, January 12, 2012

Bonus Season

It's bonus season at most financial institutions--big or small, behemoth or boutique. At some, payouts were made in December. At others, bonuses are paid in January after a strenuous month of evaluations, rankings and appraisals in December.

For everybody involved, it's not always a comfortable time, especially in the current environment. For perhaps a generation, senior finance professionals got used to receiving the bulk of their compensation in one lump-sum payout in January. A year of doing deals, generating revenues, bringing in fees, managing risks, handling portfolios, selling services, introducing new clients, making presentations, and creating new products traditionally led to that big day of a big payout.

Times are different now. The art, science and politics of compensation are as complicated as ever--because (a) in 2011 business revenues at banks, funds, and firms were volatile and unpredictable and (b) with regulation looming, not many are sure how current business models can justify the old large incentive payouts that became a habit in the 1990s and 2000s.

Every firm, it seems, is struggling to figure out how to do it right. How do you pay top performers at all levels--sufficiently enough to keep them from fleeing to another bank or another industry? How do you rationalize the right payouts in a scenario of dwindling profitability and uncertain revenue trends--when trading revenues will disappear or revenues from deals, clients, and products aren't consistent or "sticky"? And what are the right payouts in the face of a public looking for a scapegoat to blame the financial crisis and recession?

Some institutions will find a way to continue to pay top performers at mid-2000 levels, even while they scale back operations, reduce staff, and withdraw from certain businesses. Others will strive for a fair, consistent bonus strategy at all levels of experience and performance. In other words, everybody must bear the pain of a new era or a new business model.

A few (including boutique firm Greenhill) have announced they will target total firmwide compensation at a specific percentage of net revenues--probably 40-50%.  Bankers and traders must learn to be satisfied within that model. Not the 50-60% levels of the past. If revenues are down, then bonuses will decline to ensure they meet compensation-percentage targets. 

Everybody is watching each other, no doubt. What will UBS do? Bank of America? Or Goldman Sachs, Paribas, Blackstone, or Credit Suisse? Financial institutions have always peeped over their shoulders to determine how "the market" for compensation is faring. (Among bulge brackets, Goldman, it was always thought, set the standard for associates, vice presidents and managing directors.)

What does this mean to recent MBA finance graduates, especially those who are early in their careers, still hoping to remain in finance throughout a career, and perhaps yearning (with illusions?) to remain at the same firm for a long time?

1.  Financial institutions, especially those accustomed to paying professionals bonuses that double or triple (or quadruple!) their base salaries, often say incentive plans are objective and metric-based. The process starts out that way, as senior managers review contributions, accomplishments and progress of individuals.  Further along, however, the process becomes political, subjective, and biased.

Senior managers are instructed to cut bonus pools all of a sudden--sometimes a day or two before scheduled payouts.  Some seniors seek to protect favorites.  Others shift some of the compensation pie to talented people who threaten to leave. Many managers sometimes can't agree on what is outstanding performance or what types of contributions or performances should be rewarded. 

Younger professionals often don't understand the underlying influences of incentive payouts. They won't know the behind-scenes discussions or the last-moment instructions from sector heads to change the rules. The rules are fluid throughout bonus season.

The junior population often agonizes, but shouldn't try to figure out why the compensation game is changing in the middle of the game.  Too much anxiety becomes a distraction from performance--which still counts for much, especially as they build reputations and a "buzz" around them and when promotions are under discussion.

2.  Incentive payments come in assorted packages. They may include a package of cash, restricted stock and/or options.  MBA associates and junior vice presidents seldom, if ever, have a say in the content of payouts. Most prefer up-front cash.  Senior managers, in good times, offer up-front cash to keep talent from deserting. In times of struggle, bank management will have few choices--pay in larger percentages of stock and options, or don't pay any amounts at all.

In times of uncertainty and little leverage, younger professionals should gladly accept grants of stock. Furthermore, in times of uncertainty, there's always that faction that reminds us that having a permanent job and a base salary is the bonus after all.

3. Younger professionals shouldn't jeopardize the possibility of a bonus with tepid, indifferent performance or abhorrent behavior in the few days before scheduled payouts. Sector heads and senior managers sometimes change their minds or look for reasons to take away from Paul to pay Peter. A bad impression in December, because of a rude attitude or sloppy presentation after 11 months of superb performance, has often--more than most know--led to a reduction in pay in January.

4.  One more life lesson. Bonus season, as much as any episode in somebody's career finance, is a smack-in-the-face reminder that sometimes life is fair, and sometimes it isn't.

Tracy Williams

The Toughest Interviewers

Imagine surveying MBA graduates at top schools, asking them to reveal which firms are the toughest interviewers, and Goldman Sachs or Morgan Stanley are not on the list.

In a survey last year of business professionals and from a compilation of feedback on its website, a California-based group listed its top 20 toughest places to interview. Strangely, Goldman Sachs, Morgan Stanley or other well-known financial institutions were not on the list.  Those firms, as many MBA and Consortium graduates in finance know well, are known to put candidates through a grueling, marathon process over many rounds before they extend an offer.

Many other banks and financial institutions are known to follow similar practices--whether the candidate is vying for a spot in a BA/BS program or is an experienced vice president looking to make a lateral move. How often have you heard about "the process"--successive rounds of three-on-one interviews, technical interviews on specific chapters in finance, situational interviews related to a deal or client, and virtual psychology tests, including brain-teasers and pressure points?

The website,, nonetheless, includes only two "financial institutions" (hedge funds) on its list. The site addresses topics and issues related to the culture and hiring practices at companies around the nation.

The beginning of a new year typically means interviewing season. MBA first-year students are preparing for interviews for internships after spending much of the fall trying to secure interview spots.  MBA second-year students are hustling to find permanent spots, if they didn't like their summer-internship experiences or if they didn't receive an August offer. More senior finance people might be considering a move now that bonus and evaluation season is over.

In the survey from 2011, consulting firms were frequent on the list.  That wasn't a surprise. That Goldman, Morgan Stanley, UBS, Credit Suisse, Lazard or JPMorgan weren't on the list is intriguing. Many factors could explain that.

McKinsey, Bain, and Boston Consulting, which hold some of the most coveted spots at consulting firms, finished nos. 1, 4, and 5, respectively on the list. Hedge funds Jane Street and Bridgewater finished no. 2 and 16.  Bridgewater is known to put candidates through nightmarish sessions. It boasts about how it judges candidates on how they respond to their grueling, sometimes demeaning tests.  Jane Street, a lesser known trading firm in New York, was said to require candidates to make quick, complex, and decisive trading decisions based on hypothetical market scenarios.

Teach for America was no. 7--somewhat a surprise. But it must filter candidates carefully to ensure they are qualified for the classroom. Amazon and eBay were nos. 16 and 17 on the list.

Note, too, that technology firms (including Google, Facebook and Apple), also known to "play mind games" with candidates who endure interview ordeals worthy of legend, were not on the list.

The large banks may not have been on the list for a few reasons. They attract candidates (MBAs or otherwise) who are familiar with what is required to get through the process. Candidates likely spend much time preparing for rounds of interrogation, getting intelligence from colleagues and alumni, and reviewing  specific topics in finance that could surface. Business-school students and alumni, including those at Consortium schools, take advantage of career services on campus and alumni networks, all of whom coach candidates. The interview process is still tough, but they are well-prepared.

You might argue, however, that those those are the same types who also aim for offer letters from McKinsey and other big consulting firms.

The big financial institutions will attempt to be hard, tough, but are likely assessing candidates carefully for "fit" and "maturity" and the ability to develop into managers, business leaders, and client-oriented professionals. Sure, they will ask candidates to compute discounted-cash-flows in their heads, but are also evaluating when and whether they will trust a candidate to lead a major deal, trade or negotiation with clients. It suits them to envision the candidate in a natural business setting.

Notwithstanding the recent list, most MBA students and graduates will still declare the rounds of talks they have with, say, Barclays, UBS, Bank of America, or Wells Fargo were as tough as it can get.

Tracy Williams

For more about Bridgewater, the hedge fund, see

For more about interview experiences, tales, and summaries at specific companies, see