CONSORTIUM FINANCE NETWORK

Campus Updates: The Global Imperative

2012-01-25T17:04:00.002-06:00


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" (http://www.poetsandquants.com/), 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: http://www.aswathdamodaran.blogspot.com/. (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
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For more about Damodaran, see
http://consortiumfinancenetwork.blogspot.com/2011/08/mba-professors-most-popular-10.html

For more about Fortune's satisfaction ranking of schools, see
http://consortiumfinancenetwork.blogspot.com/2011/07/business-schools-satisfied-alumni.html

Bonus Season

2012-01-12T20:23:00.003-06:00

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

2012-01-12T15:18:00.003-06:00

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, http://www.glassdoor.com/, 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
http://consortiumfinancenetwork.blogspot.com/2011/04/firm-culture-could-you-work-here.html

For more about interview experiences, tales, and summaries at specific companies, see http://www.glassdoor.com/.

Getting Real: Opportunities for 2012

2011-12-21T22:53:00.000-06:00

Let's get real. As we turn the corner and head toward an uncertain 2012, where are the real opportunities for MBA finance professionals?

What's the real scoop? In an environment where some tip-toe when they project better scenarios next year, but where every other day large banks announce lay-offs by the thousands, what's the real story?

Who's hiring? Who's promoting solid performers? Who's luring those interested in finance and promising long-term career paths? Where are the sectors or institutions that will harbor finance pros and allow them to grow, contribute and thrive over the the next few years?

Let's take a glance and gauge vibes and signals across the sectors.

1. Investment banking, corporate finance. From now until about mid-2012, you know banks won't commit. Uncertainty forces them to be hesitant. They'll want to see sustained trends in an economic recovery. Until then, banks will resort to old-time habits of firing rashly and excessively, but hiring too aggressively when signs point to more deal flow. Some banking sectors (Asia, financial institutions, e.g.) are thriving more than others. But even those change from quarter to quarter.

But old habits mean when the tide picks up (or when deals rush through the door), the doors of banks open, and they welcome new contributors at all levels.

2. Investment banking: equities, fixed-income. Who knows? Groupon, Facebook, Zynga, and Linkedin IPOs or projected IPOs were supposed to kick-start the equities sector. Low interest rates were supposed to encourage companies to refinance and get comfortable with debt levels. But regulation (especially from the new Dodd Frank rules) is forcing banks to restructure their trading desks and the complementary role investment banking plays.

Some analysts project fixed-income sectors will diminish in importance because of the lingering damage from the mortgage castastrophe and banks not being able to offset declines in fixed-income revenues with fixed-income banking fees. Some project equities units will soar and thrive, when markets improve, because of higher fees from deals.

2. Investment banking, mergers & acquisitions. Read between the lines or current deals. All depends on the industry sector. Many industries wait for entrenched signs of growth before they acquire companies or merge with a peer. Other industries, because of business conditions, must consolidate, restructure, or sell off divisions to survive. M&A groups stand ready to advise on any kind of corporate reorganization that exists.

New regulation won't tarnish this business too much, since it's fee-based and doesn't often require banks to use too much of their balance sheets. Opportunities for M&A pros in selected areas will always exist, as long as they're comfortable with a lifestyle of few holidays and weekends and arduous travel.

3. Bank sales & trading. Expect few opportunities. Profit opportunities are disappearing. Regulation, compliance, and market volatility have combined to become an avalanche. And banks, after careful analysis, are choosing to get out of the way. Expect gradual reductions in staff across the board. Some are deciding that trading requires too much effort, pain and compliance just to squeak out a few basis points of revenues or tiny profit margins.

Banks are restructuring their trading desks, because they must. Some will depart from all trading activity, except from bare-bones customer-flow transactions. Many (J.P. Morgan, e.g.) have already reduced staff in commodities substantially. The new Volcker Rules will change the game, guidelines and profit dynamics. Some will rationalize maintaining a presence in certain trading areas if they can offset declines with gains in business elsewhere, if that's possible.

They know their best traders will flee for hedge funds and take entire desks with them, and there's not much they can do about it.

4. Risk management. Right after the financial crisis, this was the "growth area" in most financial institutions. Banks, firms, and funds hurried to ensure they had experienced, wise risk managers in place. They reviewed governance policies and rewrote them to give risk managers sufficient authority to confront the next crisis.

They even re-branded risk units to attract and keep talent. Risk management would be a destination unit, not a temporary stop-off between corporate finance assignments. Since then, the rush to reorganize and re-emphasize risk management has slowed down, but few institutions will want to be seen as reducing risk staff or risk support during challenging times.

At many firms, you seldom hear about drastic cuts in risk staff. Risk management, you can argue, is the glue that keeps Goldman Sachs in order. The lack of a strong risk organization, some argue, is why MF Global failed.

5. Corporate banking. Corporate banking, or old-fashioned relationship banking and corporate lending, regained prominence in recent years. Big banks, fatigue from the ups and downs of investment banking, rediscovered the benefits of corporate banking: a stable revenue base from lower-risk products and a loyal, committed client base that rewards banks for service, not for dramatic board-room pitches.

Many banks continue their renewed emphasis on corporate banking and project hiring experienced bankers. They are also designing new paths for new MBAs, especially for those who never contemplated such a career while in business school.

6. Bank treasury services, funds transfer, custody and cash management. The other half of nuts, bolts, blocking and tackling of service banking. Big firms re-emphasizing corporate banking must also have superior service products, too. Banks in the past were often careless in their efforts to attract strong product managers or marketing experts from the outside or from within.

Lately, however, some (J.P. Morgan, e.g.) have successfully convinced former investment bankers to transfer into these areas to energize mature (and sometimes moribund) business units. Banks, nonetheless, haven't yet rationalized a comparable compensation program for those ex-investment bankers and may not be able to.

7. Corporate treasury, financial management, financial analysis. Ah, breaths of fresh air. Amid all the market turmoil and difficulties at financial institutions, blue-chip companies are quietly reporting strong earnings, investing in new markets, and projecting reasonable growth. The finance units in these companies continue to recruit aggressively at business schools; some have convinced top graduates to by-pass Wall Street.

They promise more stability, opportunities to work in foreign countries, and worthwhile management experience. A financial analyst job at Ford or General Motors (popular destinations for many Consortium graduates) might have become fashionable again. Or a position in corporate strategy at Eli Lily or Pepsico is a desirable first job.

8. Private wealth management. Almost every bank in the country has decided to devote capital and attention to this sector. Almost every bank is attracted to a business model of aggressive accumulation and gathering of client assets, which lead to stable revenues, steady growth, and fewer headaches from market risks, regulatory threats, and an uncertain corporate clientele.

At least for now, before too many banks chase too few clients or too little in assets (or clients get too frustrated with market performance), everybody agrees this is the hot hiring growth spot in the year or two to come.

9. Community banking and development, retail banking. Some institutions see long-term growth in brick-and-mortar banking. Some don't. J.P. Morgan Chase and Bank of America have seen it. Citi sees it overseas. HSBC or BNY Mellon didn't see it.

Those that do will continue to acquire branches, hire more managers and staff, and provide more face-to-face banking services, even if it's not always easy to justify the efficiencies of such expansion. As long as they attract more and more customers (especially those who prefer a personal touch) and as long as those customers bring their deposits and their ongoing personal needs (mortgages, car loans, credit cards, e.g.), they can justify it.

Not many MBAs from top schools (including many from Consortium schools) have conventionally expressed interest in retail or community banking, but many with experience have eventually turned toward these sectors when opportunities arise.

10. Hedge funds. Hedge funds stumbled through a tough 2011. They have admitted to their investors they were caught off guard with troubles in Europe and U.S. budget-deficit fuss. But funds tend to forget the past. Or at least they try to.

Others close up shop and reopen in a different incarnation. They move on and start anew. They know, too, they'll benefit from banks being forced to downsize proprietary trading. There will be opportunities, but the industry, as always, will still be difficult to break into. Hedge-fund managers hire cronies, classmates, former colleagues from other trading experiences, graduates from the schools they attended, and sons and daughters of classmates.

11. Venture capital and private equity (financial sponsors). This is the industry of home-runs and American-dream stories of earning millions inside the proverbial five-year window. Opportunities for firms and funds to make money exist in good times (new markets and mature markets) and in bad times (distressed assets, bargain-basement prices, and restructurings). There are some (KKR, e.g.) who have even discovered ways to make investments in battered Europe. But the doors to get inside this industry are difficult to penetrate. Now, next year, and for years to come.

Some (Blackstone comes to mind) have tried to be open-minded about opening their doors to a wider array of talent and backgrounds, partly because a few have become public institutions or have been contemplating going public.

12. Asia, Europe, South America, China. Of course, Europe is in turmoil, and experts project the likelihood of continued problems. Banks there are besieged with issues and capital challenges. Few European institutions (UBS, RBS, Deutsche Bank, HSBC, e.g.) are heralding opportunities while the continent tries to right itself.

Meanwhile, financial institutions everywhere continue to have expansion eyes on parts of Asia, South America (especially Brazil), and China.

13. Diversity initiatives. When institutions struggled to remain alive after the Lehman collapse, many initiatives and much enthusiasm for diversity slipped. You could hardly get a CEO or sector head to discuss the topic, much less attend a meeting or conference call on the topic.

Some enthusiasm has revived since then, partly because some institutions see the long-term benefits and genuinely believe it's a way to hire top talent.

We've reached the corner and are headed toward the new year. Uncertainty prevails, but the mood isn't one of hopelessness or disenchantment. It's about caution and picking the right spots, the right places, and the most optimistic and resourceful institutions.

Tracy Williams

Approaching 2012

2011-12-12T14:43:00.001-06:00

Trying to project 2012 is like reading tea leaves. Who's willing to make an informed, detailed forecast and be comfortable and confident about it? The variables are too numerous, too complex, too bewildering. If you are a finance professional, an MBA student or a Consortium alumnus, how do you brace and prepare for next year--a year of turning points and pivots with Europe unable to make up its mind about a corrective course and with U.S. elections hovering?

By now, we have grown weary of the tail end of 2011 and are ready for the year to get going. Early in 2011, business and financial signs were uplifting. We were poised for a sustained upturn until we fell off a cliff in August. Since then, we've feared a repeat of the fall, 2008, with a different set of plots, twists and finger-pointing.

The plot this time revolved around the bickering in Congress about budget deficits and debt levels and bickering in Europe about debt levels and budget deficits. The collapse of MF Global and its unexplained loss of a billion dollars of customer funds caught everybody off guard. Jon Corzine, its CEO, was supposed to have brought Goldman magic to the struggling futures brokerage. Insider-trading scandals, pending financial reform, and general economic malaise complicate the plot.

Markets meanwhile swooned out of control, with a mind wandering on its own, reacting irrationally to whatever announcement, statistic or trend happened to be the worry of the day.

Financial institutions, rebounding with a blaze with 2010 profits and gearing up to hire in large numbers, began to stumble. Trading losses hurt their bottom lines, and many are still crippled from mortgage-related businesses. It didn't help in late 2011 when the public perceived big banks were creating fees (ATM fees, checking-account fees, debt-card fees, whatever) out of the blue, unnerving retail customers. Financial institutions around the globe continued to duck slings and arrows from critics, pundits, politicians, and economists.

Nonetheless, amidst this apparent mess, lately there has been a quiet seepage of good news on employment fronts, retail spending, and general confidence. Facebook still wants to proceed with its public offering, and major banks everywhere continue to push hard in certain areas--wealth management, community banking, e.g.

What do finance professionals--both the MBA student and the experienced, senior executive--make of this confusing environment? How then do they approach 2012, when many expect a market holding pattern as Europe endures a few more scuffles before it figures itself out?

For MBA students, including Consortium students across the country, the environment seems like a whirlpool--enticing, but constantly stirring. Students are unsure when and how the waters will calm down. They are forced to adopt a Plan A, then a Plan B, and likely a Plan C.

Financial institutions are sending mixed signals. They want to hire more interns and first-year associates in private wealth management, in corporate strategy, in treasury, in corporate banking, in risk management, and in spots in Asia. But then they change their minds, reduce their expected hiring numbers, or announce large-scale cutbacks in the areas they previously promised to emphasize more.

Students are wooed by major institutions, but they know they must be purposeful and diligent in finding the right spot at the right place.

More experienced finance professionals are thankful they are in substantive roles. But the memory of 2008 is haunting. They endured the crisis, many survived it, some repositioned or rebranded themselves and landed elsewhere. However, they know what can or might happen. Although 2011 is not 2008, they can't help but wonder whether a Euro collapse could be more devastating than a Lehman downfall. How do we, they must ask, prepare individually for what could happen in a way that we weren't prepared before?

Experienced MBA graduates (including many Consortium alumni in finance) know better this time around they should take efforts to manage the uncertainty around them or shrewdly insulate themselves from career risks that may or may not happen.

Experienced professionals, however, could be the ones who guide younger MBAs who are unsure if a financial hurricane or financial sunshine looms ahead. They can compare the current scenario with other periods in recent finance history. Is this a scaled-down repeat of 2008? How do these times compare to periods of market upheaval or market confusion during the dot-com blow-up of the early 2000s or the maddening sequence of Long Term Capital, Russia and Asia defaults in 1998? How is the industry better prepared now (or less so) than in struggling times in the past? Are we in the midst of a real recovery, but we don't see it because we are blinded by the turbulence across the Atlantic?

More senior professionals, in a mentoring role, can advise younger professionals and students on how to focus on daily, immediate tasks and have confidence in what can be controlled--the next project, the next presentation, the new opportunity to learn.

Approaching 2012 is like turning a corner. Perhaps around the bend lie opportunities, optimism, profits and improved times--not the daunting signals of a crushing, long-term slowdown.

Tracy Williams

First-Year MBAs: Internships and Recruiting

2011-11-22T16:25:00.001-06:00

What are current sentiments, trends, and outlook, as MBA students prepare for a tough job market in 2012-13? What are the best tools, advice, and guidelines to get ready?

The Consortium Finance Network hosted a webinar Nov. 22 for first-year Consortium MBAs in finance to discuss strategies for recruiting and securing internships for the summer, 2012.

Panelists included Consortium graduates Eddie Galvan, Denzil Vaughn, and Enoch Kariuki. CFN founding members Tracy Williams and Camilo Sandoval (also a Consortium alumnus) and the Consortium's D-Lori Newsome-Pitts organized the webinar.

Fortunately for students, the hiring environment for 2012 is not as discouraging as it was in 2008-09, when financial institutions worried more about survival than bringing aboard new MBAs. Yet with announcements every other day from banks about rounds of lay-offs, finance students know the task of winning an offer for a meaningful internship will be tricky.

Market volatility in recent months, frenzied discussions about U.S. debt reduction, a stumbling economic recovery and persistent rumblings from Europe all have impact even in hiring MBA students. The webinar provided strategies for new students.

Panelists said there is some optimism--despite all. Financial institutions are in better shape now than they were in 2008. They have stronger capital cushion and are flooded with cash reserves, although they momentarily are suffering from trading losses or slow deal flow. They are, however, hopeful they'll get over a late-2011-2012 hump, endure a long election year and want to be prepared for 2012-13.

Many large firms, panelists said, are optimistic and hopeful, but cautious. There are areas of opportunity (private banking, risk management, middle-market banking, e.g.), but there are also areas of decline or little hope (some sectors in trading). Financial reform, not just economic conditions, will also affect recruiting trends.

For now, financial institutions this fall made the rounds at Consortium and other top business schools, as they usually do, no matter the environment. A few canceled planned presentations on campus--still unsure about deal flow, new clients, new business, and costs to support business efforts in the short term. Most institutions are struggling to count how many spots for MBA internships it will offer. The same institutions have a decades-long history for not getting the number right (over-hiring, under-hiring, and doing so too quickly). They certainly have a habit for changing the expected number throughout the process.

MBAs, nonethless, throughout the post-crisis fracas, continue to have degrees of interest in finance. Over 80 students in this year's Consortium first-year class expressed interest in financial services, banking, sales & trading, investment research, and asset management.

Panelist during the webinar provided a road map for students. How do you take advantage of networks? How do you choose the right finance sector, culture and fit? Why is it important to keep up with current topics? How do you confront technical interviews? Will you succeed in certain environments? How do you impress an institution where you prefer to work? How do you control and master rounds and rounds of interviewing?

Panelists shared stories of how they chose to work at a certain firm, why they chose one firm over another, or why they took a detour and went into a non-banking role. They showed, too, how they tapped networks to find opportunities. They advised on how students can manage academics, recruiting and keeping up with trends and events in markets. They reminded students to handle technical interviews with confidence and preparation.

They discussed trends in diversity. Are the major institutions still committed? Will institutions be committed in all times--good times, downturns, booms?

And once you have the offer, how do you negotiate and accept it? How do you make sure the summer internship leads to a full-time offer? Panelists shared their experiences.

CFN, upon request, will share details of the presentation to Consortium students and alumni.

Tracy Williams

Venture Capital: Diversity Update

2011-11-22T16:24:00.001-06:00

If you were to peep inside the corridors of most venture capital firms, including those in pockets of Silicon Valley or those scattered about Manhattan or in the Boston suburbs, would you see encouraging signs of diversity? Would you see a diverse environment, an inclusive culture, or a setting where those from under-represented groups are deeply involved in investment discussions, analyses, presentations, and decision-making?

In those same venture capital firms, would you see women, blacks and Hispanics in prominent professional roles?

Not really, says a survey from the National Venture Capital Association (http://www.nvca.org/). Would you be surprised? Not really, the survey also shows. The business of venture capital (investing in promising start-ups, nurturing new ideas, coaching young entrepreneurs, and facilitating financing in second and third rounds) has a long way to go.

The survey was taken in mid-2011 and follows a similar survey from 2008. The survey was sent to investment professionals and to those in a variety of administrative roles. About 600 responded, providing answers to questions related to race, ethnicity, background and education. Whether optimally scientific or not, the responses weren't surprising. Women, blacks and Hispanics still do not have significant roles in venture capital--at least at the big, world-shaking firms.

What did the survey tell us?

1. Women are not prominent in major roles at venture-capital firms. Only 11 percent of those in investing roles are women, a decline, in fact, from 2008 (14 percent).

2. Women are more involved in life sciences and clean technology (18 percent), less involved in non-high-tech businesses (8 percent).

3. There are signs of progress. Women (both investing professionals and administrators) comprise 28 percent of those under 30.

4. Blacks and Hispanics are virtually invisible in the industry, and there has been little or no progress the past three years. African-Americans and Hispanics (combined) comprise 2 percent of all survey respondents (both investors and administrators)--down from 3 percent in 2008.

5. There are few signs of progress among Blacks and Hispanics. They comprise 3 percent of investing professionals who had less than five years of experience (those who are among the most recent hires).

6. Asians and Asian-Americans have a greater presence at venture-capital firms, but not in significant numbers: 9 percent of all respondents this year, 17 percent of all investing professionals with less than five years of experience.

7. Alumni from prominent graduate schools are present in large numbers at top venture-capital firms. Almost 80 percent have master's, J.D., or Ph.D. degrees; about half have MBAs. Graduates of Harvard, Stanford, Yale, Penn, MIT, Berkeley, Duke, Norwestern, Michigan, and Columbia comprised about half of all the respondents.

8. More than half of respondents had spent some time in their careers as consultants, investment bankers or attorneys, suggesting that one of the best ways to enter the field is to have started out first and gained meaningful experience in one of these roles.

Why are the numbers for under-represented groups woefully low?

Why hasn't there been progress? Is there something that keeps or discourages blacks, Hispanics and women from large-scale entrepreneurial activity and from participating in expected profits and large windfalls from sales of private stock or IPOs?

As most know, the top venture-capital firms tend to be concentrated in hotbeds of entrepreneurial activity, where firms have close access to new ideas, innovation, and eager entrepreneurs, but also access to capital and investors. Silicon Valley and the greater San Francisco area are well-known homes for top ventures firms, but so are Boston, Chicago, and New York.

Top firms, based on the number of deals they've done over the past few years and the amount of capital they manage, include Sequoia Capital, Andreesson Horrowitz, Draper Fisher, Kleiner Perkins, General Catalyst, Accel, Charles River Ventures, Khosla, Oak Investment, and Greylock--many of whom are members of the NVCA and likely had employees and investing professionals who participated in the survey.

Why are those from under-represented groups not intimately involved in the promise, innovation and profit-sharing of venture investing?

1. The venture-capital world is private, clubbish. "Members" know each other well from previous deals, affiliations, and experiences. They know each other in previous roles as bankers, lawyers, and consultants. They may, in fact, know each other from school. They invest in deals and funds within the club; they hire among each other or tap investing talent they know among themselves.

Some firm leaders might have been entrepreneurs before. They benefited from financial support and industry guidance from other venture firms. The survey said more than 15 percent of investing professionals at venture firms were CEOs or heads of other start-ups. Many managed start-ups through early stages, reaped large benefits from the sale of their enterprises, and then invested the wealth in new venture funds. Marc Andreessen, a Netscape founder, and Peter Thiel, PayPal's founder, are now widely known as venture investors.

2. Venture firms are narrowly focused on the next deal, the next new idea, and the next entrepreneur who has a "disrupting" vision. They are seldom motivated by or caring enough to ensure diversity among their professional staff. Institutions, investors, and funds that provide capital for the venture fund don't hold firms accountable. Because transactions and relationships are private, they aren't likely to push to make firm's culture inclusive and or push to provide opportunities for those from a variety of backgrounds.

3. Venture firms, not held accountable and operating in closed-door environments, are likely to be unaware, uninformed or unperceptive of diversity's benefits.

4. Venture firms tend to be marginally staffed. They include investor professionals, principals, partners, analysts, and researchers. They also include attorneys, administrators, and financial staff. They are not likely to have personnel who pursue diversity-related initiatives and programs, who hold the firm's leaders accountable to fairness, opportunities and diversity, or who prompt the firm to catch up or keep up in related issues.

5. Venture firms aren't likely familiar with diversity pipeline programs or aren't aware that blacks, women, and Hispanics in numbers are interested in venture capital, private equity and fund investing and attend the same top business schools that their leaders did. Blacks, Hispanics, Asians and women who find their ways into the sheltered cultures are likely to have attended the same schools and found a pathway from school ties, summer internships, or experiences in investment banking or consulting.

Despite the dismal numbers, some African-Americans, Hispanics and women have punctured the closed doors. Some have started their own funds or have found a way into top spots at the bigger venture capital or private-equity firms (Ronald Blaylock's GenNx360 Capital, e.g.).

Nonetheless, applaud the NVCA. First, it dares to conduct such a survey and report its results widely, even if there isn't yet much to celebrate while progress is stiflingly slow. Second, it states it has objectives to improve the numbers. Its president Mark Heesen said in a recent release, "Ideally, we would like to see a professional base that reflects the entrepreneurs in which we invest, one that is robust and diverse in terms of gender, ethnicity, nationality and age."

In other words,the NVCA is daring to hold the industry accountable, if it doesn't do so itself.

Tracy Williams

MF Global: Too Small to Save

2011-11-08T19:42:00.001-06:00

Not the same impact as Lehman

Late last month the world of finance, brokerage and trading experienced a hiccup--beyond the daily eruptions from Europe. It wasn't yet another day of market swoons or showdowns in Europe. It wasn't yet another day of a nose-dive in the Dow or headline disagreements on how the economy should recover.

MF Global, the futures brokerage firm, filed for bankruptcy. It was deemed too small to save. MF Global was not a household name (but so wasn't Bernard Madoff before the world found out about that fraud). Few outside the industry knew much about MF Global. Some knew that former New Jersey Governor Jon Corzine was its CEO. And they knew Corzine had been the head at Goldman Sachs in the 1990s.

MF Global was known as a major player in futures and commodities brokerage. It had institutional client accounts with hedge funds, pension funds, corporations, banks, other brokerages, and other trading firms. It facilitated futures and commodities trading on all the important derivatives exchanges around the world and special trading over the counter.

For the most part, it acted in intermediary roles, a broker for clients who wished to engage in futures and commodities trading for hedging purposes or for taking a bet or view on interest rates, crude oil, foreign currencies, or stock indices. Clients deposited funds at the firm, and the firm facilitated trading at futures and commodities exchanges or "over the counter." It earned commissions (or "mark-ups"). Client funds not yet deployed for transaction purposes were supposed to be deemed "safe" and "segregated."

MF Global was supposed to be somewhat insulated from virulent swings in markets, as long as there was some activity or some transaction for which it could charge a commission. While clients try to hedge against market swings, MF Global is supposed to thrive in market volatility, not suffer inexplicable trading losses that lead to bankruptcy.

Entered Corzine, recovering from a devastating loss for reelection for a gubernatorial term in New Jersey and perhaps hoping to write a thrilling second chapter to his career on Wall Street. He felt he could be the catalyst to wake up a sleeping MF Global, which had stumbled through a few performance and risk-management issues before he arrived.

To provide earnings spark and improve performance, Corzine felt he needed to reinvent MF Global. It wouldn't move away from its core brokerage expertise, but it needed to be more daring. It would take risks in the same way Goldman evolved to become a trading powerhouse under his helm in the 1990s.

MF's demise has caused ripples in markets, not a Lehman-like thunderous roar. Its disappearance won't be a threat to the global financial system. But many market participants wonder whether other medium-sized brokerage houses are similarly vulnerable or could be next. Who could be next? Unfortunately, too, at MF Global, regulators are scrambling to locate hundreds of millions of dollars of missing customer funds. Many experienced brokerage personnel at the firm must look elsewhere for work. (Over 900 were let go this week.)

What happened at MF? What hastened its demise?

1. Corzine likely tried to hard too fast to replicate parts of Goldman and had a stubborn belief in his old, successful ways. About a year after Corzine had settled in, MF Global started to suffer substantial losses from leveraged bets on Europe sovereign debt this year (exploiting its access to "repo" markets and credit-default swaps, but stumbling soon thereafter).

2. Risk management lacked a voice or authority to restrain the trading and the firm's piling up of risks. It certainly lacked authority to second-guess Corzine. He presided over a risk-management structure that didn't allow risk managers to say "no" or "slow down."

3. MF was non-responsive to regulators' persistent requests to increase its capital base. Capital might have been adequate for a pure-brokerage role, but it wasn't when it began to engage in proprietary trading on a large scale. Instead of boosting capital to comply with requests, Corzine and team would lead arguments for why it felt new capital wasn't necessary.

Are there lessons to be learned from the MF Global mini-crisis?

1. Leveraged trading is still risky, even if it involves trading government securities.

2. Risk management within financial institutions must have an authoritative voice to be effective.

3. Old, successful ways of making money in trading may not be magical and profitable at a different firm in a different era in apparently different market scenarios.

4. Plain-vanilla brokerage and banking businesses may not always lead to stellar returns, but can help ensure long-term survival.

What happens over the next year or two?

1. The bankruptcy will run its course. It will continue to be a business headline, because customer funds and deposits are missing and can't be accounted for. Regulators, market watchers, and business media will persist in asking how that could happen. They will blame woefully inadequate operations, and some will suspect fraud.

2. Exchanges and regulators will ponder rules changes to discourage futures brokerages from taking big proprietary-trading risks. As with other financial reform, new rules will be thoroughly discussed, but won't be implemented soon.

3. MF Global will become a broker/dealer-industry footnote like Rothshild, Hutton, Refco, and Drexel. That it will become a footnote in the history of finance is probably good. It meant it was too small to save, just a market ripple.

Tracy Williams

BE's Who's Who on Wall Street, 2011

2011-11-08T16:59:00.002-06:00

Chris Williams of Williams Capital

After financial turmoil in 2008-09, Black Enterprise magazine decided to wait a year or two before presenting its occasional list of the most powerful blacks on Wall Street. It figured it needed to watch the shake-out in the industry and observe the impact on African-Americans.

In its latest issue (http://www.blackenterprise.com/), it decided now is a good time to update its list, although Wall Street, banking and trading have experienced many bumps and bruises in 2011. It failed to answer conclusively whether African-Americans took unfair, backward steps in diversity progress among top banks, brokers and financial institutions. Everybody took hits during 2009-10, all groups and genders, including African-Americans in entry and middle-level roles. We all saw the industry reduce staff by the thousands during the crisis.And we saw how some on their own fled the industry to avoid stress and uncertainty or to explore other opportunities with less strain.

With signs of an upturn in 2010 and with institutions recommitting themselves to older diversity initiatives, it's not yet clear whether blacks are returning to Wall Street in the same numbers as before. Banks are reaching out to hire African-Americans interested in banking and finance, but like many in the population, blacks may not be raising their hands as they did in the 1990s and early 2000s. Many don't want to confront anxiety, possible layoffs, and going to work not sure where the industry is headed in the next year. Many on the inside confront that now, as we head into bonus and appraisal season.

In its latest list, however, Black Enterprise observed that many senior African-Americans in the industry continue in senior roles. The latest list includes familiar names, people who have been top players in investment banking, investment management, and private equity for the past 10-15 years; some more than 20 years.

Many on the list include top executives of familiar black-owned firms: Chris Williams (above) of Williams Capital, John Rogers of Ariel Investments, Bernard Beal of M.R. Beal, Tracy Maitland of Advent Capital, Donald Rice of Rice Financial, James Reynolds of Loop Capital, and Calvin Grigsby of Grisby Associates.

The list also includes known investment bankers, managing directors or senior advisers at top banks--those prominent in mergers and acquisitions, corporate finance, municipal finance or corporate advisory: Raymond McGuire at Citi, Rodney Miller at JPMorgan, Carla Harris and Melissa James at Morgan Stanley, and William Lewis at Lazard.

It includes an impressive number who have made their marks in private equity: Ronald Blaylock, founder at GenNx360 Capital, Terry Jones of Syncom Venture Partners, Raymond Whiteman of Carlyle, and Adebayo Ogunlesi at Global Infrastructure (a GE venture).

Most of the above have had long careers on Wall Street (more than 20 years); many started at major banks and moved on to start their own firms after gaining experience, contact and access to capital.

The BE list includes a couple who made their names elsewhere, but turned to Wall Street in the latter parts of their careers: Robert Johnson of BET fame and fortune is on the list for having started a middle-market private-equity firm. Vernon Jordan, best known for his roles at the National Urban League and as a Clinton presidential insider, is a senior managing director at Lazard.

The list, for some reason, excludes Roger Ferguson, CEO of TIAA-CREF, the large retirement fund with over $480 billion in assets. Ferguson is also a former governor at the Federal Reserve. And it excludes Kenneth Chenault, CEO of American Express, arguably more powerful than all 75 on the current list. Black Enterprise couldn't have forgotten him, since it has featured him often on covers and in articles over the past two decades.

Black Enterprise's list shows where there might be gaps on Wall Street, segments of financial services where blacks have virtually no role, are negligible in numbers or have not been able to penetrate at all--even if they have desire and interest. The list, for example, doesn't include many blacks who are sufficiently senior to be included in equity research, industry analysts who present their financial views of companies publicly and whose opinions about specific companies or macroeconomic trends can move markets in minutes.

Notably, the list doesn't include many African-Americans who are senior traders at prominent hedge funds or high-frequency trading firms or who are partners at Silicon Valley venture capital firms. That might not be an accident. Market-influencing hedge funds, high-frequency trading firms and ground-breaking venture firms are private. They operate in hush-hush environments. They tend to hire among small circles in tight networks and are indifferent to the benefits of diversity. Young African-Americans learn about these firms at business school, in exploring opportunities in finance, and from networks.But they have tough times when they knock on those doors--at least in junior positions.

Black Enterprise's list, once again, shows there are indeed many blacks--even post-crisis--who aspire to careers on Wall Street, who want to trade, invest, do research, manage portfolios, advise companies and finance start-ups, who want to help companies and municipalities fund operations, and who want to consider starting their own boutiques and shops when they are ready.

Tracy Williams

Here They Come, the Volcker Rules

2011-11-03T16:27:00.000-05:00

Like it or not, the Volcker rules are coming. Ready or not, banks confront the new reality. Banks reported a gush of trading-related revenues in the 2000s. Going forward, they will not be permitted to engage in proprietary trading in the way they have done successfully the past decade.

Banks, including old commercial banks and investment banks that turned into bank holding companies, maintained trading units and ran them like internal hedge funds. They were allowed to use capital to support trading in most any instrument they felt they had expertise in or perceived profit opportunities. They traded equities, held positions long or short, traded equity derivatives, and traded equity-linked swaps. Big banks, like JPMorgan, Citi, or Goldman Sachs, reported profits, had substantial roles in all markets, and attracted talent. Small community banks shied away.

They could execute "black blox" trades, high-frequency algorithms, or deal in"exotics." Analysts described Goldman as a trading firm or hedge fund disguised as an investment bank. Morgan Stanley, for many years, operated a closed-doors proprietary trading group, featuring traders with doctorates with complex ideas about exotic trades and statistical arbitrage.

Banks organized and managed desks in bonds, structured notes, mortgages, foreign currencies, convertible bonds, options, and high-yield debt. They traded in every imaginable derivative--from currency swaps to credit-default swaps and asset-backed indices. They took positions, took risks in market trends, and bet in the long term or short term.

And none of this trading was required to accommodate customers, although selling to or buying from investors who were clients was a significant part of the business.

Dodd-Frank and other bank regulation around the globe are curtailing prop-trading at commercial banks, at bank holding-companies, and at any financial institution that has a deposit-taking business in its vicinity. For months, banks have been re-engineering their operations to comply with expected rules changes. More important, they are scrambling to figure out how they will replace profits from trading with other revenue sources to generate similar returns on equity. The clock is ticking.

Or perhaps they will learn to settle for lower returns on equity, but more stable performance from quarter to quarter.

Banks knew the rules were coming, ever since the frantic aftermath of 2008-09 when former Federal Reserve chairman Paul Volcker proposed the abolition of prop-trading at banks. He, as well as politicians, regulators and the public at large, reasoned prop-trading contributed to or exacerbated the crisis. A year after the passing of Dodd-Frank legislation, banks are hustling to offset expected loss revenues, make sense of the rules, and figure out what they can and cannot do.

The rules permit client-flow trading. Banks won't be forced to shut down their trading operations. They can maintain trading positions if they exist to accommodate a client wishing to buy or sell securities or derivatives. That's not as easy as it sounds.

The rules that explain client-related flow trading are difficult to interpret and even harder to comply with: If a bank purchases equities from a client and hold them for a week, is that client-related trading? If a bank purchases corporate bonds in anticipation of clients wanting to buy them, is that client-related trading? If a bank purchases securities and re-sells them for an above-normal profit within a day, is that client-related trading?

Banks are huddling among themselves to understand what the rules will permit or prohibit. Banks also are puzzled to determine what is an infraction. The rules, for example, let regulators infer that prop-trading exists if banks report excess trading revenues or volatile trading revenues, even if it appears all trading is tied to a client request.

Trades for hedging purposes will be permitted. Yet hedges are hard to interpret. When is a hedge really a hedge? What if equity positions are hedged 100 percent one day, but market movement causes the same position to be hedged 90 percent the next week? The rules are subject to interpretation. But no bank wants to be subject to a penalty or subpoena. Some banks will not want to absorb unusual legal costs to interpret every aspect of the rules.

Some major banks (such as JPMorgan, Bank of America, and Morgan Stanley)--especially those with significant institutional and hedge-fund clients--will dig in, continue to maintain trading desks for client flows, and learn with difficulty to live within the rules. They anticipate declining trading revenues, but hope other client business (e.g., equity IPOs, M&A mandates or cash-management services) will offset the declines.

Other banks--especially those that weren't major traders or those with negligible success in prop-trading--will abandon trading altogether.

The big banks that stick it must invest in systems and hire compliance people to monitor trading activity to make sure they obey rules. They prefer to invest in other revenue-generating projects, but if they choose to retain trading desks, they will learn to live with constraints, limits, and compliance costs.

Banks don't broadcast all the repercussions of limited trading, but there are other implications. Some analysts rationalize the disappearance of prop-trading revenues could push ROEs, customarily above 15%, down to 10% and below, even in the best of times, unless they find offsets or new products and services.

Bank trading arms attracted smart, talented traders, researchers, and black-box theorists. This group will now seek to work for hedge funds, private-equity firms, and broker/dealers. Cynics argue that's fine, since the same group might have contributed to the exotic products that led to the crisis.

Bank trading units have long been centers of innovation, new ideas, and new products. Hedge funds and private-equity firms spawn ideas, too. But the Goldmans and Morgan Stanleys with global networks, securities distribution arms, research groups, market intelligence, investing clients and capital often acted as incubators for new products or ways of trading. Lower profitability will discourage them from devoting resources to new products or trading ideas.

Again, cynics, regulators and many in the general public say that's fine. New trading products and ideas should be, they say, developed slowly, and their risks and impact on markets analyzed and studied in depth.

Bank trading units may scale down their market-making and dealing roles. Banks had capital and resources to act as market-makers across multiple products. They provided vast amounts of liquidity in derivatives, bonds, and currencies. Will liquidity be jeopardized if banks de-emphasize trading? Will banks be less willing to assist institutional clients in hedging strategies or if it wants to avoid penalties lest regulators misinterpret the position?

Tough questions for big banks, but with solutions that might make them uncomfortable for a while.

Tracy Williams
_________________________
For more on the Volcker Rules, see also CFN post of June-2010:
http://consortiumfinancenetwork.blogspot.com/2010/06/volckerized.html

The MBA: Remaining Relevant in 2011

2011-10-16T15:43:00.000-05:00

It's nothing new that top graduate business schools across the country stretch themselves to keep up with the times, remain relevant, and enhance the quality of a student's two-year stint in school. Over the past two decades, they have responded to financial crises, evolving corporate needs, questions of ethics, and a global economy. They've even responded to the cries of students who want lavish facilities and daily comfort on campus to justify steep tuition costs.

Once there was a time when a student could leave b-school and sidestep courses related to Asia or Europe business, emerging markets, regulation, ethics and technology. Students today can't avoid these topics and typically don't want to.

Insider-trading scandals from the 1980s and 1990s and accounting and financial fraud at Enron and other companies spurred schools to address ethics in business. The Internet explosion of the 1990s and 2000s encouraged schools to examine technology and online business models. The financial crisis of 2008-09 has encouraged schools to cover topics in regulation, derivatives, financial reform and "asset bubbles." Emerging economies from India to China and Brazil meant schools needed to become international in scope, experience and research.

Business schools today are more accommodating to students with multiple interests or more more specialized interests. For a long time, top schools have encouraged or permitted students to pursue joint MBA and JD degrees. Others today pursue joint degrees in business and any one of the following: public policy, public administration, international studies, and communications.

Similarly, they have encouraged (and required) students to focus or concentrate on a specific area of interest: real estate, energy, industrial management, operations, entrepreneurship, non-profit sector or finance. Students don't just take core courses and a broad array of general business topics in pursuit of a "generalist" MBA degree. They can pursue in more depth what they are interested in or what they think is relevant and important.

If students are interested in the MBA and green technology, the MBA and developing economies, or the MBA and the music industry, b-schools today at least try to find a way to accommodate them.

In its annual assessment of MBA education, the Economist reports (http://www.economist.com/node/21532269) that some schools are exploring all kinds of ideas of MBA concentration, not just the familiar sectors of marketing and finance. Some schools are responding to business trends or corporate needs. Others are responding to students' interests and a sluggish economy. Many are willing to be creative, as long as they can maintain high quality and attract exceptional students.

The Economist suggests how it makes sense for a school like Washington University with respected schools of business and medicine to offer a special program in, say, "medical-sector management," comprising students and faculty from both schools and with specific disciplines in health-care management and related issues.

Long-time Consortium supporter Joe Fox tells the magazine that ideas such as that are welcome, but are not easy to implement. Fox, the director of Washington-Olin's MBA program and a Consortium board member for many years, agrees a joint medical-business-school program is attractive and relevant. He contends, however, that while such joint efforts make sense on paper or in concept, they are difficult approve and implement, because they involve cooperation from many--faculty, deans and others. (Washington University's Olin is one of the original Consortium schools.)

Students, too, must decide whether the special programs (including joint degrees or special concentrations) will require more time and, as a result, more expenses. Will the special program or the joint degree mean three or four years in school (instead of two)? Will there be a sufficient return on this investment, especially in current uncertain times, even if the student has the passion, time and energy to pursue a special program?

Most students, of course, will ask (and are asking) whether there will be meaningful opportunities after they have completed a course of study--any course of study, whether it's a traditional MBA, joint degrees or a MBA with a unique concentration. Will there be opportunities to do what they want to do within the realm of their interests and studies?

MBA corporate recruiters typically don't require joint degrees or special concentrations. But candidates who have pursued unique degree programs can stand out from the large pool of students. They show expertise in a specific area, perhaps ingenuity and a way to contribute right away in an entry-level job. The finance MBA graduate with specialty in, say, "medical-sector management" would be attractive to the health-care finance unit of an investment bank or consulting firm, if not to those who manage hospitals and medical centers.

Business schools keep adapting, as if that's the way it will always be. And the way it should be.

Tracy Williams

UCLA Anderson: Going It Alone?

2011-10-07T18:19:00.004-05:00

UCLA's Anderson business school is exploring going it alone. No, it won't completely separate itself from the rest of the university. It wouldn't be an outright secession. It won't relinquish the UCLA name. It has decided there might be greater benefits in becoming a self-funding, stand-alone institution at UCLA. In the process, it is studying how it can rely less on the "parent" university or the state for financial support. In turn, it will request the right to determine tuition and fees, set academic standards, and hire and pay what they wish for top faculty talent.

Anderson, a Consortium school, has decided that if it can control its finances, preside over all fund-raising and decide what value to put in the cost of an MBA degree, it will attract even greater numbers of high-quality students and improve the MBA experience at UCLA. There is intrinsic value in being affiliated with the greater UCLA, and it is willing to pay a "tax" for that. It would also pay for other services the parent provides (administration, infrastructure, etc.). But it figures that Anderson would be an even better business school, offering exceptional experiences and resources, if it decides to go it alone.

For prospective students and for alumni who experienced and benefited from Anderson, is this the proper course of action? Will there be notches of improvement in the school, but with substantial increases in tuition? Will alumni, supporters and other benefactors be more willing to become large donors?

Moreover, is there a risk in making itself inaccessible to some portions of the population interested in attending a top business school?

This isn't the first time a business school untangled itself from the rest of the university. Virginia's Darden, also a high-quality, public business school, has done something slightly similar. UCLA-Anderson is studying Darden's blueprint and claims to be somewhat self-sufficient already. It says it doesn't rely on state funding as much as many would think.

What will going alone mean for future students and applicants? While this move may permit it to hire the best professors it can find or launch unique, innovative programs of study, will Anderson price out bright prospects (including those from under-represented groups) who won't be able to rationalize "private school" tuition?

The move is still under review. No doubt it is contemplating these questions and studying all implications and more:

1. Will other first-rate public business schools follow the same? Will it set tuition and fees based on cost and value of a UCLA MBA, or will they (as many schools do) set it by matching rates at other well-known top private schools? Will a San Diego resident be required to pay the same to attend UCLA for an MBA as that at Cornell's Johnson school or Dartmouth's Tuck school?

Will it be able to provide scholarships and financial aid to select students just as much as it has done before? Or will it argue that self-sufficiency permits it to raise more funds earmarked for scholarships and financial aid?

2. Being somewhat detached and having authority to set its own agenda (including curriculum, expansion, and forays into online learning), will there be tension with the rest of the university?

3. Will there be inconsistencies with the rest of the university in how it manages itself? Many business schools, including Anderson, exist with appropriate levels of autonomy already, although all business schools must answer, in some way, to a university president and board of trustees. Will conflicts of interest arise because one graduate school within the university operates in a vastly different manner from others?

3. Will there be impediments or barriers for students interested in joint programs or degrees (MBA and JD, or MBA and MPA/MPH)? Will business-school students still be able to cross-enroll smoothly in other courses in other parts of the university (international relations, law, communications, engineering, e.g.)?

4. What happens at the business school, if the school's vision becomes too ambitious (too expensive) such that there funding shortfalls? Must the "parent" university promise to step in to ensure the school is always healthy enough to remain self-sufficient? Or will the parent permit it to sustain and prove itself financially viable (and even fail)--alone?

5. After UCLA, who would be next? Would other top public business schools hop on board and attempt to do the same? UC-Berkeley (Haas), Indiana (Kelley), Wisconsin-Madison, Texas-McCombs, all Consortium schools?

5. Does this in any way jeopardize its relationship with the Consortium and other diversity pipeline programs? UCLA-Anderson is one of the newest schools in the Consortium, having joined within the past three years (along with Cornell and Yale).

The last item, in fact, might be the easiest to address. Most, if not all, top-tier business schools are proving a commitment to diversity and ensuring their school rolls include people of all colors, backgrounds and countries. A more independent Anderson will likely strive just as hard to be a better and more desirable Anderson. It knows to be better and more desirable, it must also be attractive and accessible to women and those from under-represented groups.

Tracy Williams

"What Have You Done for Me Lately?"

2011-09-28T21:27:00.000-05:00

Remember days of yore--when an MBA in finance accepted an offer from an investment bank, commercial bank, brokerage house, trading firm or insurance company in the spring of second year and thereafter embarked on a long career with one firm, one employer? Shortly after arriving at the firm, the MBA started a training program or entry position--with the expectations of earning promotions every few years and with sights on becoming a senior manager (at the same firm) at the apex of a productive, memorable career.

In those days, you had the luxury of failing or slipping up in performance (a few times, not often), as long as you showed drive, loyalty, commitment and some promise. Now and then, you could fail to win a deal, could lose a major client, or could report a decline in revenues. You were reprimanded slightly, gently coached, and learned from experience. You were confident you would get a second chance, and you envisioned a career lasting, oh, 15, 20 or more years.

What happened to those days? Times changed. The environment changed. Competition among financial institutions grew fierce. Regulation loosened some of the rules and guidelines. Commercial banks infringed on the turfs of investment banks. Insurance companies, boutique firms, and hedge funds butted heads among themselves and with bankers. Shareholders, boards of directors and investors, accustomed to 10-15% returns, suddenly sought 20-25% returns, even with dwindling opportunities. They demanded revenue increases, soaring earnings and steady upticks in share prices.

And they demanded it from quarter to quarter every year. From the chairman of the firm to the sector managing director to the vice president in a client unit or on a trading desk all the way to the newly hired MBA only a few months out of Stern, Darden, Haas, or Tuck, the mantra became: "What have you done for me lately?"

How can and how do MBAs, including those from Consortium schools, confront such daily pressures? How should they and how can they handle a culture where you are only as good as the last deal you've done, the last client you brought to the firm, the last trade you put on the books or the last investment you analyzed and endorsed?

The topsy-turvy environment of 2011 makes matters worse. While financial institutions of all kinds scramble to win business, keep clients and cut costs to remain profitable, uncertainty about markets, global issues in Europe, and a start-stop recovery in the U.S. heightens the pressure. Banks, in particular, still sit in frustrating meetings brainstorming on how to make money with Dodd-Frank and Basel III regulation whipping them from behind. In the midst of all this uncertainty and week-to-week chaos, somebody is always peering over everybody's shoulder to ask: What have you done lately to justify your existence here?

Will this be the norm going forward? Will this be common practice to manage professional talent? Will bankers, traders, researchers, salespersons and managers be evaluated from quarter to quarter based on their current contributions to earnings (and not based on a long-term value to the firm)? Will employees at financial institutions approach each work day as one to confront threats, hardships and enormous pressures to perform and achieve?

Or when market stability turns, along with some certainty of a sustained recovery, will financial institutions settle down and nurture long-term career paths for those who truly want to be around for a long time? There is risk in not doing so.

In unsettled markets and high-pressure situations (where compensation is too uncertain to offset daily anxiety and turmoil), talented professionals seek solace elsewhere. If the environment is unsatisfying and too threatening, they move on. They flee to smaller firms or more specialized outfits. They contemplate going on their own, setting up their own shops, boutiques or funds. Many bring their clients, strategies, and colleagues with them.

Others shop around for more comfortable roles or environments. If they go to work plastered with constant rumors of lay-offs or spin-offs of business units they work in or if they are subject to harsh demands to meet extraordinary business targets, they reach out to peer firms. They go where expectations are reasonable and where pressures are tolerable (or compensated for). They go across the street to the "other bank."

Younger professionals and newly minted MBAs may not have networks or contacts to pursue other opportunities yet. Many also want to stay put, because they want to spend the first few years learning and getting experience--in doing deals, in negotiating with clients, in tackling financial models, in managing people and in making tough business decisions.

Yet in an environment where some will tap them on shoulders and ask what have they done lately, it helps to have a survival plan. What can they do?

1. Keep, maintain and update a personal scorecard of accomplishments, achievements, deals, business wins, and successful projects. Be ready to present and explain it at any time, because, yes, in these times, your value to the firm is always under review.

As others assess your value (whether formally in appraisal meetings or informally in chatter during a coffee break), you want the review to be fair, objective, and up to date.

2. Understand what your weaknesses are and how they are perceived by others. Develop a short- and long-term plan to address them, and be ready to share the plan with supervisors and mentors. As others evaluate you, they may overlook what might be regarded as a glaring weakness, if they know you have plan to improve.

3. Always assess "what you bring to the table." Make sure to the table, you bring something important, useful, possibly money-generating, or valued highly in the short- and long-term. That may be access to clients, people and contacts. It may be specialized knowledge, new ideas, or an astounding understanding of financial models, markets, products, or regulation. For many recent MBA graduates, it may also be an intense, consistent work ethic, a willingness to get the job done no matter the obstacles (and of course during all hours of the night or weekend).

There is no fail-safe response to the question: What have you done for me lately? Sometimes a 20% increase in revenues won't do. Or winning the mandate from a new client to do a big, headline-garnering deal won't create a buzz among senior managers. Or creating a new product that clients will swarm toward may still be insufficient for those who ask these types of value questions.

But it still helps to be prepared and be ready to present your case.

Tracy Williams

Market Volatility: Can You Stand It?

2011-09-14T22:31:00.001-05:00

Summer, 2011, has marked a rambunctious time of swirls and volatility in equity markets. It feels like 2008 all over again. Can you stomach it?

No, you can't stand it. Nor can you explain it, follow it, track it, quantify it or tolerate it. A day when equity markets slide 2, 3 or 4 percent is followed by days when they surge, soar or promise that a new bull market is around the corner. And then comes the nose-dive again, another day when selling begets more selling, which contributes to panic and wonder. It churns the inside.

Can the old finance texts explain it? Can market watchers and pundits project it? Many think they do. Do hedge funds and high-frequency traders profit from it? Certainly they try. Are hedge funds and high-frequency traders responsible for it? They certainly contribute to it. Do technical trend-followers try to quantify it or forecast it? Yes, when they unveil graphs, present variance analyses, or analyze "VIX" (market-volatility) indices.

Often over the past two months, it has felt like 2008-09, like 1999-2001 when technical stocks bounced around and then burst, like 1998 when the collapse off Long-Term Capital caused a month or two of panic, or even like the long-ago days after crash of 1987.

Everybody has a reason to explain volatility. Many say they can see it coming. Not many, however, agree on the specific causes. Others quietly try to make money from it. Others are squeamish, and yet others bolt.

The suspected causes are as broad as the number of market participants. The most common blame is uncertainty. Markets are engulfed in too many unknowns about where the economy is heading and how companies will fare in uncertain conditions. Amid widespread uncertainty, market participants separately try to determine what economic trend is dominant. And the outcome might be violent swings in market values.

Others blame high-frequency traders, the large segment of traders who buy and sell thousands (millions?) of shares electronically in time frames measured by seconds. They don't value companies, project cash flows, or analyze the long-term fortunes of companies. They use technology prowess to get in and get out, faster than all other participants--including mom and pop on Main Street.

Among themselves, they race to see who can respond and act on market signals most quickly. They buy in certain markets and geographies and sell in others. They buy options in one market, sell equities in another. To them, a decline in profitability at a manufacturer because of an increase in costs of raw materials doesn't matter. They look for signals, trends, and momentum. And often they replicate the activity or trading patterns of their peers and competitors (a phenomenon now known as "crowded trades"). If one is selling, others do, too, and an equity market dives 2 percent without reason.

Panic among retail investors contributes to volatility. They call their financial consultants to order them to sell because they can't bear the fluctuations. How often have we heard when seasoned investors give up on stock investing and send instructions in sell all equity holdings immediately, so they can sleep better at night?

Why wouldn't a succession of hundred-point declines in markets cause even the most experienced investor to give up? Who wouldn't feel the urge to sell and reduce all risks when portfolios in 2008 plunged by 20-plus percent?

One segment blames short-sellers. Short-sellers do exist. Not necessarily those who sell equities short as a hedge for a long-term portfolio of stocks, but those funds and traders whose primary purpose is to investigate and analyze the bad fortunes of companies and profit from a possible decline in their stock values. Some say short-sellers spur doomsday moods by broadcasting the vulnerabilities or downturns of companies, which lead to sell-offs. Meanwhile, they quietly profit from such declines after establishing short positions.

The continual effort to guess at or measure what government entities or regulators are thinking or will say, do, enact, or support (or what they won't do) contributes to wild swings in markets. All the guessing leads to conflicting views about whether to buy or sell.

In the past decade or so, leveraged hedge funds will swear they don't contribute to volatility. But whn they must sell assets to reduce borrowings, they often must sell the most liquid assets (Treasuries and exchange-traded equities) to raise cash. As a result, they contribute to sell-offs in markets.

Traders, investment managers and economists now agree there exists something called world-wide contagion: What happens in Greece has impact on markets in Chicago and New York. What happens in Tokyo influences activity in the U.S.--for many reasons. Economies and markets are intertwined. Companies have global operations and sell in global markets. Investors and traders have diversified portfolios with exposures around the globe. When they buy or sell equities and sniff out opportunities or fear downturns, they have their eyeballs on emerging markets, as much as they watch trends in the U.S. and Europe.

What is the long-term impact of all this market madness? How will we learn to handle market turbulence, occasional market panic, and unrelenting uncertainty?

Business leaders and bankers fear volatility leads to lack of trust and confidence in capital markets. Investors shy away, preferring to invest in money-market funds or Treasuries, feeling disadvantaged or uncomfortable with equity portfolios. Others seek shelter in fixed-income investments and commodities (and, yes, even gold). Sophisticated investors look to "alternative assets": hedge funds and private equity.

Others wait it out. They return when measured or observed volatility (from, say, "VIX" indices and the like) decline to tolerable, bearable levels. They jump back in when market swings can be rationalized, explained or when market indices follow a pattern.

And often in the long term, memories tend to be short. When confidence and a degree of certainty are reintroduced, market participants (investors, traders, researchers and mom and pop) somehow tend to forget treacherous days and once again set off to chase opportunity and profits.

Tracy Williams

Is I-Banking Still Hot?

2011-09-02T00:07:00.001-05:00

Does investment banking still have the same attraction? Do MBA students still swarm toward investment-banking roles? Do many have dreams of joining a top firm, hitting the ground running doing deals and anticipating big year-end bonuses?

After the industry turmoil and a series of setbacks and embarrassments, is investment banking still a hot area?

There have been upheaval, backlash and calls for reform since Lehman Brothers and Bear Stearns disappeared from the scene. Yet since 2008, trends suggest (a) i-banking is still attractive to many MBA students in finance at top schools and (b) the industry has evolved, but not yet gone through the major overhaul and transformation many predicted or hoped for.

Despite public pleas for changes in how banks conduct business and pay bankers and despite sluggish economic recovery and stomach-churning markets, deals are getting done. Companies are going public, issuing long-term debt, or acquiring other companies. Not necessarily at levels from 2006-07, but there is activity, enough so for banks to continue recruiting and for MBAs to pursue careers.

In this year's entering class of Consortium MBAs, at least 90 new students (about a third) have indicated an interest in finance--a number that is about the same or slightly higher from previous years. Of the 90, as many as 30 (about 10 percent of all Consortium students) have expressed a specific interest in investment banking, corporate banking or corporate finance. The actual number interested in i-banking could be higher, as many students will indicate a general interest in financial services, but have not yet acknowledged an interest in banking.

(Ten students say they are interested in investment managent, and a handful express specific interests in media finance, private equity, venture capital or real estate.)

Most students understand they will probably revise plans as they proceed through a grinding recruiting process. Banks, as they did before, put prospects through rounds of interviews, including tough technical sessions. Some students don't survive the process. Some change their minds, while others switch to other industries. Some become even more charged with enthusiasm about i-banking.

Interest in i-banking, therefore, has not disappeared. The actual number that will be recruited and hired in 2012 has yet to be determined, especially as banks struggle to make sense of this summer of volatility and uncertainty. Those who are committed and will pursue banking will encounter an evolving industry, but one that reflects familiar traditions and practices.

Over the past three years, the players and leading firms have changed. The sudden departure of Lehman and Bear Stearns and the absoprtion of Merrill Lynch by Bank of America left gaping holes in the "bulge bracket" lists. Goldman Sachs, JPMorgan, and Morgan Stanley continue to jockey for the top spots in equity and bond finance and merger activity. However, foreign banks, especially international banks with large investment-banking operations, have shoved themselves into the big picture: UBS, Deutsche, RBC, and of course Barclays, which bought the U.S. operations of Lehman.

Firms like Jefferies and Lazard Freres, once comfortable in their own mid-tier niches, took advantage of industry shake-out and expanded their reach and business. Jefferies is a more diversified, comprehensive bank than it was a decade ago. Some regionals--mostly the i-banking units of commercial banks--have also stepped up where they could.

Smaller "boutique" firms have picked up pieces and grabbed business that bulge-bracket firms once kept among themselves. Bulge brackets are now "bank holding companies," subject to banking oversight by the Federal Reserve an often weighed down--in their eyes--by onerous capital requirements and ominous regulation.

As with all banks, bulge brackets must address a laundry list of issues since TARP rolled out in 2008. Dodd-Frank regulation will force them re-engineer their businesses. They can no longer rely on surges in trading revenues to offset the cyclicality of i-banking. While big banks tend to internal restructuring and worry about declining returns, boutiques have slipped in and swiped a few lucrative deals away from them.

Boutiques absorbed experienced bankers who were dismissed by bulge brackets let go or were demoralized by the crisis. The new bankers brought clients, deals, relationships and junior staff with them. Boutiques, meanwhile, have remained steadfast in being experts in special areas (M&A, media finance, technology finance, restructuring, capital-raising, or strategic advisory).

They didn't venture to foreign lands or create hard-to-manage bureaucracies and processes. And they seldom need to scratch their heads managing conflicts of interests, "tail" risks, or burdensome capital requirements. They just do deals.

And they've done more than their share over the past year. Centerview and Qatalyst, boutique banks, had primary advisory roles in the recently announced Google-Motorola merger. Sandler O'Neill, adamant about remaining small, is one of the top banks for financial institutions. Moelis, Evercore, Allen & Co., Greenhill, Keefe Bruyette, and Perella Weingberg are all respected, if not envied, players.

Some challenges and issues continue to stifle firms these days, big and small--enough to frustrate senior managers and deal-doers who wish they could focus on clients and deals and enough to discourage some MBAs from pursuing a career.

The turtle-crawl economic recovery has a direct bearing on i-banking activity. Corporations are reluctant to grow their busineses or consider acquisitions. They hesitate to issue new capital (debt or equity) to invest in new business or innovative products. They let cash reserves sit around because they are engulfed in uncertainty. In the end, investment banks can't convince corporate CFOs or CEOs to take their advice or proceed with financings that at least make sense in Excel spreadsheets. Deals ready to go to market are suddenly shelved.

Thus, fees and revenues from mergers, acquisitions, underwritings, lending, and new products fluctuate unpredictably, while senior bankers figure out how to endure uncertainty and MBAs ponder whether they should pursue a dream.

Pending regulation and reform are looming challenges. Banks try to interpret new rules and anticipate what they will be once regulators write them up more formally. Then they huddle in backrooms to reorganize their business to make them operate profitably with the new restrictions. The 25% return on equity some bulge brackets could count on in the glory days of the mid-2000s or late 1990s might become an unreasonable target. Disgruntled shareholders may need to become accustomed to, at best, 15% returns under new models.

Risk management at all banks has gotten much attention. Banks have increased risk staff and force deal-doers to assess, probe, analyze, and measure the worst-case risks in doing a deal or bring in a new client. Risk-vs.-reward exercises are more prominent than ever.

Derivatives once attracted Ph.d. graduates and quant jocks and spawned floods of profits over the past decade or so. Going forward, regulation will force most of them to be traded on exchanges and through designated dealers. Investment banks aren't sure what the new profit dynamics will be or whether it will be worth the effort to encourage quant jocks to create new forms of them. Quant jocks aren't sure they will be welcome or will flee to hedge funds. I-bankers haven't yet figured out what they should say to clients on a consistent basis.

Work-life balance in the industry was supposed to have improved, if only to attract graduates who fear that lower bonus payouts in the future won't make it worth spending 12-14-hour days in the office, six days a week. Anecdotes suggest work-life balance is often discussed and mulled over, but when deals must be done, it's back to back-breaking, suffocating hours in the office.

The current environment with uncertainfy, regulation, and dwindling profitability will add more pressure to bankers to find new clients, win more mandates and get more deals done. Expectations by management and the public have risen the past three years. Competition from other banks is just as fierce, and clients are demanding more from banks. The pressure has not waned.

Yet the attraction to i-banking is still apparent. Despite the nervous environment, Consortium numbers suggest new students still want a shot at doing deals, helping clients borrow money or go public, or advising them on how to expand and grow.

The adrenaline from participating in a headline-grabbing transaction or a billion-dollar bond issue still exists. The satisfaction of deriving and negotiating the fair value of a targeted firm is still there. The thrill in traveling all over the country or globe to meet new clients in new industries continues. Of course, compensation--even if it has become as volatile as markets--is generally still attractive.

One tradition has not changed. I-bank recruiting and the campaign to win a spot on a bank's interview list start the first week MBAs get to campus. Those who have ambitions of securing a spot in 2012 must get going now.

Tracy Williams

MBA Professors: The Most Popular 10

2011-08-25T21:49:00.000-05:00

NYU's Damodaran, tops on the list

What makes an outstanding business-school professor? Ask a few MBA students, and you might get a dozen answers, a dozen criteria, and many examples.

Many will say the best professors are those who teach with passion, energy and excitement. The subject matter--whether it's first-year corporate finance or the mechanics of an intermediate-accounting course--comes alive. Those are the professors who present the principles of debit-credit accounting or the equations of Black-Scholes in a spirited way--as if they discover gold time and again.

Many will say the best are those who share details, memories and stories of having been on the front lines of business, those who were involved in heavyweight corporate strategy, major acquisitions and tense negotiations. They might be adjunct professors who can convey decades of experience within the outlines of a core course. They may have spent years on Wall Street, in boardrooms, or in Europe or Asia in special assignments.

Others will say the best are those who encourage and spawn new ideas. They have new theories or are preparing to unveil a batch of new ideas. They nurture innovation and clever ways of thinking. They have new ways of looking at stagnant business models. They offer new ways to value corporations or manage large organizations. They cheer for and support students who have entrepreneurial instincts and interests.

A few weeks ago BusinessWeek tried to identify who might be the top (or favorite? or preferred?) professors in top business schools. (See http://www.businessweek.com/bschools/blogs/.) It polled over 3,700 students at 30 business schools to come up with a top-10 list. Students were asked to name a favorite or popular professor on campus--not much more than that. No criteria, no explanations.

At least 60 students from a school needed to respond to allow that school's results to be included in national polling. A professor who made the final list received at least 20% of all votes on that campus. Students weren't required to explain why they preferred a professor, but could provide commentary.

Eight of the top 10 professors were from Consortium schools (and suggest the high probability that Consortium MBAs have had some interaction in the last few years with some of the country's most popular professors). BusinessWeek presided over a popularity contest and promoted it just as that. Students approach the MBA program and learning seriously, so they likely voted fairly. Not necessarily based on the grade they received. Or maybe the final grade spurred them to participate and vote.

Aswath Damodaran, a finance professor from NYU-Stern, topped the list. His specialty is corporate finance, more notably the equity valuation of companies. He's so popular that he has over 4,000 followers in Twitter. He has a Ph.d. degree from Consortium school UCLA-Anderson and taught at Consortium school UC-Berkeley-Haas before joining the staff at Stern.

Damodaran writes a popular blog of corporate-finance topics, helpful for both students and practitioners on Wall Street (http://aswathdamodaran.blogspot.com/). In the past month, he blogged on such topics as "trapped cash" in corporations and the "equity risk premium." This week he offers rambling, reasoned "musings" on the share price of Bank of America. It's not just the topics he blogs on, but the enthusiastic, ponderous ways he shares ideas in finance.

Finance instructor Jim Nolen from Texas-McCombs was third on the popularity list. Students say they like him because he's a story-teller with a Texas accent. Nolen is an expert in small business and new-venture financing. He teaches a popular course in financial management of small enterprises. Texas students say they are entranced by his stories and experiences in business. According to BusinessWeek, they adore--most of all--how he has helped placed students in lucrative roles in finance.

Emory's Raymond Hill, a finance professor, was sixth on the list. Hill brought years of business experience before he joined Goizueta. He spent 11 years in investment banking at Lehman Brothers and over a decade at the utility Southern Company. He started out in academia, switched to investment banking and business, but returned to the campus. (He has a Ph.d. from MIT.)

At Lehman, he spent seven years in its Hong Kong office managing banking activities in Southeast Asia. At Emory, he specializes in energy finance and project finance. Students cited his ability to relate arcane, difficult theory from texts (macroeconomics, e.g.) to current events and trends.

Sharon Oster, an economics professor from Yale-SOM and its dean until a few weeks ago, was seventh on the list. As a woman in economics and business management, she has long been regarded a pioneer, having been at Yale for 37 years. She specializes in economic competition, competitive analysis, and labor economics. She has written extensively on regulation and non-profit management.

Students highlight her devotion to Yale's program and its students. Some say she tries to keep ties to every student she has taught while at Yale-SOM and can often prove it.

Other Consortium-school professors on the list include Gautam Ahuja, a strategy professor at Michigan-Ross (2nd on the list); Terry Taylor, an operations and technology management professor at UC-Berkeley-Haas (5th); Neil Morgan, a marketing professor from Indiana-Kelley (8th), and Eric Sussman, who specializes in real estate and accounting at UCLA-Anderson (9th). That Sussman is known to sing 1980s pop songs in class doesn't hurt his popularity.

BusinessWeek all but apologized that Oster from Yale is the only woman on its list. Students don't necessarily prefer male professors. The scarcity of women is likely due to the fact that women still comprise small numbers of experienced faculty members at business schools. And that is likely due to the lagging percentages of women at top business schools and women who pursue doctorates in finance, economics or business.

Being male isn't sufficient to be on the list, but it surely helps to have passion about the subject matter. And it helps to have an ability to tell stories, share experiences, write colorful blogs, keep the material relevant, be an unabashed promoter of the school, help in career placement, and maintain ties to most students who pass through the doors.

Tracy Williams

One Thing for Certain....

2011-08-17T21:59:00.001-05:00

Uncertainty. It drives equity markets insane, causing them to swoop, surge, nose-dive and rumble upward, only to swoop and surge again. Investors can't figure out whether to ignore, reallocate, hold or sell. Speculators and high-frequency traders find ways to thrive, often spurring markets toward a plunge and or meddling to make them bounce like ping-pong balls.

Such is the way it has been in this August of market turbulence. It has felt too much like autumn, 2008.

At financial institutions--especially at large banks, investment firms or trading houses--uncertainty in the marketplace leads to a degree of certainty in-house. When markets bounce all over the place and when ongoing threats to a reviving economy slow it down, there are predictable, certain patterns within banks' walls. Examples?

1. When markets turn downward or signal a downturn of any kind, even if momentary, financial institutions "circle the wagons." They assume worst-case scenarios in revenues, business, outlook, and opportunities. They hope for a prompt upturn, but plan for the worst.

They examine deals in the pipeline and business and transactions not yet closed. They go through business or balance-sheet "stress tests" to see how they can withstand a collapse in markets or business activity.

2. Financial institutions begin to reassess, retrench and respond. All of a sudden, with revenue declines looming, they look to cut costs. And personnel costs are the easiest and first to slice. With certainty, they reassess recruiting and hiring and lower projections for how many they plan to bring in over the next year.

3. With the prospects of a diminished flow from deals, clients and new business, they huddle up to reassess bonus payouts. They outline cost-cutting and layoffs. Shortly thereafter, they communicate to employees, analysts, and media the cost-cutting campaigns that will come from lower bonuses and planned staff reduction. While investors applaud their efforts to retrench, employees and new recruits begin to worry.

Unfortunately this atmosphere of anxiety becomes a distraction from winning new business, planning new products or bringing in new clients. The managing director who normally flies off to Chicago to see a client is now forced into morning sessions to decide how much year-end bonuses should be scaled back and what group should be hit the hardest. The vice president who gathers a team to explore a new business strategy now wonders whether senior managers will have time to pay attention to the new idea.

4. Often with uncertainty and volatile markets, banks get risk-averse. With the prospects of lower revenues, they don't want to worsen troubled times with bad investments, bad loans or bad business decisions. A deal, transaction, or investment that was smoothly approved in good times is shelved, pushed back or ignored in times of uncertainty.

Some institutions promised they would carry lessons from other crises, especially the lesson of being disadvantaged by acting too quickly or too rashly at the hint of a downturn. Does it make sense, they wonder, to retrench and retreat too swiftly, only to be forced to gear up, ramp up and rehire when business begins to flow again? Some retain the lessons; many others follow the familiar pattern of gear-up, retrench, lay off, rehire, expand and are comfortable with bearing the related administrative costs.

Experienced MBAs and professionals in finance know these patterns well and have learned how to adapt to them, even if they aren't comfortable going through them. New professionals and recent graduates learn fast that this is often the way of the world of volatility and instability.

Both the old and new understand the importance of concentrating on what they can control--working hard and performing at high levels. They also realize that underneath the piles of spreadsheets, projects, and presentations and in the midst of attending non-stop meetings on confronting the worst case, they must have a Plan B.

Tracy Williams

A Summer Reading List?

2011-08-10T15:39:00.001-05:00

Summer reading lists. Everybody tends to have a list of books they want to read, they need to read, or they prefer to read, when the days and weeks before Labor Day mean half-hearted attempts to focus on work or dreamy moments of a planned vacation.

In finance the past few years, there has been an explosion of published accounts of the financial crisis. Just when we think there is nothing else to report or analyze as it relates to the collapse of Lehman, Bear Stearns or AIG, out comes another 300-pager.

Then comes the summer of 2011. Just when we thought it might be safe to escape for vacation and tote copies of what's on our reading list (in duffel bags or imbedded in a Kindle), the circus of Washington becomes more frenzied. And the markets behave as if it's 2008 all over again.

A summer reading list at a time like this? With the daily chaos of global markets, political fisticuffs over sovereign debt levels, S&P punishing politicians and the U.S.'s lackluster recovery, will there even be time to go on vacation before fall arrives?

Is there any point to combing through an old analysis of the Madoff scandal, Goldman Sachs' "big short" on mortgage markets, or Countrywide's massive buildup of subprime assets when nobody knows what today's markets and business confidence will look like next week? When much of the industry had hoped to be gazing at the horizon from a vacation rental?

Still, prospective students in finance will ask what's appropriate to read as they prepare for business school or gear up for a tough semester of corporate finance 101. MBA alumni and other experienced professionals wonder what they can read to catch up on current issues.

What can they read to "stay ahead in the game" or have an in-depth understanding of specific topics? What should they read to comprehend the controversy of derivatives, CDOs, and mortgage-backed securities? What should they read to figure out what happened at Madoff, AIG, Merrill, and Goldman? Why did some hedge funds prosper during the old crisis? Could Bear Stearns and Lehman have been rescued? With pending reform, what will banking and finance look like in the next decade?

Publishing houses have flooded the book-reading public with new takes and versions on what happened in 2007-09. There are numerous viewpoints, analyses, and updated summaries of events. In the latest round, William Cohan follows his thorough accounting of the fall of Bear Stearns ("House of Cards") with a new book on Goldman Sachs, a book project he likely had in mind for years. But he might have updated his approach when Goldman suddenly became a symbolic punching bag as industry recovered from mishaps of the 2000s.

Cohan's "House of Cards" was an excellent, day-by-day account of Bear Stearns' fall and explained better than others how lack of funding, liquidity and perhaps wisdom and morals caused the firm to sink. His understanding of investment-bank operations, people, deals and history would make the new book "How Goldman Sachs Came to Rule the World" required reading. Goldman, of course, doesn't rule the world, even if it tried to, but Cohan provides a solid accounting of how a top firm manages to remain perennially profitable.

Last year, Suzanne McGee hopped on the Goldman story-telling bandwagon with her book "Chasing Goldman Sachs." She argues the crisis of 2008-09 is partly due to other firms and funds trying to "be like Goldman." Everybody wants to achieve similar returns and approach businesses and markets in the way Goldman does. And they think they can do so--whether or not they have the capital or people.

In doing so, we got the near collapse of the financial system in 2008. Her book, however, offers pages of solutions. She suggests an overhaul of investment banking and recommends the industry be operated as a public utility if it doesn't learn to manage risks. McGee knows she won't win fans in the industry with this idea, but hints this may be inevitable if more crises ensue.

Joe Nocera, a New York Times op-ed columnist, teamed with Bethany McLean to write the consummate book on how mortgage markets spurred the crisis: "All the Devils Are Here." They write fascinating accounts, for example, on the internal failings and politics at Countrywide, at Washington Mutual, at Merrill Lynch (before BoA acquired it), and among regulators. They spare readers some of the technicals. Instead they present the drama of bankers and mortgage brokers hustling to become rich from originating and selling subprime loans.

For just one summer, the list is almost too much to choose from. Gretchen Morgenson, a Times business columnist, and Joshua Resner paired up to pinpoint leaders who were responsible for the troubles at Fannie Mae and Freddie Mac in "Reckless Endangerment." Times business columnist Diana Henriques offers her account of the Bernard Madoff scandal in "Wizard of Lies." She was the first journalist to interview Madoff in prison. Roddy Boyd, not from the New York Times, jumped in to tell the tale of what happened at AIG, or more notably how its derivatives-trading unit contributed to the mortgage mess: "Fatal Risk."

One new book sought to explain the mechanics and virtues of high-frequency trading, although nobody has yet written the book on last May's "flash crash," a subject that might be too cumbersome for a general reading audience.

Even with the cascade of books, nobody has sufficiently tackled the pressing issue of how banks will evolve and be profitable in the face of new regulation and reform. Many argue that greater amounts of capital help banks survive or withstand tough times. But not many have figured out ways for banks to achieve reasonable returns, when more capital will be required. Banks themselves are struggling to figure this out.

And nobody dared to touch the impact of the crisis and subsequent upheaval on diversity? Have the events the past few years discouraged those from under-represented groups from becoming traders, bankers, investors and researchers? Why does it seem as if there are fewer women and people of color in top levels in financial institutions? Do banks, insurance companies, and hedge funds care as much?

For now, for this late-summer period of stomach-churning volatility, most will agree on one thing: Not many right now will want to read a book about bipartisan quarrels and political jockeying occurring on Capitol Hill.

Tracy Williams

Team from Tepper Takes ELC's Prize

2011-08-02T16:10:00.003-05:00

A Carnegie Mellon quintet of MBAs faced challenging competition from teams from USC and Michigan, but managed to emerge as the winner of the Executive Leadership Council's (ELC) annual business-case competition in Alexandria, Va. in May. (See http://www.elcinfo.com/.) The USC and Michigan teams followed in second and third place, respectively.

Exxon Mobil and ELC sponsored the annual competition. ELC has presided over the competition since 2002. This year the topic was energy and the reduction of greenhouse gases. Students from top business schools were asked to present a detailed business strategy outlining America's transition to lower greenhouse gas by 2030 in the most cost-effective way.

Carnegie Mellon's winning team from the Tepper School earned over $35,000 in scholarships. The team from Tepper, a Consortium school, included recent Consortium graduate Jacob Garcia. Other team members included Jesse Alleyne, Ian Buggs, Felix Amoruwa, and Richard Burgess. (USC and Michigan are also Consortium schools.)

Team captain Amoruwa told ELC organizers his group sometimes worked until 3 a.m. to work on the project and had follow-up meetings the next morning at 8 a.m. He said the group's effort "truly paid off for us."

The project was expansive. Teams had to outline plans for the nation to meet energy goals without incurring excessive costs. They had to identify areas of public and private investment and job growth. And they were required to specify ways to recruit more African Americans and other under-represented minorities to work in energy. Over 50 teams from business schools across the country participated.

The Carnegie Mellon team will be honored at the ELC's annual gala dinner in Washington, D.C., in October. The team will also participate in leadership activities in New York in the fall.

Consortium student Garcia graduated from Tepper in May, where he concentrated in marketing, strategy and quantitative analysis. Tepper student Alleyne, a rising second-year student, was also a winning participant in case competitions sponsored by McKinsey and Deloitte. Buggs, a recent Tepper graduate, was president of the school's graduate business association.

Tracy Williams

On Campus: No Summer Slowdown

2011-07-28T21:00:00.000-05:00

Virginia-Darden Dean Bruner

Just weeks ago, members of the MBA Class of 2011 dispersed all over the country--first to take well-deserved breaks and vacations, second to prepare to move to big cities or other outposts to start new positions. Business schools get a short respite, a chance to pause after a bustling school year.

Afterward summer activity picks up again at most schools. Many have summer semesters and course offerings. Most are gearing up to welcome the parade of bright, confident faces who will make up the Class of 2013. (Some have representatives who have just returned from the Consortium's Orientation Program in Minneapolis.) At some schools, orientation starts in a few days. At most, deans will inevitably proclaim the Class of 2013 as its best, most ambitious, most talented, most diverse and most interesting.

The pulse of business discussion, academic research, and the continual revamping of b-school curriculum is as vigorous as ever. Business schools, including the Consortium 17, don't lose a beat in their efforts to remain as relevant as ever.

In recent days, Virginia-Darden's Dean Rob Bruner shared his views of the tension and stalemate that has engulfed Washington. The debt-ceiling fracas, he says, will make a fascinating case study on business negotiation. The typical business setting is about negotiations, especially in finance, where deals are proposed, discussed and struck, and where prices, fees, terms and conditions are debated. Dean Bruner says, "To aficionados of bargaining, watching (the Democrats and Republicans in Congress go head to head throughout July) is high entertainment"--even if it's not amusing to the rest of the country.

In his blog (See www.darden.virginia.edu/deansblog) , he highlights primary discussions between two principals, but also the "hidden discussions" among the principals within their circles--the discussions that take place out of view. Tactically, negotiators should investigate those "hidden discussions."

He writes about "brinksmanship," the timeline point where neither side moves toward compromise and a deadline is looming. He doesn't project how the Congressional stalemate will turn out, but he challenges professors to use the current imbroglio as a teaching point in classes in negotiation and policy. And perhaps even ethics.

Business schools still favor the case method of study for some courses. With new technology (iPads, tablets, notebooks and laptops), do professors still hand out or require students to purchase the volumes of paper cases for students to review, analyze and discuss in class? Yes, many do. New technology is spurring schools to go the electronic route, especially schools that have thousands of cases on file. NYU-Stern has tried to migrate to the iPad and other tablets, while Virginia-Darden is experimenting with the Kindle.

The transition is not as easy as planned, even for b-school students who don't know a world without personal computers and cell phones. Some students say using iPads, Kindles or other tablets for case study in class makes it difficult to keep up, turn pages, or make notes. Improvements will come inevitably.

At Indiana-Kelley, Consortium alumna Joy Somerset was featured this spring on its school site as an example of a graduate who achieved several objectives in finding the right job. (See http://www.kelley.idu.ed/.) While a Consortium student at Kelley, Somerset approached career coaches to help her decide what she would do after getting the MBA. A coach reaffirmed her interests in brand management, but observed she wanted to do something "altruistic," or "bring joy to others."

The advice and coaching helped lead her to an internship and eventual full-time offer at Consortium sponsor Eli Lily in brand management in a special role where she works with doctors and cancer patients.

North Carolina-Kenan this month launched its new MBA-online program, called MBA@UNC. Some approached this with apprehension, thinking it might not have the rigor, prestige and attraction of its full-time program. Will it offer the same credential, some asked?

The program, as it has rolled out, will prove to be anything but MBA-lite. In its new class, many of the 19 new students have doctorates and law degrees. They will meet for class and have case-group discussions online. Students will be converge on campus at least twice for "immersion weekends."

Many wonder how students will engage in partnerships in projects, in exchanges of ideas, or teamwork activities online. Students, however, will not be anonymous during classes and case groups. At all times, when they log on, their faces will be on the screen, and they will be expected to participate and contribute in the same way in a classroom. Professors and case-group leaders will know who is not in class or who is not attentive or adding to the discussion.

UCLA-Anderson admissions director Rob Weiler told Businessweek (http://www.businessweek.com/) this summer that once again Anderson's full-time MBA program is gearing up for one of its best classes ever, a class that includes Consortium students. "Anderson students are confident, but not arrogant or cocky," he said." "They tend to play well with others. They tend to be people who dive in." They don't sit on sidelines.

From about 2,500 applications, Anderson will welcome a class of 360, including about 30% minorities and 30% with an expressed interest in finance.

While full-time students are away, Yale's School of Management Shiller participated in the program.

Michigan-Ross welcomed its new dean, Alison Davis-Blake, who started her new job July 1. She spent 15 years of her career at Consortium school Texas-McCombs and says her objective at Michigan will be to focus on entrepreneurship, innovation and globalization.

Meanwhile, with market volatility, debt struggles among sovereigns, and a financial system still trying to right itself three years after the demise of Lehman, there is much to research and discuss on campus. B-schools have been involved in that and much more, including such topics as the phenomenon that is Groupon, the fragility of the Murdoch media empire, and the anticipation of what could possibly be the next "black swan" event.

Tracy Williams

Business Schools: "Satisfied" Alumni

2011-07-21T16:50:00.002-05:00

Dartmouth's Tuck leads top business schools in alumni-participation in donations

Who are the most satisfied alumni among top business schools? "Satisfied," for these purposes, isn't defined by the alumni happiest in their careers, the most content in their outlook, or the most optimistic about business opportunities. Satisfied," in this case, applies to alumni who are happiest about their business-school experiences.

They are the ones who most appreciated the two years of toil to get the MBA and reflect fondly on time spent with professors, deans, classmates and career advisers. They might recall cheerfully the class "field trip" to China, the end-of-year skit performed before a standing-room crowd, or the thought-provoking cases in project finance. They will have appreciated the school's brand-new, state-of-art facility--featuring technology marvels and electronic wizardry.

Sometimes satisfaction in career correlates closely to satisfaction at business school, because alumni reason that the b-school experience helped prepare them well for a thriving career. Other times, unhappy alumni may not appreciate a long-ago experience until years after they graduate.

They will complain about a tortuous experience in an advanced accounting course while in school, but will appreciate the principles they learned while doing a deal years later. They will gripe that a school is too far from the finance centers of New York and Chicago, but will appreciate decades later the contacts they made and the friendships and networks they cultivated. They may not understand why they must take a required course in policy or decision-making until they are sitting in decision-making roles later on.

Business schools, their stakeholders, and those who try to rate, rank and evaluate business schools struggle to define ways to measure "alumni satisfaction."

One way they do it is not necessarily the best or fairest way. But they measure it anyway. They measure satisfaction by tallying up the numbers of alumni who contribute consistently to their respective schools. They presume alumni happy with their experiences on campus will happily write checks once or twice a year. The amounts will vary, depending on what alumni are doing and where they are in their career stages.

Along this premise, CNN and Money magazine tried to determine which top schools have the "most satisfied" alumni based on percentage of alumni who give back (http://www.management.fortune.cnn.com/). Consortium school Dartmouth (Tuck) was a run-away leader with 67% of nearly 9,000 living alumni who made donations in a recent year. Analysts attribute that to "satisfaction" with their experiences in Hanover, to appreciation of how Tuck prepared them for careers, and to Tuck's vast, tight global network of alumni.

Consortium schools Yale and Virginia (Darden) followed in second and third place, with 46% and 43% participation rates, respectively.

As with any list, readers should approach statistics-based rankings with care. Some observers or deans say alumni giving is influenced by many factors. Some schools, for example, encourage alumni to write their big checks during reunion years (once every five years), so year-to-year participation rates can be misleading. Other schools encourage alumni to contribute something--any amount in any way--every year to get into the habit of giving.

Some, according to CNN, say public business schools lag because alumni may presume as neighboring tax-payers they are already supporting schools. Other schools encourage giving, but are just as happy if alumni donate time, volunteer in service, or partipate in mentor programs, interview prospects, or recruit.

Satisfying and memorable experiences surely influence alumni giving. But economic conditions, personal situations, time constraints and the schools' own alumni infrastructure can be significant factors, too. The development offices at some schools are more efficient and successful than at others. National alumni networks are better organized at some schools.

Then there could be the UC-Berkeley MBA graduate, who appreciates the courses and professors in entrepreneurship that helped her launch a start-up in nearby Silicon Valley. She has intentions to give back, but in her company's early stages does not have the resources or time to be "reflective" or "appreciative" of experiences at Haas. Or she simply promises herself to write the big check when her personal net worth soars.

In general, Consortium schools fared well on CNN's list. Cornell (Johnson), 23% participation, was seventh; Consortium schools UCLA, Carnegie Mellon and USC were 11th, 12th and 13th , respectively with participation rates between 19-20%. UC-Berkeley, Emory, UNC, Michigan, Indiana, NYU, and Texas were also included in the list.

Consortium schools Wisconsin, Washington Univ., and Rochester were not included on the list--likely because they were unintentionally omitted from the survey or CNN may not have had sufficient information.

For all schools, the median gift is about $150--suggesting that many alumni, no matter their age or experience or net worth, will make a nominal donation yearly because they are sufficiently satisfied and because they are respectful of the schools' solicitation efforts (the e-mails, the letters, and the phone calls).

What about giving rates among Consortium graduates? Do Consortium graduates give back to their schools? Do they also give back to the Consortium? Compiling these statistics is more complex than it appears. Consortium graduates give back to their schools, probably in comparable percentages as the rest of their classmates. Many Consortium graduates give back to the Consortium, too. Some make donations to both; some request and hope contributions to the Consortium are also counted as contributions to their schools, and vice-versa.

Some even dream of making a philanthropist-like contribution, too, once personal net worth soars "after the IPO" or after "the new business takes off."

In 2010, the Consortium reported a 13% increase in the amount of donations from over 1,200 individual donors (including alumni)--an increase that is due in part to improved economics, but also to the Consortium's own well-planned efforts to reach out to alumni and others.

The statistics may not capture one popular Consortium sentiment: Most, if not all, Consortium alumni, whether they contribute regularly or not, will say they are "satisfied" with the opportunity the Consortium experience afforded.

Tracy Williams

Affinity Groups: To Join or Not to Join

2011-07-07T22:49:00.004-05:00

To join or not to join. To get involved or not. The New York Times Sunday posed the query to Consortium CEO Peter Aranda in its July 3 edition: Should members of under-represented groups join the "affinity groups" that exist in certain business settings? They are special-purpose groups within a company that attract a membership of women, Hispanics, or Asian- or African-Americans. Or they may be groups that attract others with shared interests or backgrounds: LGBTs, Native Americans, Arab-Americans, or South Asians.

They may include--within the institution--groups of African-American investment bankers, an Asian society of traders, researchers and analysts, or women in risk management. They could include Latinos in private banking or financial consulting.

The Times posed a challenging question, one that many within these groups grapple with from time to time. Is there an advantage or disadvantage if you choose to affiliate with affinity groups while you are ambitiously trying to advance within the company? Is there a negative stigma in the eyes of those who appraise and promote you? (See http://www.nytimes.com/2011/07/03/jobs

Aranda suggested affinity-group involvement is beneficial if the primary purpose is not social. "Affinity groups can operate like focus groups," he told the Times. The affinity group should have a purpose consistent with the business objectives of the company. Aranda suggested you should join groups that have senior-executive sponsors and that are directly tied to business functions like recruiting, marketing, or product development.

Or you should join if the group has a mentor program. "From a minority perspective, you should have mentors, so if you are a Hispanic junior executive and you hope to rise through the ranks, you can talk to someone who has been down that path ahead of you," Aranda said. "What you need to be careful about with affinity groups is that you aren't creating segregation by being exclusive."

Many major financial institutions, such as Citi, JPMorgan Chase, and BofA endorse the formation of affinity groups and support them in many ways. Most such groups were formed to help in professional recruiting and evolved into networks that assist in retention and career development. They work with recruiting units to top identify candidates and escort prospects through the recruiting process.

It's not unusual, however, for a woman, African-American or Asian-American to assess whether being associated with such groups slow down progress to get promoted or win an opportunity to transfer overseas. In financial services, performance, commitment and productivity count during appraisals. But impressions do, too, whether or not they are conveyed fairly. So inevitably, women and minorities ask themselves about the possible stigma of being associated with groups that might be regarded by outsiders as separate or exclusive.

Often, however, affinity groups offer broad advantages and institutional assistance. Big banks, firms and institutions in recent years have not shunned their formation and have not frowned on them.

How then can affinity groups be formed "without guilt" and with pride and enthusiasm, while conforming to overall business objectives?

1. Affinity groups can assist in recruiting. They can participate by visiting campuses and identifying candidates. They can help institutions formulate firm-wide recruiting strategy, establish relationships with diversity pipelines (such as the Consortium, of course), improve relationships with professors and career advisers at colleges and business schools, and assist recruiters as they comb through long lists of candidates.

Members of affinity groups are usually committed, experienced business professionals. They will know better than corporate recruiters the special talents and strengths necessary to excel on the job. They will be able to pinpoint outstanding women and minority candidates more quickly. They will, also, be more familiar with the sources, pipelines and places to find that talent. They will know HBCUs, understand the value of such groups as National Black MBA Association, the Consortium, or Toigo, or have ties to social and professional organizations within these communities.

2. Affinity groups can assist in the institution's efforts to hire experienced or lateral talent. How often have we heard banks, funds or companies say they want desperately to hire experienced vice presidents from under-represented groups, but "can't find them"? Affinity groups usually know who they are, where they can be found, and whether they might be interested in a lateral move.

3. Affinity groups can assist in the development of entry-level professionals, including recent MBA graduates. And they can do this in formal or informal ways. Most large institutions have structured professional tracks (for analysts, associates, etc.) and care about the development of all who join. Often, however, some junior professionals get more attention and support than others. Others are deserving of support and encouragement, but get lost among the throngs of new people.

Affinity groups, therefore, can step in to ensure that everybody is advised, guided and encouraged to progress. They can do this via mentor programs, special seminars or career-development sessions. Or they can encourage senior managers, bankers and traders (including those who are part of the affinity groups) to reach out to junior professionals.

4. In finance, topics, markets, and business can be complex and always changing. The learning curve is always upward. Keeping up can be difficult. Affinity groups can (and should do more to) be a source for members to reach out to each other for information, knowledge and understanding. The affinity group may act as a "clearinghouse" for questions about products, markets, clients, and technical analysis.

For example, a junior banker may need a refresher on equity derivatives or foreign currencies. The affinity group can match the banker with another member who is an expert on the topic and will gladly take the time to explain the product. A recent MBA graduate may want more information about tax-related accounting, financial models, or corporate valuations. The affinity group can find a member expert who will gladly help.

Once formed, how can affinity groups be effective and self-sustaining? How can they exist long beyond the initial enthusiasm of the early days of formation?

1. As mentioned above, they should have business-related purposes and specific objectives aligned with the business objectives of the institution, the sector, or business unit. If so, the group will likely provide ongoing institutional support.

As Aranda said, affinity groups should have senior-management presence or senior sponsors. A senior manager should agree to be more than an in-name-only sponsor and should agree to be involved and act as a champion for the group in business-unit meetings, corporate strategy sessions or even board meetings.

2. To ensure it transcends being a social outfit, the group should define objectives and strategies clearly, should share them with the broad corporate population, and should meet routinely. The group should show that it is serious about its intentions and it plans to be around.

3. The group should reach out early to new professionals, solicit their ideas, absorb their energy and accept them as equals in the group.

What then makes affinity groups vulnerable and ineffective or perceived negatively?

1. Petty issues and politics suffocate affinity groups. Sometimes they get bogged down in non-essential issues or caught up in broad corporate politics. The groups sometimes risk spending too much time on the wrong issues. Members lose interest, when they think the time is better spent going back to the office to tackle the in-box.

Affinity groups should, therefore, be attentive to and conscious of how members use their time. Most members must weigh the time involved vs. the time involved in daily job responsibility. But most are willing to take the time, because they see the long-term benefits. Affinity groups must strive to avoid unnecessary work or projects.

2. Sometimes they smother themselves with power struggles within the groups. Sometimes members become more impressed by their being heads of their organization than by the mission at hand. Members risk wasting time figuring out what the titles or name of the group should be or who will represent the group in its meeting with the CEO.

3. Vague and inconsistent communication sometimes hampers such groups. A group's steering committee might fail to inform all members about what the objectives, programs, strategies and updates are. Members then feel isolated or disillusioned and become less interested to support the overall cause.

Affinity groups are effective when they are inclusive and are fierce in their efforts to keep everybody informed.

4. Sometimes affinity groups trip when their objectives are vague, confusing or cumbersome because of corporate-speak. Some outsiders are already not sure why they have been formed or why they exist; hence, members shouldn't be confused about the real purpose.

The objectives should be crisp, simple, straightforward.

5. Affinity groups shouldn't be exclusive. They shouldn't try to define membership qualifications and should, in fact, encourage those of different ethnic backgrounds or sex to join and participate. Sometimes groups have stumbled over themselves trying to stipulate who can join or not or who can become leaders or not.

To join or not to join?

If the objective is proper, if the ultimate aim is consistent with institutional mission, if the passion is there, and if the time involved is productive, then why not? There will be long-term benefits for members--and for the institution.

Tracy Williams

Finance Rumblings: Here We Go Again?

2011-06-30T08:34:00.000-05:00

Just when we thought all had turned around and we sensed the corner had been turned, we hear banter about financial institutions pondering lay-offs and staff reductions. Haven't we heard these rumblings before?

As big banks and other financial institutions stumble toward the end of the second quarter, 2011, published reports say lay-offs are looming. Senior managers have begun to panic over whether they will be able to generate returns that will match those of 2010, especially with deal flow, trading activity, and the economy sputtering. Historically, the first response of financial institutions (from trading desks and deal teams to operations groups and compliance functions) is to reduce personnel numbers to brace for rougher waters. And always, the method that comes to mind to reduce is "LIFO" outplacement--the last in are the first out. Critics say the first reaction is to protect compensation among the elders when the industry must weather a brief storm.

This time around, some financial institutions say they will manage a hint of a slow-down in intelligent, efficient ways. Banks, funds, dealers and other financial institutions in the past often reduced staff too quickly. Once markets signaled a decline, institutions marshaled out the door the young, ambitious talent it had just hired with effusive enthusiasm. When markets turned bright months later, firms with swiveled heads rushed to replace the talent it just let flee.

Financial institutions promise they will manage staff numbers better the next time. So at midyear, 2011, when banks and firms sense turbulence heading into the second half (not a crash, not a collapse, not a double-dip recession, but a pause or a correction of some kind), they must restrain themselves to avoid rampant lay-offs in areas where they will be desperate for analysts, team leaders, MBAs and finance experts once markets and activity surge again.

Still, the professionals in these roles must be prepared--from managing director, senior vice president to analyst intern. In fact, this could be an opportune time for self-assessment, the time to ask introspective questions about what's next or the time to make sure you are in sturdy spot if there is commotion around and about:

1. Are you in a group, unit or business area that could be vulnerable?

2. How would you expect business-unit leaders to respond, behave or react if there is a prolonged slow-down in the business? How have they reacted or behaved in the past?

3. Do you understand the positioning, the strategy or the vulnerabilities of your group or area? Are you aware of the profits and losses (or expense burdens) of your group?

4. Have you performed as best as possible, given the circumstances? Have you done something recently (managed a project, done a deal, generated new business, or developed staff) that can separate you from the rest?

5. Are there other opportunities worth exploring? Could this be the right time to move to a new area, new role or a position with greater responsibility and visibility?

Often finance professionals, from those at entry-level to those in privileged perches at the top, will say they are too mired in current problems, deadlines, and group turmoil to address career-related questions. "We are just trying to survive," everybody says.

Pausing and assessing what's going, nevertheless, might be worth the time and attention--even if you are exhausted from trying to develop new business in shaky markets, taking on extra projects to prove you can still contribute, or existing in an environment of uncertainty and worry.

Whether they are Consortium MBAs or others with extensive experience, there are many stories of how people thrived when the ground was shaking beneath them, when they took advantage of tenuous circumstances or when they used them to springboard to a better position. This is the time when equity analysts might decide to transition into private banking, when a derivatives expert might consider being a foreign-currency risk-manager, when a top client-relationship executive moves into corporate staff management. Or when a senior manager agrees to take on more responsibility--more groups or more clients reporting into her. Or when the 10-year corporate citizen decides to pursue an opening at a smaller boutique.

It could be the right time, too, to reach out to networks, peers, and colleagues to share ideas, perspectives and concerns. Not gossip, not hot leads to a new job, but information or insight about what's going on and where the industry is headed. Ideas about next steps and appropriate ways to manage uncertainty. What better time, say, than for Consortium MBAs in finance to reach out to share thoughts about where markets are headed from here, what the hiring trends are in certain areas of the U.S., what opportunities exist in foreign locations, and what the best ways are to confront uncertainty.

Tracy Williams

Financial Services: How Are Black-Owned Doing?

2011-06-13T20:06:00.002-05:00

What are the top black-owned banks, brokers, and asset managers in the U.S.? Has there been progress in financial services for African-Americans who want to start, run, own and manage their own firms? Is the outlook better today than it was in the 1980s--or even a few years ago?

For the young black banker, broker, or trader, are there fair, reasonable opportunities to dream and aspire to starting a new firm?

Black Enterprise magazine just published its annual BE100s lists. The list shows what's possible and what's been done. The magazine every year publishes several lists of the top black-owned businesses in the U.S. for several industry groups. In financial services, its lists includes the top banks, top asset managers, top investment banks and top private-equity firms. Those lists suggest how much black firms have penetrated within the industry.

Review and analyze the lists in financial services, and applaud the courage, progress and showing among top black firms. But notice, too, there is still a way to go before many of the top firms find their way onto lists of top 100 or 200 U.S. banks, investment banks or asset managers.

In most cases, the firms are led by experienced leaders, many of whom started their careers at established institutions (like Merrill Lynch, Morgan Stanley, or Goldman Sachs), but decided at some point to take risks and do it on their own. In many cases, they sacrificed big bonuses and industry notoriety for the opportunity to manage and control their own (smaller) operation.

The lists in 2011 include many familiar names and firms. In recent years, the rankings have hardly changed, yet prove how many were sturdy enough to survive the financial crisis or bounce back from episodes of dwindling business opportunity or market volatility. If the financial crisis was a momentary blow for Morgan Stanley or Bank of America, surely it must have forced black-owned firms to pare businesses and develop new strategies. Black Enterprises's list shows how some bounced back and even got better.

Among commercial banks. Harlem's Carver Federal Savings, led by long-time CEO Deborah Wright, is the no. 1 bank (with $744 million in assets). Just like their larger peers, black banks had to wrestle with dwindling capital and credit losses from mortgage portfolios. Many are now trying to boost their capital bases to keep regulators comfortable. Citizens Bancshares in Atlanta, led by former JPMorgan Chase banker Jim Young, leads black banks with the most capital with $46 million.

Since the 1970s, blacks have regularly started their own investment banks and broker/dealers. Many started their careers as investment bankers or institutional traders at major investment banks. Once they gained a track record of success, relationships with dozens of clients, and the silent backing of major institutions, they opened their own firms. Some took advantage of the goals of corporations and municipalities that with open minds opened up opportunities for minorities in finance by including them in syndicate underwritings and new bond and equity offerings. Blaylock Partners and Utendahl Capital are two of many examples. Jackson Securities, founded in 1987 by former Atlanta mayor Maynard Jackson, attached itself to Jackson's relationships and reputation in the South to become a significant municipal firm in the South. The firm struggled after Jackson's death in 2003 and is now owned by insurance company Atlanta Life.

Black Enterprise's 2011 list no longer includes Blaylock, Utendahl, Jackson and others, but there are familiar mainstays. Chicago's Loop Capital and New York's Siebert Brandford Shank rank as the top black investment banks. Loop Capital is well known for its relationships with leaders of the City of Chicago. That has led to consistent lead roles in Chicago municipal-bond deals.

Siebert Brandford was actually formed from a venture combining Muriel Siebert, the New York-based broker/dealer run by Muriel Siebert, well known in New York circles as a woman pioneer in the securities industry, and Brandford Shank, the black-owned West Coast investment bank.

Williams Capital Group and M.R. Beal are two other familiar black-owned firms in the top 5. They have survived and thrived in the past few years, despite industry turmoil and uncertainty. Christopher Williams, an MBA graduate of Consortium school Dartmouth, founded his firm in 1994 after stints at Lehman Brothers and Jefferies. Bernard Beal, a Stanford MBA graduate, founded his firm in 1988 after leaving what was then E.F.Hutton. Over the past two years, Beal has been able sweep up talent from large firms that downsized and import talent (of all colors and background) to help boost his firm.

The top black asset managers, just like the investment banks, include long-time firms, with leaders who first made their marks at major firms. American Beacon Advisors is the top asset manager (with $44 billion under management). Tracy Maitland's Advent Capital management ($6 billion) in New York climbed into the top 5 this year. Maitland, a Columbia graduate, started his career in convertible bonds at Merrill Lynch in the 1980s and at one point worked with Utendahl.

The top 15 includes John Rogers' Ariel Investment (Chicago) and Eugene Profit's Profit Investment ($2 billion) (Maryland). Rogers, based in Chicago, started his firm in 1983, shortly after he graduated from Princeton, where he also played basketball. Profit, a Yale football player successful enough to have played in the NFL for the Patriots and Redskins, founded his firm in 1996.

Black Enterprise now also includes the top black-owned private-equity and venture-capital firms. Black firms in this segment are much smaller and have not yet established a long-term record as black investment banks have. But there is progress. Some are affiliates or extensions of the established investment banks (Williams Capital, for example, has a private-equity unit.) Ronald Blaylock, who once led investment bank Blaylock Partners, now leads GenNx360 Capital ($600 million under management), a New York private-equity firm focusing on investments in medium-size companies. Hartford's Fairview Capital is Black Enterprise's top private-equity firm ($3 billion).

For black-owned firms, challenges still exist. In many ways, they are the same challenges that larger, known firms confront:

(a) the need for more capital,
(b) the long wait for a sustained economic recovery,
(c) the hiring and holding onto top talent,
(d) the uncertainty over regulatory reform,
(e) the urgency to find, nurture and keep clients (as borrowers, investors, depositors, or issuers), and

(f) the requirement that operating costs are under control and compliance is in order

Black firms face special challenges, too. They know they need to establish and maintain credibility, the continual, grinding effort to prove they can provide superior service, advice, trade execution, pricing, or research, compared to larger, peer firms, who are heartless, fierce competitors. In financial services, business is not necessarily handed to them.

They have the monumental task of proving to corporate clients and investors that it makes sense to move business from Jefferies, UBS, Morgan Stanley, Deutsche Bank, or Wells Fargo to their firms. They must show officials from California or Illinois that they can help the state borrow at a lower rate than that offered by Goldman Sachs. They must convince the budding trader or broker that career prospects (in the long term) are better at their firms than at JPMorgan Chase. And they can't ease up.

Somehow they find a way to survive, get the big deals done, make a difference in communities, act as adviser to large corporations and municipalities and hire the right people in crucial roles (trading, risk management, lending, compliance, research, and brokerage).

Among all black financial-service companies, Chicago's Seaway Bank is the leading employer (200 on staff). Loop Capital, Carver Federal, Washington's Industrial Bank, and New Orleans' Liberty Bank each has over 120 employees.

Historically, black firms tend to try to go at it alone, unless dire survival is at stake. Hence, seldom do they seek to grow or increase market share by combining or acquiring a peer firm. The black banker who worked 10-15 years at Merrill Lynch, founded his own firm and struggled to keep it viable and profitable--while maintaining complete control of the firm and its strategic vision--usually doesn't want to give that up in a merger, even if the combined firm is twice the size.

While it is discouraging to some that after decades, black firms are still a blip in the financial-services landscape, it's encouraging that many of the firms have been around for a long time.

Tracy Williams

Midyear, 2011: Perspectives, Outlook

2011-06-05T16:41:00.002-05:00

Still looking for a sustained uptown?

We are all suffering fatigue waiting for a surging recovery in job markets and the general economy. Every month or so, the news sours after a few months of hopeful, surging signs.

That--in a nutshell--describes midyear 2011. A series of upturns and optimism followed by the stench of a momentum-killing downturn.

MBAs in finance, especially those who embarked on careers the last decade, know these trends, teasing market movements and promising signs well. Many have adjusted to these ups and downs and press on.

As of midyear, 2011, the mood is not dismal. Uncertainty, however, always seems to be hovering overhead. Many MBAs are finding jobs and meaningful positions in finance. Job openings and opportunities are more prevalent now than they were in the depressed years of 2008-09. Yet they may not be first-choice jobs or dream roles. While a select few are winning prize positions at investment banks or private-equity firms, most others are finding suitable spots at smaller institutions, boutiques and industrial companies and are content.

Consortium MBAs have seen growing opportunities in private wealth management. The big firms, Morgan Stanley, Goldman Sachs, and JPMorgan, continue to hire large numbers of MBAs--right out of school or with a few years of experience in other finance roles. They have convinced MBAs from top schools to explore careers beyond, say, mergers and acquisitions or bond trading. Big banks have turned asset and wealth management in response to the crisis, regulation and the likelihood that traditional trading and banking businesses will have difficulty achieving expected levels of profitability.

In midyear, 2011, market signs are unclear. One market, nonetheless, seems to have shown renewed life signs--the IPO market. The evidence is not necessarily from a flood new offerings, but from recent banner-headline equity deals (Groupon's announcement, Linkedin's IPO, anticipation at Twitter and Facebook). Technology and social networks have rekindled interests in equity offerings, although investors are still reminded of the busted dot-com bubble of the early 2000s.

Months and months after a new guidelines were enacted, financial regulation is still nebulous, arcane, and uncertain. The rules are changing, but banks, brokers and funds are still stumbling to understand what the rules will be, how they will be enforced, how detrimental they will be to their businesses, and how certain instruments will be traded, processed and cleared (derivatives, most notably). Financial institutions are going through proper motions, but many are at a stand-still on what the regulatory picture will look like 3-5 years from now.

Meanwhile, in midyear, 2011, insider-trading indictments and court cases are in the news, reminding old-timers of the dramatic insider-trading scandals of the late 1980s and early 1990s and reminding many that history oddly repeats itself more often than we think.

Lehman and Bear Stearns collapsed three years ago. Meanwhile, the barrage of books retelling what happened (at Lehman, at Bear, at Madoff, in mortgage and derivative markets) continues. In the first half of 2011, new books telling dramatic tales of about Madoff, Goldman Sachs, mortgage-markets, and AIG have been published. No finance MBA can keep up with cascading reading list, although many are already familiar with the subject matter and issues. Former Merrill and U.S. Treasury official Herb Allison just wrote a short treatise, not recounting the gory past, but proposing tough solutions.

Inside business schools and at many hedge funds, efficient-market theories have been analyzed and in some cases attacked. Many are analyzing "asymmetries" of markets. Some are calling for an overhaul or review of older concepts; the crisis proved more than ever that markets are flawed.

Top business schools are now welcoming another class. The MBA and the business-school curriculum and experience are still criticized by pockets of pundits and the public, who blame MBA-trained leaders, managers, traders and deal-doers for market and ethical lapses of recent years. All business schools sprint to adapt, reform and make the degree as relevant as ever. The degree is still in demand--among students, who have applied in near-record numbers in recent years, and among financial institutions, who recruit and hire by the hundreds when markets and business grow.

Diversity topics and issues are still on the agenda. Few signs exist that big banks, financial institutions, and public companies have reduced emphasis, although even fewer signs exist that there is a notable pipeline of under-represented minorities or women who will step up to become CEO of a major financial institution soon. As ever, there is still work to be done, especially after the torment of 2008-09 discouraged much talent to explore opportunities elsewhere.

The recovery at midyear, 2011, has been a series of starts-stops, occasional stumbles, and promising upturns. As many economists would say, just like most recoveries.

Tracy Williams

CFN's MBA Guide: Surviving First Year

2011-05-23T16:42:00.001-05:00

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

Dimon's "State of the Industry"

2011-05-06T17:33:00.000-05:00

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

Consortium OP 2011: Alumni Are Welcome

2011-04-20T15:41:00.001-05:00

Consortium alumni, you are invited, too.

The Consortium's annual Orientation Program is not merely a five-day celebration of the Consortium's first-year MBA students. Alumni are welcome and can get involved in various ways. If they attend, they take advantage of the program's varied offerings--from career-strategy sessions to leadership and development seminars. And of course, the always-popular career fair.

Granted, the OP (including the Consortium's 45th this year in Minneapolis) is intended to be a memorable, festive welcoming event for over 300 first-year MBA students. First-year students get a head start on business school; 17 top business schools get acquainted with students formerly known to them for their GMAT scores, glowing recommendations and pertinent work experience. Corporate sponsors, by the hundreds, get access to diverse talent and get an early start on recruiting for summer internships.

Alumni can join the festivities, too. Consortium MBA alumni often say they want an opportunity to relive the OP experience of their first years. But now as experienced professionals, they look for reasons to attend and for programs geared to their interests and spots on the long career path. More and more, the Consortium has responded.

This year's OP will include ample programming for alumni--whether they are first-year associates at Morgan Stanley or team vice presidents at New York Life, whether they are in transition or they seek guidance on how to get the coveted promotion. Throughout the orientation, alumni will be able to reconnect with their schools, with classmates or with others with similar interests. Several school meetings and sessions are planned.

A few workshops tailored for alumni and experienced professionals are scheduled. Alumni may also want to attend other sessions--including career panels and or seminars on innovation, leadership and strategy. Alumni will flock, too, to various networking receptions and dinners.

Most sessions are intended for first-year students, especially career panels, which provide an in-depth introduction to, for example, corporate finance, investment banking, investment management and energy. Alumni, however, in the past have appeared at such panels, especially to catch up on industry trends, to provide their own candid viewpoints, or to give feedback and guidance to first-year students. Career panels also attract alumni in transition, who, say, might have experience in marketing, but are pursuing roles in finance sales & trading.

Alumni in the past and certainly those in 2011 treasure the widespread corporate presence at the OP. First, sponsoring corporations help make the event possible. Second, corporate representatives, officials and recruiters are visible and active throughout the several days. Accessible and approachable, they are eager to start relationships and recruiting dialogue with students and alumni.

This year, as usual, several companies will sponsor corporate receptions. Year in and year out the Consortium's major sponsors, such companies as 3M, Bank of America, Kraft, Colgate-Palmolive, Mattel, Nestle', Pepsico and Walmart will host gatherings.

The culmination of the OP's vast networking experience is the career fair, often held in a large hall with hundreds of company representatives present and willing to discuss careers, opportunities and specific job openings at their respective organizations. Alumni are welcome, and many in past years have flown in just for this event.

Alumni need not attend the OP just for job search, career switching or transition soul-searching. They may come to help and be involved. The Consortium this year is welcoming alumni who want to volunteer to help in the dozens of program events, receptions, and panels. They may assist in advising or encouraging first-year Consortium students, who brace for the overwhelming tasks ahead of them in business school.

As in the past two years, the Consortium Finance Network (CFN) will have an OP presence (along with other Consortium special-interest groups). CFN will be at the career fair, will invite finance students to join, and will distribute (electronically) its guide for MBA students interested in finance careers. Alumni in finance can invite students to join CFN and help steer them toward summer-internship offers.

For Consortium alumni, the OP need not be a one-year wonder or a fond first-year memory. There is a spot or role or purpose for all MBAs in Minneapolis.

For more information about the OP's schedule and registration this year, see http://www.cgsm.org.

For MBA alumni interested in volunteering, contact D-Lori Newsome-Pitts at newsome-pittsd@cgsm.org.

Tracy Williams

Firm Culture: Could You Work Here?

2011-04-17T21:21:00.002-05:00

Dalio of Bridgewater Associates

Bridgewater Associates is a successful, $90 billion hedge fund, located along the Connecticut corridor where other successful, gargantuan hedge funds have a home base. Ray Dalio, a Harvard Business School graduate, is its founder and leader. The fund's investors include pension funds and university endowments.

Over 1,000 people are employed in a variety of roles. It recruits those who are tough-skinned, highly motivated and interested in a long-term career at the fund. MBAs in finance would no doubt be attracted to an opportunity there.

Would you want to work there?

Would it be a place where you can find a niche, thrive and be successful? Would you be able to endure hardships and demands to perform well? Would you be able to stomach equity volatility, risks of losses, and virulent market turmoil? And would you be able to perform under pulsating pressure and high expectations?

Bridgewater is also known as a fund that operates based on a set of cult-like principles, written and often updated and revised by founder Dalio. "The principles" had been rumored and talked about for a long time. Before they were public, former employees, managers and investors mentioned them. They told tales of employees (traders, analysts, and researchers) being subjected to tough, unrelenting, bruising criticism--as required by the principles.

Dalio, perhaps tired of speculation about whether the principles exist or not, eventually decided to post them (all 122 pages) on the firm's website for all to see. (See BRIDGEWATER-PRINCIPLES) There they are, to be seen and studied by competing funds, prospective employees, and academic experts in business strategy and corporate organizations.

In the world of hedge-fund blogs and chatter, some say Bridgewater is not a culture, but a cult. Others say if the firm is successful (having attracted talent and experience and having survived the financial crisis), then it's not a cult, but an organization whose culture might be replicated by other funds, institutions and organizations. Others who have worked there speak (anonymously) of having had demoralizing experiences or or having endured debilitating asssessments of their work.

Dalio is unapologetic. "We maintain an environment of radical openness," the Bridgewater site states. "(That) honesty can be difficult and uncomfortable." Sharp criticism and open discussion, he explains, help people improve, which helps the firm be consistently profitable. There is pain, but there is ultimate gain for all.

Are there, however, costs to such success and consistent performance? Bridgewater, as a private fund, does not report results and doesn't have to (except to investors and, even then, occasionally and in the manner it chooses). As a reputable hedge fund with billions under management, fund managers, traders, analysts, researchers, and new MBA recruits are well-compensated. Yet at what costs?

How would a Bridgewater culture differ from the vaunted, well-examined cultures of such firms as GE and Goldman Sachs? If it works at Bridgewater, can it work in other industries? For new MBAs, how important is culture in evaluating a prospective employer?

Some outsiders say employee retention is low at Bridgewater. It's not unusual for 30-40% of those hired to leave within the first few years. Some ex-employees say the smothering criticism starts during interviews, where interviewers crush prospects with analyses of weaknesses and deficiencies.

Dalio contends it works and suggests that employees who understand and absorb the principles thrive and benefit in the long term.

Bridgewater's principles, as they appear for all to see and examine, aren't corporate-polished. They are bluntly presented. They are ruminations from Dalio--imperative statements based on experiences in the past and based on what has worked for him the past three decades. They boil down to understanding reality, not hiding from it, identifying mistakes, learning from them, and using them to get better. Identifying, exposing and calling out mistakes boldly, brashly, and purposefully. That's where it gets uncomfortable.

Bridgewater is susceptible to being called a cult, because the principles are presented as a one-way stream of thoughts from its founder. The principles never address the details of Bridgewater's fund business. They expound on goals, planning, and behavior. Nothing about capital, risk management and asset allocation; nothing about arbitrage, currencies, technicals, trading momentum and value-investing.

Some of its principles make sense--at least for this type of organization, a large hedge fund required to make trading and investment decisions in swift-moving markets. They may work for a fund, but not for a manufacturer, an industrial complex or a conglomerate.

The principles address decision-making--a critical element in hedge-fund trading and investing fund capital. What are the goals in making decisions? How should decisions be made? How can the fund ensure that people will make the best decisions on behalf of the fund?

The principles discuss goals. Reaching goals requires identifying and solving problems. And solving problems requires harsh, candid assessment of employees. "Once you identify your problems, you must not tolerate them," Dalio writes. Diagnose the problem, he says, and solve them--even if it requires upsetting employees. After goals and problem-solving, the principles address planning and execution.

Some of the principles are reasonable and well-rationalized. For example, Dalio says managers should obsess in putting people in the right roles, increasing the probability they can succeed. He says in evaluating employees, pay for the person and not the job; weigh an employees' values and abilities more than skills.

Dalio says, "In our culture, there’s nothing embarrassing about making mistakes and having weaknesses....At Bridgewater people have to value getting at truth so badly that they are willing to humiliate themselves to get it." Elsewhere, he says, "(E)valuate (employees) accurately, not kindly."

As an MBA in finance (with or without experience), could you work and thrive in this environment? Would potential compensation and experience offset possible personal humiliation?

He values communication, even excess communication to ensure everybody throughout the organization understands goals, issues, and corrective action. He values managers, employees, and colleagues maintaining healthy, tight relationships with each other, making it easier to evaluate the performance of each other.

In 122 pages, almost all aspects of management and organization behavior are covered--from performance metrics to firing employees (when they exhibit no potential to improve). Some topics are not addressed, possibly because Dalio has not gotten around to writing them down. He dismisses job-related stress, leaving it to employees to internalize egos or handle the frustration of being humbled by a jarring critique of a recently completed project.

The principles don't address the value and importance of diversity in organizations--except when Dalio explains the value of permitting all voices within an organization to speak up and share their views or criticism of others.

For the most part, the Bridgewater approach is "take it or leave it." But Dalio heartily believes you might be better off "taking it."

Would you be willing to do so?

Tracy Williams

On Campus: Admission Season

2011-04-01T20:26:00.003-05:00

On campus at Virginia's Darden School in Charlottesville

Around the country, applicants to the Consortium are being notified of their admissions. The special ones selected to become Consortium members are planning their June trips to the Orientation Program in Minneapolis. This, of course, includes dozens of admitted students who will indicate an interest in financial services.

If this year is like those in recent years, between 80-125 prospective students will report they are interested in finance in some form. With improvements in markets and performance among major financial institutions, that number could exceed 125 this year. Prospective students won't likely fear being interested in banking or investment management or trading in 2011, as they were in 2009.

While the Consortium process has wound down, admission season continues at most Consortium schools, which tend to have "rounds" of admission. They review hundreds of applications in batches for each round and make admission decisions shortly thereafter. The deadline for the final round for many schools was this past week.

As business schools adapt, change, update, reinvent themselves or conduct upheavals in the curriculum and core courses, admission to full-time programs at Consortium schools still tends to be selective. It's still not easy to get into Tuck, Stern, Ross, Tepper, Darden and most other Consortium schools.

Applications at Consortium schools (to the school, not merely the Consortium program) are still holding up, proving there is still a keen interest among young professionals to pursue the MBA--despite uncertainty in job paths, despite pockets of critics who say the degree needs to reorient itself toward different skills, or despite the continuing increases in costs.

Many Consortum schools (including Michigan, Yale, Cornell, NYU, UCLA, and Virginia) still must read through over 2,500 applications each year at each school and select less than 20% applicants for admission. Take NYU, for example. In recent years, it hasn't been unusal for it to have over 4,500 applications, where only 13-15% are invited for admission to its full-time program. Dartmouth and Yale typically have around 3,000 applications (each), and about 14-16% are admitted.

Michigan, Virginia, Cornell, and UCLA are other Consortium schools have applications numbering close to or far in excess of 3,000. Just about all Consortium schools have average GMAT scores among first-year, full-time students at least above 635. (Average GMAT scores, in fact, at such schools as Michigan, UCLA and Dartmouth exceed 700.)

Consortium schools continue to have the luxury of being selective. It's not just high scores and solid GPAs; they expect years of quality work experience, evidence of leadership potential and passion for people and organizations. So getting into Consortium schools is still a challenge, but an exciting, not too daunting one for many who pursue the degree.

Most Consortium schools, from the mere fact they chose to be partners with the Consortium, are in the lead when it comes to diversity or assembling classes from all backgrounds and from many countries. Consortium schools, however, know they can't rest on laurels and must maintain an unrelenting effort to ensure they recruit adequate numbers every year.

Sometimes it's not easy, as from year to year the number of, say, African-Americans at one school may surge one year, but decline sharply the next year. The percentage of women at top MBA schools is far less than 50%, although demographics and statistics show women are highly qualified to attend. At USC, for example, in a recent year, the school reports an admirable 30% of its first-year class as Asians, African-Americans, and Hispanics, but only 27% are women. Such a breakdown is not unsual at many top programs.

Even with the leverage of being selective in choosing applicants, Consortium schools still compete for top students by making themselves special, attractive and perpetually relevant. Yale is making it a priority to build a new state-of-the-art (by 2011 standards) business-school campus--thanks to a $50 million donation. The new buildings are expected to open within the next two years.

Virginia's Darden school happily reports, as it does now, that it ranks no. 1 (at least by Bloomberg-Businessweek) in student satisfaction. MBA students can and will be demanding. That's not a surprise, given most are paying full tuition at extraordinary ticker prices and are extracting two years out of the precious years of the early stages of a career to return to campus. They want and expect updated technology, new facilities, access to top professors, facility comfort and business legends and leaders to come to campus. According to Businessweek, Darden is meeting many of those demands.

This past week, DeMaurice Smith, executive director of the NFL's players association, gave a lecture on campus presenting the graphic and gory financial argument of the players' case in the current lock-out. The room was packed with interested students, who were enticed by his numbers-oriented presentation.

Carnegie Mellon's Tepper School will have a new dean next month: Financial economics professor Robert Damon, who specializes in anaytical decision-making and wants to introduce such methods and techniques to the process of leading a top business school. (He also happens to have an MBA from Consortium school Wisconsin.)

With admission season winding down, next comes the countdown to the first days of fall session, 2011.

Tracy Williams

Minneapolis-Bound: OP, 2011

2011-03-28T20:45:00.000-05:00

Minneapolis will host the Consortium's 45th Orientation Program in June

The Consortium's annual Orientation Program for new students and alumni will take place in Minneapolis this year, June 26-29. Minneapolis will be the host city for the third time. This is the Consortium's 45th orientation. The program was in Orlando last year and in Charlotte the previous year.

Depending on sponsors and arrangements with at various locations, the Orientation Program has criss-crossed the country. Dallas, New York, St. Louis, Atlanta, Cincinnati, Indianapolis, and San Francisco have also hosted the OP in the past.

The Orientation Program celebrates the achievements of new students and introduces them to each other and to business-school deans and officials and corporate sponsors. Activities involving alumni and others are included. The career fair has always been one of the most popular events during the week. New students also like the panel events on industry sectors from consumer products to investment banking.

Alumni, sponsors and corporate representatives interested in more information about this year's program should go directly to the Consortium website: http://www.cgsm.org.

As at the last two OPs, the Consortium Finance Network plans to have a presence during the week and at the career fair (along with other special-interest groups). It will introduce CFN to new students and other alumni, solicit input about programs and events, and welcome others interested in working with the steering committee.

For the past two years, CFN has prepared a detailed, useful guide for first-year MBA students in finance. The guide will be updated and sent to new students in finance again this year in June. The guide offers advice on what students in finance should do in the summer before business school and how to gear up for recruiting once they get to campus.

The guide offers tools and hints on technical topics (from corporate finance to capital markets) and helps students keep up with the rapid changes and updates in finance.

If you plan to attend OP this year (as an alumnus, sponsor or corporate representative) and want to help CFN and other Consortium special-interest groups (at the career fair), let us know (via Linkedin or separate e-mail). If you're interested in a copy of this year's finance-student guide, we can send you a copy when it is ready.

Tracy Williams

Diversity: Time for an Update

2011-03-18T13:52:00.001-05:00

With a recovery on the way (despite occasional bumps and bruises), it's time for a diversity update.

Have financial institutions revived their efforts to increase the number of professionals among under-represented minorities and women? Is there a steady pipeline of blacks, Latinos, Asians and women joining banks, hedge funds, brokerage firms, asset managers, private-equity firms and insurance companies? Is diverse talent coming to Wall Street in growing numbers? Are they starting out in fast-track roles with ample opportunity to become vice presidents and senior managers?

In financial services, what grade does diversity as an agenda topic deserve in 2011?

Did progress slow down during the crisis and is stalled while the environment is better? Are institutions taking advantage of talent flow made possible by the Consortium and other programs--MLT, Toigo, InRoads, SEO, Jumpstart, NBMBA, NHMBA or 85 Broads?

Granted, diversity seems sometimes to be a cyclical phenomenon. Financial institutions devote time, attention and energy to open their doors, and then something impedes progress or slows it to a crawl. Attention is diverted, or energy dims. Mergers, reorganizations, and restructurings can douse enthusiasm. So can bad corporate performance, indifferent management, or a corporate culture that caters to nepotism and cliques.

Most financial institutions made laudable progress in the 2000s. But then came the financial crisis. All of a sudden, diversity committees were tabled, didn't have time to meet or were no longer a priority. The Executive Vice President, who convened a monthly meeting to address topics raised by senior women or senior bankers of color, suddenly cancels sessions. The investment firm that supported pipeline organizations and advertised everywhere its support of such programs suddenly withdraws sponsorship.

Senior managers focused on the survival of institutions. They focused on reviving sagging businesses and attracting capital and clients. Many firms curtailed recruiting--sometimes because resources were gone, other times because competent leaders of diversity efforts were no longer around.

Through it all, however, a few firms, worthy of praise, stuck through. They fought for their lives to survive a downturn and remain viable, but diversity remained a priority. The best firms understand that diversity is not a short-term project. They believe in the long-term payout.

As many financial institutions have rebounded and put turmoil behind them, has diversity revived, too? Is it an important, legitimate part of the corporate agenda?

In 2011, major financial institutions don't dismiss the agenda. Many have permanent programs in place. Smaller firms sometimes neglect its importance, because they are struggling to grow and expand and may not appreciate the value of diversity. Or they may not yet value talent, input and experience from those with different backgrounds.

In 2011, major institutions are likely rearranging the diversity agenda in various ways. Most--like a Goldman Sachs, Wells Fargo, New York Life, Citi, or Bank of America--hire diverse talent into entry-level programs in satisfactory numbers. They hire Consortium and Toigo MBA graduates. They recruit at HBCUs, and they sponsor programs to encourage women to seek opportunities in finance. They examine whether they can improve recruiting among all groups--blacks, Latinos, gays, women, and Asians.

But in 2011, larger institutions notice something else that requires fixing. Some worry about what to do; some are not sure what to do. They say they need to replenish diverse talent at middle and upper levels. They say it and know it. They just aren't sure of a solution. Where are the Latino senior associates, the black vice presidents or female heads of trading desks, all of whom will one day become managing directors, sector executives, presidents of international divisions or chief financial officers? Who will be the next Kenneth Chenault?

The financial downturn depleted the ranks of mid-and-upper-level diverse talent at many institutions. Some were dismissed, some retired, some reassigned to roles with less responsibility, and many others opted out, electing to explore other less-pressured areas. At some banks, brokerages, investment firms and funds, there are fewer people of color in mid-to-upper roles today than five years ago.

Why have they been successful in hiring into entry positions, but watch the numbers at higher echelons? Some institutions whine they can't find and retain mid-level talent. They complain, aren't sure what to do, and stumble in forming strategies to do something. Other institutions take action and do something.

Citi, for example, sponsored the Consortium Finance Network event in Feb., primarily because it hoped to identify experienced diverse talent, people whom they can hire now at senior-associate and vice-president levels in many areas of corporate- and investment-banking. JPMorgan has appointed recruiting officers to find diverse talent, who can move laterally onto trading desks, into research spots, into operations and financial management, or into corporate-finance roles.

The crisis took its toll. It could have been a traumatic memory for many early-career professionals from under-represented groups. So the challenge to boost numbers in the upper ranks might continue. Many MBAs who were once willing to do whatever it takes to secure a position in private banking, private equity, mergers & acquisitions, equity research or derivatives trading may have second thoughts or may have discovered other appealing opportunities, where they can deploy the same skills.

Others may no longer want to guess at or pull their brains to figure out the intangibles necessary to move up the ranks. Hard work, productivity, deals, and new clients, they learned, don't always guarantee promotions to managing director or sector head. Networking, special ties, and "the right vibes" are also factors or variables--based on subjective impressions of performance.

Those starting out today may also be subject to more pressure to produce and generate revenues faster than in years before. At many companies, there is no more apprentice period or chance to learn the business first.

For some MBAs, there could be a looming fear of another market collapse around the corner, an interruption that would once again jeopardize job security and long-term careers. Some from under-represented groups might prefer the security of other industries or opportunities--especially after an investment of two years in business school.

But some in under-represented groups are just as motivated and interested as ever. They want long-term careers in private banking, venture capital, and corporate finance. So the talent is out there.

In finance circles, institutions finally achieved, say, a B+ grade in improvements in the 2000s. That grade slipped to C- or D at many organizations during the two-year crisis period. A renewed interest in trying to do the right thing merits a B- grade. Diversity still appears cyclical. Some firms keep the momentum going, others still need the occasional push or thrust.

Tracy Williams

New Consortium Class: A Well-Thought-Out Detour

2011-03-11T16:47:00.001-06:00

In a matter of days, around the country, over 300 Consortium applicants will have received good news. They will have been invited to become Consortium members and will prepare to enter top-tier business schools. Many will be awarded full-tuition fellowships. Of course, they will be invited to the annual Orientation Program (this year in Minneapolis), where they'll meet fellow Consortium students from 17 schools. They will join more than 6,000 other Consortium alumni and students.

They'll be relieved, knowing the painstaking effort to apply, write detailed essays about their business aspirations, solicit recommendations, and present themselves in neat, powerful packages will have been worth it.

This year's class, more than a conventional class, endured much to reach the point of returning to school. A typical applicant probably finished college in the mid-2000s and joined a prominent institution in an entry-level program. When applicants started out, it would have been bustling years; markets soared and there was little hint that a collapse was approaching. But just as they began to make full impressions in their work worlds, rugs were pulled from them.

Hence, this new crop of Consortium students endured and survived the worst of the financial crisis and recession. They had to bear lay-offs, uncertainty, changes in jobs, and re-locations; they had to reflect candidly about what they wanted to do in the long run. Their reflections likely led them to consider business school as the best option to rekindle their careers, transition into something they enjoy or prefer, or steer themselves onto a better long-term track.

This new crop, too, was well-schooled on how to take next steps, make switches, or present themselves in attractive ways. One outcome of the recent times has been a flood of career advice offered to young MBAs or pre-MBAs--a cottage industry of executive and business coaching. Before they set off to business school, many in this class reached out to mentors, managers, and career counselors. They will have had chances to get their resumes' reviewed, polished, and reformatted, their elevator pitches perfected, and--thanks to Facebook and Linkedin--their networks expanded and nurtured.

In the midst of turmoil, transitions, and coaching, applicants decided the next step would be business school.

Applicants and new students are not necessarily abandoning old, favorite career paths, but they don't appear to fall into conventional or prestige traps. Recall the days when students marched into business school wanting investment banking or consulting, but weren't sure why or aware what it entailed--beyond the fact that this is what students at top schools do, so they heard.

Or remember way back when business-school graduates fled to dot-com start-ups, not because they had an idea or a plan, but because that was the target path for a period. Some applicants and students this year (and in recent classes) still want investment banking or consulting and some want to work for Internet companies on the West Coast, but they know why and understand why.

Applicants and new students today also are willing to explore, change their minds, and pursue something they had not thought of initially. Thus, students start out with mergers and acquisitions in mind and decide (with emphasis and determination) they prefer private banking. Some say they want to be derivatives traders, but learn about green technology, microfinance, media management and take detours into that direction.

Some, while in school, discover pharmaceutical or energy sectors or international business and all of a sudden focus on new interests. Others start in real estate and switch into investment management. Others, too, become turned on to industry groups and decide to accept corporate-finance offers in industrial or consumer-product companies. Or they learn they can do mergers, acquisitions, consulting or business strategy at companies outside of Wall Street or Park Avenue.

Today's Consortium applicants and students appear comfortable switching into something else without regret or without missing the career that might have been if they stayed on a conventional path. Business schools have stepped up to explain and present a variety of career options--from entrepreneurship to non-profit management to innovative business models--and to show the advantages of working abroad.

Gone are the days when applicants, after they are admitted to a top school, checked off they wanted to do consulting at McKinsey and spend 5-10 years there before deciding what's next. Applicants and students, nowadays, don't necessarily know what they want to do, and they are comfortable with that. They do know, more than ever, they must seize control and chart pathways for themselves.

First, however, comes the thrilling anticipation of an overwhelming, memorable two-year experience in school. There will be core courses, case studies and mind-boggling amounts of work. But there will also be eye-opening sessions with professors who are doing new things, spring-break jaunts to foreign companies, important projects that reach into the community or across the country, taps into elaborate alumni and student networks, and perhaps a semester in South America, China or Europe. An exciting detour before they resume a career path better thought out.

Tracy Williams

The Dreaded Performance Review

2011-03-05T00:04:00.002-06:00

Here is the scenario. You are a fourth-year associate at a major financial institution. It's late December, or early January. Your supervising manager summons you to his (or her) office. You know the meeting topic has nothing to do with a client, deal, financial model, or presentation. You discern the uneasiness of your manager. The calendar hints at the nature of the meeting. It's time for the dreaded performance review.

You dread it because you had no meaningful review of performance during the course of the year. You dread it because you have no clue in which direction the evaluation will swing: Outstanding? Superb? Above-average? Insufficient? Below par? Didn't meet expectations? Your manager decides.

You prepare yourself for the worst of assessments and hope for the best--good or bad, fair or unfair, subjective or objective, misleading or straightforward. If you are inexperienced, you may approach it with too much confidence, because if the boss hasn't critiqued your work in severe, traumatizing ways, you assume must doing fine.

If you have been around long enough and you understand the "game" of performance reviews, you arm yourself with statistics, lists of accomplishments, any summary output from long hours of toil, and examples of where you had a notable impact on the bottom line--all matters of record that will deflect the slings of unfair observations of what you've done the past year.

Some managers handle the performance review well. It's not a rushed, one-hour session late on New Year's Eve. The best managers provide ongoing feedback, focus on constructive commentary, start the year with goals and objectives, and revise or update them as the year unfurls. The best managers use metrics or objective standards to measure progress with goals and are sticklers for making the process as fair as possible. They minimize bias and try for an uplifting, forward-looking experience when giving feedback.

But some managers fail at it. Many managers, especially those in a deal-doing, trading-oriented, client-focused environments at financial institutions, will say they can't find time, energy or attention span to do this for all who report directly to them. They don't hold regular review sessions, because there are other pressures to tend to--responding to clients, boosting revenues, or preparing reports for senior managers.

So they skimp. They skip quarterly feedback sessions, or provide critiques in the form of hollow, unknowing comments or in emotional outbursts. Or they whisper their assessments to colleagues, not directly to employees. Manager and employee during the year have countless conversations in business settings, when they plot strategies to ward off competitors, make plans to win a client over, or review details of a major presentation to senior business leaders. But they avoid the uneasiness of having regular dialogue about how both are performing--employee and the manager. They put it off, and the manager always promises there will be an in-depth performance review at year end.

For the best managers, because they have meaningful exchange throughout the year with employees, the dreaded performance reviews are welcome, lively meetings. There is less tension. The year-end meetings are more about setting goals and objectives for the next year.

For others, these sessions often turn out to be clumsy and difficult. The employee comes away with a superficial or unfair evaluation, or sometimes the employee emerges so scathed that he or she decides "it's time to leave the insitution." That's why some experts have a radical solution: The formal, year-end performance review ought to be done away with.

Samuel Culbert, a professor at Consortium school UCLA-Anderson, says performance reviews--the way they are customarily conducted--ought to be abolished. He wrote the book on it: "Get Rid of the Performance Review! How Companies Stop Intimidating, Start Managing--and Focus on What Really Matters." The title is a mouthful, but Culbert might be on to something.

This week he wrote about it in an Op-Ed piece in the New York Times. The essay was intended to prove the error in the ways of state politicians, who favor performance reviews of state workers vs. the restrictive review standards of unions. However, he used the Times platform to say that performance reviews, in general, whether among public-school teachers in Wisconsin or engineers at IBM or fourth-year associates at Morgan Stanley, don't work well. And he explained why.

"I've learned that they are subjective evaluations that measure how 'comfortable' a boss is with an employee," Culbert said in the Times. "Not how much an employee contributes to overall results. they are an intimidating tool that makes employees too scared to speak their minds, lest their criticsm come back to haunt them in their annual evaluations.

"Performance reviews corrupt the system," he wrote, "by getting employees to focus on pleasing the boss, rather than on achieving desired results." (See http://www.performancereview.com/ for more about Culbert's ideas and the book.)

Culbert recommends "top-down reviews," where managers and employees together set goals and objectives, measure the progress of both parties achieving those goals, and hold both accountable. In this way, it's not about the employee messing up or trying to please the boss; it's about the manager-employee in unison making accomplishments or assessing together why they may have fallen short. In this setting, the review of performance is objective, measurable, and mutual.

He also recommends a "pre-performance review." Those sessions are comfortable for participants, revolve around honest, open discussion of goals and accountability, and often prove to be more beneficial to employee, manager and the business group. It eliminates the one-sidedness of performance reviews.

It does, however, require time and priority. Managers must set aside time to help employees set goals and review them throughout the year. And managers' managers must similarly provide goals and objectives and incentives to make sure they do.

Many financial institutions assess employees based on forced ranking and rating systems--arguably the primary reason why performance reviews are dreaded. Ranking and ratings make it easy for business groups to carve out pieces of the bonus pie as quickly and efficiently as possible. For most finance professionals, a year's worth of work, projects, business trips, research, revenue generation, presentations, modeling, strategizing, risk assessment, and tough client negotiations come down to a single ranking or rating. That ranking or rating contributes to holiday stress and tension among employees. They worry and wonder about it; they can't interpret what it implies.

Often managers are pleased with the work, progress and contributions of most employees. They may say so throughout the year in passing comments and summarize this well in performance write-ups. Some are rarely critical in written evaluations and worry that criticism will discourage the best employee and cause them to leave. But a ranking-rating system requires that they "grade on a curve."

Managers are forced to assign a rating or ranking for most employees that says bluntly they are "middle of the pack," "just getting by," or "no longer essential"--even if managers don't feel it or mean it. The ranking system requires that most employees in a group must be deemed "average," even if in a group, division or sector, a large number of them are truly outstanding.

Knowing there is such a system, the fourth-year associate above dreads performance-review day. And for all the 60-80-hour work-weeks and missed vacations and enormous output (in projects, presentations, decks, models, and travel all over the country), he or she knows the ranking may likely suggest "just average" or "just getting by."

If young professionals or MBAs early in their careers cannot squash the system or are too junior to try to overhaul it for something fair and better or something that emphasizes development and improvement, what can they do?

1. If your manager doesn't present or articulate goals and objectives, prepare your own. This doesn't require much time; it may, nonetheless, require thought and contemplation. Show them to the manager at the beginning of the year and schedule meetings to discuss progress during the year.

2. Scheduling meetings with managers to discuss clients, business, revenue trends and deals is not hard. Scheduling meetings to discuss performance and solicit constructive feedback is downright difficult. Many managers put them off. Some don't like this part of management. So find ways to have informal, ongoing discussions with managers about priorities, workload, working agenda, and progress. Informal dialogue will be more comfortable and often more productive. This permits you and the manager to understand better your contributions and the factors that might affect performance.

3. Prepare your own self-assessment about twice a year. This also doesn't require much time, if you keep notes during the year of what you have done and the impact you have on a team or larger group. Include contributions, strengths, accomplishments, and measured impact on the bottom line. Include areas of improvement, new interests and activities related to recruiting and development of yourself and others. Include, too, current career plans--what you hope to do five years from now.

4. Throughout the year, show initiative and insight; be creative and helpful. Find a way to show that you are thinking three or four steps ahead of everybody else. This helps you stand out among others.

Some financial institutions endorse and implement some of these procedures. But they do so primarily to ease the burden of managers who may not be familiar with employees' specific contributions during the year. At the end of the year, be prepared to present your self-assessment, if only because it helps to create a comfortable session and will spur an immediate discussion of upcoming goals and objectives. In this way, you manage the review of performance and minimize subjectivity, biases and emotions.

These aren't solutions to Culbert's problems with performance reviews. But they are ways for that fourth-year associate or any other recent MBA to take control and present the best side of him- or herself.

Tracy Williams

CFN Industry Event: "The Doors Are Open"

2011-02-24T22:23:00.004-06:00

With the darkest days of financial turmoil offset by recovery, clean-up and optimism, Citi says its doors are open--especially for diverse, experienced talent.

Nearly 100 Consortium alumni, students, MLT alumni, Citi recruiters, traders and bankers attended the Consortium Finance Network's industry perspectives and networking event at Citi in New York Feb. 24. The CFN event was co-sponsored by the Consortium, MLT and Citi's Institutional Clients Group (ICG).

Citi's Tyler Dickson, a managing director who oversees global capital-markets origination, announced to the audience that Citi is keenly and eagerly ready to recruit lateral talent--experienced bankers, traders and salespeople. "We may have missed (hiring you) the first time, " he said. "But we're interested in talking to you now."

Dickson, who has been at Salomon Bros. and Citi since 1989, discussed the bank's campaign in its ICG group to expand and hire more people with significant, meaningful experience and people with diverse backgrounds. This would include people who have done deals, made loans, managed clients, reviewed risks, or have account portfolios. Citi, just like its peer competition, wants to make sure it doesn't skimp on talent from under-represented groups--especially now that banks have progressed beyond the scares and close calls from the financial crisis.

Dickson, who manages a sector of over 900 bankers involved in loan, bond and stock underwriting around the world, is also on the board of MLT.

Consortium Vice President Development Anthony Davis and MLT President Ian Hardman provided updates and remarks from the Consortium and MLT before the panel discussion.

Consortium alum Nadine Burnett was one of four panelists who presented their views of the current economy, described their career experiences at Citi, and offered advice on how to pursue roles in their respective business groups. Burnett, a Consortium graduate of Virginia-Darden, is a corporate banker (Vice President) in Citi's investment-banking healthcare group. On the panel, she shared details of her daily responsibilities. She is charged with delivering a suite of products and services to health-care clients in the U.S.

She explained the difference in the roles of a corporate banker vs. an investment banker (in the combined investment- and corporate-banking groups at Citi). She said investment bankers focus on M&A and equity- and bond-underwriting. Corporate bankers focus on corporate loans, foreign exchange, derivative sales, and transaction services (cash management, securities services).

Burnett had stints at Bank of America and JPMorgan before she joined Citi five years ago. She is also an INROADS alum.

The panel also included Johny Vlachakis, a Vice President in corporate-bond sales and former military officer, who reflected on the transition from military operations in the desert to the bond-sales desk at Citi. Vlackachis has an MBA from Cornell-Johnson, a Consortium school.

Consortium alums from the New York area attended the event. Some students journeyed from as far away as Cornell to be present; some participants traveled from Chicago.

Audience participants asked several follow-up questions, including whether or not the new Dodd-Frank Act will have substantial impact on bank trading desks. Vlachakis said that for his group, if anything, such regulation (including that which will restrict proprietary trading) will "level the playing field" between his firm and such firms as Goldman Sachs.

Other panelists included Glenn Windisch, a director in Global Transaction Services, and Shawn Snyder, a senior associate in Investment Research and Analysis.

During the networking session, event participants gathered in clusters to discuss several areas of institutional banking: private banking, sales and quantitative analysis, investment banking, and global transaction services.

Citi has been a long-time Consortium sponsor. It hosted the Consortium Finance Network's special event on transitions and rebranding in May, 2009. The Consortium's annual award for outstanding service from corporate participants is named for Peter Thorpe, a Consortium board member and advisory-board chairman for many years.

Tracy Williams

Consortium and MLT alumni, panelists, Citi officials and other guests gather to discuss opportunities in institutional client banking at Citi. Citi managing director Tyler Dickson, head of global capital-markets origination, made opening remarks before the panel discussion.

The "Science" of Networking

2011-02-22T22:19:00.000-06:00

Networking is an art, most experienced professionals in finance and other business activities might assert. They value the benefits and have seen them; they acknowledge how it takes time, years, and frequent relationships and connections to get good at it.

They might say the best, most meaningful results are achieved by those who aren't desperate for immediate results, those who aren't expecting the job or promotion next week or don't expect to win the new client business based on one phone call. The best at networking and relationship-building, they might say, are those who do it all the time, who see an assortment of value in people of different backgrounds, talents and experiences. The best, they say, are those who do it naturally.

Networking could be a science, so say two business-school professors, who have done research recently in how professionals manage networks, business relationships, personal contacts and business dealing. They contend scientific experiments or methods can be used to determine the best approaches to networking and developing professional relationships.

The two professors, Ko Kuwabara of Columbia and Oliver Sheldon of Rutgers, performed studies using techniques from "game theory." They used participants ("players") and observed and monitored "business relationships" in hypothetical business situations, especially where participants were not familiar with each other socially or professionally. They monitored activities that involved "exchanges in value" among participants.

They conducted experiments and assessed situations where participants saw each other frequently (frequent, measured interactions over a short period of time) and where participants had contact that involved in-depth interaction or negotiation or required a certain amount of trust and confidence in others.

(At Columbia Business School, Prof. Kuwabara specializes in negotiation and social capital. This spring, he is teaching social networks and social capital to MBA students. At Rutgers, Prof. Sheldon specializes in negotiation and organization behavior. Both have Ph.D. degrees from Consortium school Cornell-Johnson.)

The project and research are ongoing and will likely be enhanced, fine-tuned and updated over time. But they are ready to share early observations and a few useful conclusions that might benefit many MBAs in finance, especially those early in their careers. Some of the useful recommendations from the initial research are summarized.

1. In the beginning of a relationship, whether it's one defined by mentoring, business interaction, buyer-seller relations, or adviser-client relations, frequent contact, they say, is important. They see value in establishing relationship momentum and allowing a relationship to evolve and develop from frequency of contact. Their experiments, they say, show that relationships that are "disrupted," curtailed, or stifled will be relationships that wither or dissipate. Relationship disruptions, distractions or interruptions are relationship-killers.

This advice is important for young MBAs or MBA students who wonder whether too much contact with a senior mentor or professional will overwhelm ties to a more experienced person or give an impression that the younger person is a bother or a nag. Young professionals are often hesitant to initiate frequent contact lest they be a burden.

The professors say frequent contact is crucial. The young MBA or student, however, can offset a concern of too much contact by approaching meetings with senior professionals by being focused, natural, at ease, and purposeful.

For more senior professionals in their own circles, frequent contacts and consistent networking become opportunities to explore others' talents and experiences, to tap others for insight and ideas, and even to learn something new about a topic, issue, financial instrument, business strategy or corporate client.

2. While the professors recommend frequent contact, they recommend a "slow build-up" of trust. In other words, they suggest people should "test the waters" with each other. Start slowly and deliberately to build trust and confidence. This might be called "investing in the relationship." You establish frequent contact, but allow time to build trust. When trust comes, both sides know it. The professors say that the "most robust" relationships are those where people "earned (that) trust" over time.

To get to a point of earned trust, of course, professionals had to have frequent interaction and relationship momentum from steady, consistent contact.

What might all this mean for young MBAs, MBA students, and finance professionals early in their careers, especially those who are called upon to establish meaningful (and, yes, profitable, fruitful and lucrative) relationships with clients, colleagues, senior managers, and staffers?

The professors' research suggests they, too, work at ensuring they maintain frequent, consistent contacts. Touch bases regularly, they would recommend. Keep in touch. Don't let important contacts forget who you are, what you can do, and what you might be striving for in the long term. Relationships reach a momentum, and the momentum must be tended to; otherwise, it dims or evaporates.

But they suggest, too, that you must give relationships time to build trust. Don't rush them along, or don't force results, conclusions or an immediate, tangible impact. Often in the beginning, you never know what that long-term benefit can be. It might be the job, role, position, or promotion you initially looked for. But it might also be a new idea, a new introduction, a new contact, a useful opinion, a point of view, or good, old-fashioned advice.

Or it might be a new way of doing old things. Allow for give-and-take, and allow for trust and confidence to grow. The professors contend relationships soar once trust takes hold.

Tracy Williams

Johnny Come Lately? Build it Before You Need It

2011-02-15T09:04:00.005-06:00

Several of my former colleagues, friends, and classmates are on the job prowl. I am always happy to help others, as many have helped me. A few however, want to join the conversation, via LinkedIn, Twitter, and Facebook. Although social media has been credited with mass mobilization in recent global uprisings, professional networking doesn’t work this way. Relationships take time, developing deep relationships requires patience, and people are generally cautious—if not fearful—of Johnny come lately that is asking, rather than giving. Some people change their status message on their LinkedIn profile, saying they are now looking for jobs, and I question if it’s too late.

Let’s get something straight. The concept of networking and reaching out to others for support isn’t about changing who you are. It’s about enlisting the help and advice of others to help you become who you can be.

Here are a few suggestions you can intake, invest, and pass on:

1). Waiting until you are laid-off, bored, or simply shutting down to what else is in the market is fool hearted. It doesn’t mean you need to jump ship before 1 month, or 1 year, but it means you should be talking to recruiters, companies, and hiring managers to see what next skills are needed now, and in the future. This will actually help your current employer, as you continue to skill up, and take on new projects and clients.

2). Those who ignore the party/conversation/network when they are content and decide to drop in when they need the network may not succeed. It’s pretty easy to spot those that are just joining the network purely to take—not to give. Therefore, be part of the party/conversation/network before you need anything from anyone. Start now, and continue to build relationships by giving now: share knowledge, help others, and become a trusted node and connector, not just an outlying “dot” of a comet that swings in every 4 years or so.

3). Read Keith Ferrazzi’s book Never Eat Alone and Who’s Got Your Back. These books focus on building your own personal “Relationship Rituals” and the behavioral foundation for creating lifeline relationships: Generosity, Vulnerability, Candor, Accountability.

Money Madness in March

2011-02-14T13:17:00.015-06:00

You think you can pick stocks, determine which ones have the best chance of making the most gains in a one-month period? Do you think you can apply investment-analysis principles, ratio analysis, technical trends, or just plain instinct to determine which stocks are the best bet this spring?

Then consider competing in Consortium alum's Rob Wilson's second-annual March Money Madness stock-picking contest. Last year, he started the competition to take advantage of "bracket-mania" that accompanies the annual NCAA basketball championship and to promote investing in equity markets. This year, he resumes his version of the tournament with hopes he can attract many more participants (and sponsors) and award more prizes.

March Money Madness works similar to picking winners in traditional NCAA college brackets. There are rounds of competition, and in each round, participants try to pick a weekly winner between two stocks (like two college teams competiting). Just like the NCAA, in the early rounds, there are 32 and then 16 stock pairs. In subsequent rounds, participants choose winners among the companies that are remaining in the tournament.

From round to round, winners in pairings are determined based on the higher market return in the following week. Last year, the top prize was in iPad. This year, winners in the final round (the championship) will also receive prizes.

To win, stock-pickers of course must focus on short-term gains. But Wilson says the primary purpose is to promote investment education, to help participants learn more about equity markets and get comfortable in making stock selections, and to understand more about market trends and behavior.

To register and participate in this year's tournament, go to http://www.marchmoneymadness.net/ for competition rules. Reach out to Wilson at rob@robwilson.tv if you have feedback or are interested in being a sponsor. You can register after Feb. 15, but must do so before Mar. 16.

Wilson is a 2005 Consortium graduate of Carnegie Mellon. He is a Vice President in financial consulting at Blazer Capital Management and is a TV contributor and commentator on financial topics on Pittsburgh's KDKA-TV (See http://www.robwilson.tv/.)

--Tracy Williams

Where Would You Want to Work?

2011-02-02T16:18:00.007-06:00

Everybody is attracted to lists, including corporate lists that rank the size of top corporations, the best places for diversity, and the places that offer the best opportunities. Lists provide a quick snapshot of voluminous information, of interesting statistics, or of a trend, issue, or phenomenon--no matter whether the lists are sometimes subjectively and unfairly compiled.

Fortune magazine may have started it all with its well-known Fortune 500. Few people may comb through the list line by line and in depth, but all business leaders, managers and students know what it implies--corporate size, influence, strength and global expansiveness.

Forbes owns the Forbes 400, the popular list that ranks the wealthiest people in the world. Other business media have popular lists that attract a following or at least spawn water-cooler and Internet chatter: BusinessWeek, Black Enterprise, and Institutional Investor.

Fortune may have the most abundant of lists. Beyond its list of the largest 500, it owns such lists as the most powerful women in business, the most influential business people and the most important (in its view) business people under 40.

Its latest list is out this week. It's the 100 Best Companies to Work For. (See http://www.fortune.com/.) Fortune has researched, compiled and presented this list for years. Year after year, it strives to present something as objectively as possible, although the list is based on surveys completed by the companies themselves, impressions from those who have worked there, and a handful of performance statistics. In general, the list is likely fair to those that make it. Companies on the list are likely justified. Perks, performance, and pay are what they are. The list might be unfair to dozens (if not hundreds) of small companies that are overlooked or out of sight when the lists are prepared.

Financial institutions, for various reasons, have not fared well on the "Best Companies to Work For" list. But a few appear year after year. They may legitimately be attractive companies to work for. Or they may have human-resources departments and employees who religiously take the time to complete surveys and provide data on benefits, perks and compensation (variables that rank high on the list).

Diversity, inclusion and employee satisfaction are important variables, so it shouldn't be a surprise that many on the list are Consortium sponsors (past and present): American Express, Goldman Sachs, General Mills, KPMG, and Deloitte, to name a few.

Fortune's 2011 list hardly differs from its 2010 list. Notable is the unusual number of consulting, accounting and law firms on the list: BCG, a dream target for many MBAs, is no. 2. Booz Allen, Accenture and Ernst & Young also make the list. These firms make the lists for various reasons. That new employees can aspire to be well-compensated partners one day might be a factor. Another could be their flat organizations and business models that minimize bureaucracy, processes and procedures.

A scattering of financial institutions made the list. There is no discernible pattern. Big global institutions like American Express and Goldman Sachs made it. Goldman would make most lists of the toughest companies to work for, as well, but its perks, compensation and long-term career paths may make the painstaking efforts to be employed their worth it. American Express was noted for promoting and retaining women in senior roles.

Oddly there are a few discount broker/dealers and investment managers on the list. One explanation could be the opportunity for day-to-day independence and business accountability for brokers and financial consultants. Edward Jones, Scottrade and Robert Baird made the 2011 list. In a strange way, Jones made the list despite, as Fortune says, a workforce of 93% white. But the firm was applauded for its recent efforts to do something about that. The company says it wants to be more than a "firm of middle-aged white men." Certainly an example where it gets an "A" for effort, although its past grade in diversity might have been a "D."

Familiar names make the list, as they do each year: Google, Dreamworks, Cisco, Genentech, Intel, and Starbucks--often because of the perks that have come in working at young, dynamic firms or firms with technology, project-oriented cultures. Those perks, of course, include flexible work hours, minimum (if any) dress codes, cafeteria privileges, stock options, and day-care arrangements--all sufficient enough for any employee to rank their company as high as possible on a Fortune survey.

Tracy Williams

CFN: Inbox Follow-up

2011-01-20T21:10:00.026-06:00

The Consortium Finance Network has encountered or addressed several issues, topics and opportunities over the past two years. There have been events, webinars, conference calls, e-mail exchanges, blog postings, discussions, and guidebooks. Some topics deserve follow-up: What are next steps? What are implications of events or discussions from the past year? What is the aftermath of an issue, problem, or question CFN may have tried to manage? In other words, where is Part 2, 3 or 4?

Microfinance: Growing Pains

CFN hosted two webinars on microfinance in 2010 to introduce members and participants to the sector and to possible opportunities. The first webinar offered a primer and history. The second was a case study of a successful, growing microfinance project in the Philippines. (See links below to blog summaries of the webinars).

Since then, there has been widespread reporting of scandals and problems in selected areas in microfinance around the globe. Reports indicate activities where micro-lenders have over-charged on loans and where borrowers have defaulted in greater numbers than expected. Some have blamed the problems on new industry participants who seek to maximize profits before achieving developmental objectives. Some argue that microfinance reaches development goals best when non-profit institutions are the predominant lenders.

The isolated problems will not likely deter efforts from some established institutions who have seen progress and success. But there may be calls to regulate or oversee certain activities to protect borrowers or discourage those who participate solely to maximize financial interests. The current issues likely mean the global microfinance model needs some tweaking.

http://www.consortiumfinancenetwork.blogspot.com/2010/01/microfinance-101-basics-issues.html

http://www.consortiumfinancenetwork.blogspot.com/2010/02/microfinance-ii-on-ground-in.html

Volcker Rule: Step Two

CFN blogged about the impact of a possible Volcker Rule in mid-2010: http://www.consortiumfinancenetwork.blogspot.com/2010/06/volckerized.html.

This is the rule that would prohibit banks from engaging in proprietary trading and would likely have significant impact on the profits, balance sheets, and roles of many familiar institutions (JPMorgan Chase, Citi, and Bank of Amercia; but also, Goldman Sachs and Morgan Stanley, now bank holding companies).

Banks will need to revamp their trading desks, refocus trading to client-driven activities exclusively, and risk losing talented traders and entire trading desks to hedge funds and trading and dealing firms.

Since then, the rule has now become law. But the roll-out will be slow. The law gives regulators ample time to rewrite rules and present new definitions of proprietary and client-driven trading. And as expected, regulators (or whoever will be the designated group to draft specific rules) have been deliberate and cautious. Banks now have time to (a) continue some forms of prop-trading until rules change, (b) wind down some activities without having to endure sell-offs, and (c) restructure trading departments in a way they can retain talent.

The CFA: To Pursue or Not to Pursue

CFN presided over lively debates over the value of the CFA--especially for MBAs in finance, who have already been exposed to many elements of the CFA (corporate finance, investment analysis, accounting, security analysis, etc.) in business school. To help CFN members, Consortium alumni and other MBAs decide for themselves what is right, CFN hosted a webinar on the pros, cons, costs, value and time of the CFA in Oct., 2010: http://www.consortiumfinancenetwork.blogspot.com/2010/10/cfa-where-it-makes-sense.html.

All sides of the argument have validity. In the end, it is a personal decision. Many Consortium students in finance (not necessarily influenced by the viewpoints or the webinar) continue to pursue the first levels of the CFA. Some current students have pursued Levels 1 and 2 with no intention of pursuing Level 3 or the complete designation. This group won't be able to add the full CFA onto a resume', but will be able to get what they want from the effort: polished knowledge in certain finance topics and a slightly enhanced resume' without the costs and time required to get through Level 3 and further.

Mentoring: Keeping the Relationship Alive

CFN the past two years has encouraged, embraced and facilitated mentor relationships between Consortium students and alumni. Mentorships open doors for students. Mentors guide students, boost morale, introduce them to other important contacts and even tutor them to get ready for technical interviews.

(See http://www.consortiumfinancenetwork.blogspot.com/2010/08/mentoring-still-critical-still.html.)

Thriving, long-term relationships, however, are few, scarce. Many mentor relationships start with energy and ambitions, but drift afterward. Students get busy, preoccupied with what needs to get done that day, and may not always see the value of long-term relationships. Mentors get busy, too, or may not have the interest to do what's necessary to keep the relationship alive. CFN has tried to address these phenomena and has often assessed the role the Consortium and CFN can play to keep mentor relationships going.

The long-term value of a student or young professional in having one or more mentor relationships is critical for Consortium members and makes all efforts to help students and mentors strengthen their ties worthwhile.

Delicate Balance: Long Hours at Work

One of CFN's most popular discussions or blog postings addressed the long, near-tortuous hours involved in certain jobs in finance: http://www.consortiumfinancenetwork.blogspot.com/2010/01/delicate-balance-long-hours-and.html.

MBAs in finance know the story. The hours are unending, the schedule is unpredictable. Senior managers are demanding, often unrealistic. Weekends are seized by more work, new projects, new demands and Sunday afternoons in the office. The pace is physically draining; emotions peak and ebb. Sometimes it's debilitating.

MBAs dig deep to figure out how to cope. Most scrutinize and weigh the advantages (compensation, responsibility and finance experience) with the costs (time away from family and friends and physical and emotional costs).

The crisis of 2007-08, nonetheless, led to much soul searching for just about anybody who survived the events. It encouraged people to address the delicate work-life balance more carefully--especially if the end result from all the hours was the collapse of an employer, a job loss, or a dip in compensation.

For many, the costs exceeded the advantages, and they fled to other sectors or fields that at least permit a handsome, tolerable balance. Others didn't have a say and were victims of staff reductions. Many were in transition, and while in transition had the opportunity to decide (away from the pressures and not influenced by lucrative compensation) objectively if they wanted to return to a similar environment.

Some Consortium MBAs know the score, bear down and manage the grueling pace as well as possible--especially if they feel the experience will lead to a greater goal.

Other Consortium MBAs--in a new, post-crisis era--have courageously stepped up to put work-life balance as a top priority and have pursued opportunities that permit such. That means a few have actually rejected high-paying New York finance jobs for satisfying positions (with slightly less compensation) in other regions. And they feel good about it.

Which Way to Go? Investment Banking or Private Banking

CFN in Sept., 2009, offered advice to many Consortium students and other MBA alumni in transition on how to decide between investment banking and private banking, when presented with opportunities. The two areas offer different career paths, although activities and functions overlap in some ways. Many agree, too, that the cultures of the two differ.

Most MBAs in finance have skills and aptitude to go in either direction. But they struggle to decide which way to go. Some simply go where there is opportunity. Some of CFN's advice is summarized in http://www.consortiumfinancenetwork.blogspot.com/2009/09/which-way-investment-or-private-banking.html

MBAs often"feel guilty" when they forego opportunities related to the relative high-paying world of investment banking. In recent years, many Consortium MBAs have comfortably decided to go the private-banking route. Part of the reason is due to the more professional, organized approach to recruiting MBAs in recent years. Private-banking units, which used to recruit MBAs on a one-off basis or in an unstructured way, now seek out MBAs in the aggressive, focused way investment banks do.

Another reason is that MBAs like the greater client responsibility that comes with many entry-level roles in private-banking. The so-called "apprenticeship" period is shorter. They get to have bottom-line accountability as soon as they are ready. Some who have opted for private banking know what they are talking about; they are former investment bankers.

Tracy Williams

Did Goldman Overpay for Its Facebook Stake?

2011-01-11T20:22:00.036-06:00

It's the spring final exam in an advanced corporate-finance class on the campus at Darden. Or Tuck. Or Stern, Texas, or Emory. The professor distributes the exam. The students wince and are befuddled, because the exam has only a few questions with several parts. There are no numbers, equations, spreadsheets, models, or formulas. Just questions that require thought, analysis and maybe follow-up. How would you handle them below?

1. What is the true value of Facebook? How would you value it? What is its value today? Is the true value above or below the reported $50 billion?

What would be its value in two years? In five years?

2. Did Goldman Sachs overpay for its recent $450 million stake? How did Goldman reach its implied $50 billion value--from expectations about cash flow and earnings? From comparing Facebook to current market values of Google and Microsoft? From examining the acquisition values of other Internet companies in recent years (if there were any of note)?

Or from its willingness to pay a premium above a real value in order to gain an inside track to the heart of the company?

3. What really is the primary purpose of Goldman's investment?

If it were a ploy to race to the front of bankers' efforts to win the mandate to lead Facebook's possible IPO and become its primary investment bank, is the investment worth the risk for Goldman?

4. Why was Goldman willing to tread close to legal boundaries governing investments in private companies by setting up a separate special-purpose vehicle to permit some of its private clients to invest as much as $1 billion or more in total in Facebook?

5. Why would its affiliate Goldman Sachs Capital Partners, a private-equity fund managed by a different Goldman unit, reject the opportunity to invest in Facebook? Why would the view of the value and opportunity in Facebook differ in two different parts of the same firm?

Are there potential conflicts when one side of an investment bank says yes and another says no to the same investment opportunity?

6. What impact would the recent $50 billion valuation of Facebook have on the current implied values of other private social-network sites such as Linkedin and Twitter?

7. What are reasons Facebook agreed to accept new cash capital (new funds)? Was there a short-term cash need?

Did it require funding to support long-term assets, investments or possible acquisitions? Is it adding to infrastructure to be able to accommodate over 1 billion in users?

Perhaps most important (and perhaps beyond the purview of a finance exam): With a growing number of investors at the board table, is the vision of Facebook fashioned by its CEO Mark Zuckerberg at risk of being undermined in a way that makes him and his fellow visionaries uncomfortable?

The "exam" above probably couldn't be tackled in two hours. That wouldn't be fair to students. It might entail an entire course on its own in a semester. In many instances, there are no right or wrong answers. There likely isn't even a right or wrong value of the firm at this point. It would be better if the professor from Darden (or Marshall, Tepper, or Haas) presided over a lively, probing discussion of the "value of the firm" instead of requiring students to compute an exact figure--although the real world of finance forces investors, traders and market-watchers to determine a precise number every moment markets are open.

There are challenges in determining that precise figure. The first is the lack of data and the lack of reliable financial information about past and expected performance--given the current infrastructure, funding needs and expected growth.

The second is the complexity of valuing new organizations, especially Internet companies with little earnings record, with novel business models and with a reliance on clicks and eyeballs to generate advertising revenue. Is "value" achieved from expectations of cash flow five years from now? Is "value" achieved from the aggregation of hundreds of millions users? Or will "value" be achieved if and when the company is acquired by another firm and integrated into a larger, complementary business (Google? Microsoft? Viacom?)?

The third challenge might be the pitfalls of valuing "hot" companies based on a swoon of widespread popularity and buzz and the possibility that the hot fad will dim or be canceled out by next year's new model, fad or Internet wonder. (Whatever happened to buzz and popularity of MySpace.com?)

Goldman and team, of course, had access to real data. More data have been seeping out in recent days, as Goldman prepares its offering of investments in Facebook for its client base (via the special-purpose vehicle).

By now, many who watch Facebook's every step are aware the company now has over 500 million "members" or "accounts," generates over $2 billion in revenues and probably has annual earnings in the $200-$500 million range (depending on who's estimating, who's modeling, or whose accounting methods). While Facebook's market value is being reported at or near $50 billion, its "book value" is probably significantly lower--perhaps much less than $2 billion, if anywhere near that.

With plans to continue accelerating momentum, grow and create more uses for users (more reasons for people to spend more time on the site), Facebook probably needs Goldman's cash investment (including the $1 billion-plus from private clients). The infrastructure needs to be supported; new servers must be added, and employees must be paid, as the current flow of revenues might not always keep up with expansion (at least for now).

So why would Goldman and team pay over 100x current earnings for its stake?

If the valuation has an implied growth rate, is this growth realistic? Does the implied growth rate require Facebook to reach over 2 billion accounts in five years? Does it imply the company will successfully expand into countries where it hasn't penetrated yet (Japan, China)? Does it imply the company will continue to unveil new purposes for Facebook and will summarily resolve all issues or concerns related to privacy?

In Goldman-like fashion, as it sought a new long-term client, it determined it needed to do whatever possible (by taking reasonable risks, not absurd risks) to be the first big bank inside and to do so by being all things at once--investor, financial adviser, broker, strategic adviser, and (and when those times come) lender, private-client adviser, block trader and underwriter. If that is its goal (and not neccessarily doubling its $450 million investment), then the investment will likely be worth the risks and will reap long-term rewards more than what a potential over-priced investment could.

There are non-financial risks, nonetheless: (a) the risks that it will encounter legal issues from a new interpretation of the rules that govern the maximum number of investors in a private enterprise; (b) the risks of perception that one unit of Goldman rejected an investment opportunity that another embraced; (c) the risks of perception that Goldman is facilitating lucrative, home-run investment opportunities for the "super rich," those who qualify to invest in the $1 billion SPV fund. In Goldman fashion, these kinds of risks were probably vetted thoroughly, if not resolved.

Meanwhile, Zuckerberg and team, however, must now contend with how to stay true, steadfast and stubborn to the original vision. Will the Facebook we see in 3-5 years reflect what its creators envision today? Will it be a product shaped by the intents and objectives of institutional investors seeking a 15% return on equity every quarter? Will Google, Microsoft, and/or Goldman be calling the shots? (Or will Facebook be calling Google's shots?)

Or will the next new thing have come along and the world flees to that?

Tracy Williams

CFN Schedules Industry Event

2011-01-07T23:39:00.008-06:00

Save the date! February 24 in New York City.

The Consortium Finance Network will present its 2011 industry symposium and networking event at Citi in New York next month, Feb. 24 at 5:30-8 pm.

This year's event will focus on updates, outlook and perspectives in finance and financial services. It will outline and discuss opportunities after the financial crisis and on the industry's road to recovery.

CFN encourages CFN members, Consortium alumni and others to attend the reception, to participate in the discussion and meet others.

A short panel discussion will address specific topics on financial reform, trends in banking and finance, diversity agenda across the industry, and specific opportunities in certain sectors (investment and corporate banking, trading, investment management, private banking, and other financial services).

Join CFN and the other sponsors, Citi and Management Leadership for Tomorrow (MLT), for the evening. Invitations and more details will follow.

On Campus: What's Up? What's New?

2011-01-04T19:33:00.018-06:00

Business schools in these times are always reinventing themselves. They change, morph, and transform to keep up with the times. They revamp courses and curriculum and innovate by sometimes changing the experience 180 degrees. They assess a past crisis and project what's to come. They are sensitive to and try to be responsive to their multiple stakeholders--faculty, students, university leaders and corporations.

And for the most part, it's all for the good. You see steady changes, adaptations and an obsession with making themselves continually relevant on campus--even at or especially at Consortium schools. Take a look at what has been going on on campus the past month or so. Note what students, dean and professors are working on, doing, analyzing, forecasting, or studying--whether it's financial reform, regulation, leadership, accounting principles, or entrepreneurship. Or whether it's the business setting in the Midwest, in China, in India, or Indonesia.

At Yale, second-year Consortium finance student Corey Harrison is currently featured on the school's website in a video discussing progress on the school's transforming approach to teaching business. Yale SOM students don't necessarily study the conventional core courses of marketing, accounting and finance. They study under an integrated curriculum that focuses on the primary stakeholders and participants in business activity--e.g., the customer, the company, the market, the competitor, the investor, and the employee. To hear Harrison's impressions on his Yale experience, go to http://www.mba.yale.edu/.

Washington University's Olin School sponsors "talent summits" for students and alumni around the country. They are specially planned networking sessions, opportunities for students and alumni to learn and update each other on affairs off campus and activities on campus, in the marketplace, in certain companies and in institutions everywhere. A special attraction? Corporate recruiters are invited. January is a big month for its "summits," which are scheduled for the 6th, 11th and 13th in New York, San Francisco, and Chicago, respectively.

Many remember Shirley Sherrod, who made news in 2010 when she was fired from U.S. Agriculture Department post for remarks taken out of context in a speech she made. Emory's Goizueta Business School invited her to speak at a forum on diversity in management last fall. The event was co-sponsored by the American Institute for Managing Diversity (http://www.aimd.org/) and allowed students, professors and others at Emory to discuss diversity topics in corporations.

Even as the holidays approached last month, dozens of students from Virginia's Darden School made the annual Week-on-Wall-Street trek to New York (Dec. 13-17) for sessions with top banks, firms and funds. Other schools, including Dartmouth and Michigan, sponsor similar experiences, typically earlier in the fall.

The week of meetings, conferences, networking, informational interviews and a few evening receptions provide fast-track preparation for internships and the latest in Wall Street careers, roles, and jobs. Students also hustle to make contacts that will help during the January interview process or at least help them earn spots on A-list interview sheets.

Darden students, including a few Consortium students, visited JPMorgan, Credit Suisse, Wells Fargo, Stifel Nicolaus, and Nomura.

Many MBA students continue to have interest in private equity, although some feel the doors of many top firms are impenetrable. Many firms don't have formal recruiting and first-year programs; they, however, hire MBAs to fill critical first-year associate posts, often through alumni referrals. In November, Dartmouth's Tuck School invited Carlyle Group's David Marchick, a managing director, to speak to students who want to pursue private-equity careers and to report on opportunities in the area.

Marchick discussed recent trends, including globalization, emerging markets, and the impact of financial reform.

At NYU's Stern, 40 professors contributed to a new book describing a new Wall Street after the crisis, after financial-reform legislation, and with new regulation to come. The book, "Regulating Wall Street," (http://www.wiley.com/) follows a similar collaboration Stern professors published in 2009 related to the causes of the financial crisis.

Many of the professors argue there are flaws in the Dodd-Frank Act, enough to warrant concern that such flaws might trigger another crisis. Many, in fact, protest that the Act is not strong enough.

Fortunately the book isn't a laborious list of complaints. The professors provide solutions and explain them. They also address common concerns such as lingering systemic risks in finance, the shadow banking system, the too-big-to-fail concept, and the flaws of Government guarantees of bank liabilities.

At Michigan's Ross School (and perhaps at Consortium schools everywhere), second-year students speak of fascination and enlightenment in their second-year courses after a tough year of first-year, core-course treading. As they see the finish line, they get to take courses in innovation, leadership, entrepreneurship, and change or explore in depth particular interests in real estate, venture capital, and start-up funding. Many second-year students will acknowledge that the second-year experience (including also opportunities to study abroad) makes business worth the two-year sacrifice.

If it's January at Carnegie Mellon's Tepper School, it's the season for "Meet and Greet." Tepper supports and encourages sessions planned around the world where current students talk to prospective students and interested alumni about their Tepper experiences. This month, the informal social sessions are planned for Venezuela, Baltimore and Colorado. Sessions have been or are being planned for India, Peru and New York. Students discuss experiences, courses, professors, and career planning in an informal, unstructured setting--without deans, recruiters or senior professors peering in.

It may be winter break or the calmer days after a tumultuous 2008-09. On the campus of many Consortium schools, however, nobody's sitting still.

Tracy Williams