Govind Kumar Verma
Investment Banking Industry in 2001
In 2001, the main practice prevalent in the industry was consolidation. Companies went about it via purchasing smaller businesses, partnering with banks and Mergers & Acquisitions. Many preferred stable revenue over higher margins during the year and targeted the custody business instead of the lending business. The custody business is mainly about buying and selling securities/shares for the investors and is a low-risk fee-based business with high interaction between seller and customer. At the time 50% of revenue was paid as employee salary and therefore profits of the company were showing a declining trend. In the 1990’s investments banks were paying large amount of salaries in order to retain talent and make sure employees didn’t start their own businesses in competition with the banks. That strategy was backfiring on the banks as compensation costs became so high, that the company had declining profits. In recent years, the trend has changed; students are looking at large investment banks as career opportunities. However, this has brought about another problem for the banks, they weren’t built to handle the influx of so many eager and interested students.
Societe Generale is a bank based in France which started operations in 1864, nationalized in 1945, privatized in 1987 and purchased Cowen & Company in 1998 for $600 million. On the other hand Cowen was a bond brokerage firm which started in 1918 and was dedicated to research, equity sales and trading. Once the two companies consolidated and became SG Cowen, the loss turned into operating profit. Currently the company has 1,500 professionals and the main focus of the bankers is health care and technology, highly profitable areas of business. The company started operations in Boston but has now expanded to many offices in the country and, plans to expand further to Europe, Asia and other parts of the world. In order to not isolate smaller offices and its personnel, the company has taken steps to ensure regular interaction between all employees in regards to what sales have been made, client preferences in various cities, countries and industries and various deals brokered by bankers. Therefore, SG Cowen not only believes in the philosophy of growing worldwide but also attracting the right people for the right job fit.
Hiring Process in SG Cowen
• Hiring in early Winter and Spring of each year for associates starting in summer
• Promoting analysts to associates after 3 years with the firm without business school experience
• Hiring interns who worked with the firm between 1st and 2nd year of their business school as full time associates after they graduated from business school
• New associates (never affiliated with the company in the past) were hired in fall through campus recruitment
o Company presentations in core business schools (top 10)
o Resumes received from non core business schools
o “Informational interviews” conducted before actual interviews to understand potential candidates and give them an overview of company goals and requirements.
• Team Captains (professionals involved in recruiting from top business schools) were given the task of promoting the company in one business school and being affiliated with the school in one way or another. This helped in having a familiar point of contact for potential students
• New Strategy by Rae – Instead of going to top 10 business schools and picking up mid-level students, it was preferred by him to go to the top 25 schools and pick up top level students. He believed these students were more loyal and hard working. Each school was provided a company presentation which provided them the answer to 4 main questions:...