SG Cowen: a Case Study

Group One

Patrick De Nava
Sean Fagan
Chelsea Green
Leonard Keefer
Rose Martinez

sg

SG Cowen: a Case Study

Group One

Patrick De Nava
Sean Fagan
Chelsea Green
Leonard Keefer
Rose Martinez

sg

“We’re looking for a few good men.” The Marines have been using this slogan for well over two hundred years, and while the message is the same, the recruiting methods have changed dramatically. We’re going to look at how one company, S.G. Cowen, goes about the business of filling its employee roster.
Recruiting Process SG Cowen is an investment bank that was formed by the acquisition of Cowen and Company, a small but well respected investment bank known for quality research and equity sales, by Societe Generale, an international bank based in France. The new firm is comprised of about 1,500 professionals who specialize in health care and technology. The firm looks to hire about 30 associates each year, with about many of them coming from third year analysts being promoted. Some of the new recruits are business school students who start as interns after their sophomore year in school and are hired after completing two years of summer internship. Other associates are recruited from top business schools. SG Cowen’s process for recruiting new employees is both strategic and well developed. SG Cowen begins the recruiting process each fall by holding informational presentations at its core business schools, such as NYU, Cornell, USC, and Notre Dame. Chip Rae, the director of recruiting at SG Cowen assigned team captains, banking professionals, who were alumni, at each of the schools so that potential hires would have a familiar face and point of contact. (Delong, Vijayaraghavan 3). Team captains were urged to keep their presentations short to leave adequate time for informal talk and answering of questions (4). In addition to the presentations, bankers would often hold informal interviews with students in the home office in order to provide them with more information about the banking industry and the culture of SG Cowen as well as giving the professionals an indication of just how earnest the students were about going to work for the company (3). These “pre-interviews” had the added benefit of helping the students better prepare for the first round interviews, which were conducted by associates. The use of associates had a twofold purpose; Rae said “We’re not aggressive about sending our most senior people out, we want to downstream the identification of talent and upstream the responsibility of closing offers to senior people” (5). In addition, senior bankers were far removed from the trenches and might not be as demanding of the basic skills required of a first year associate. One of the team captains, Greg Schoenberg said of these early interviews, “I’m tough on candidates because I don’t want to embarrass myself later by endorsing weak candidates” (5). Not all of the interviewers felt the as Schoenberg did, which led to unequal rigor by the interviewers, some were too easy on the candidates, where others tended to be far too hard on them. Having thinned the field to the most likely candidates, the next round of interviews began on Super Saturday. Interviews by thirty bankers began at 9 AM, with each candidate scheduled for five interviews, a punishing morning for both the interviewees and the bankers. These interviews are focused on learning about the individual’s personalities and ambitions rather than their educational background or technical skills they possess. As Rae put it, “… long term success did not come from building models, it came from loving the work, loving to teach and sell, and loving the hunt” (5). At lunch the bankers would start their hiring meeting, sharing their views on the various candidates and deciding who would get one of about twenty offers (expecting about fifteen acceptances.) Rae rode herd on the bankers during the meeting, making sure that they did not lean too heavily toward candidates from their schools or take the other extreme and hire candidates who were “good enough for the firm” but “not good enough for my group” (6).
Occasionally he would be forced to push a banker into making a decision by saying, “If you could only take one new associate to the CEO’s office with you which one would it be” (6). Or he might take the opposite tack with “If I can’t place her, she’s going to be yours, how do you feel about that” (6). By the end of the day unanimity had been arrived at, hiring decisions were complete and a new crop of bankers were going to begin the grind demanded of a first year associate.
Recruiting Evaluation Looking at the overall evaluation process, SG Cowen is very effective in its decision making process for choosing the best candidates to be groomed as effective and committed bankers for the firm. Rae’s decision to go outside the top ten business schools and include the next fifteen is an especially worthwhile strategy. There will be little or no competition from the bigger banks and a candidate who is the at the top of their class at a lower ranked school might well prove to be a better hire than a candidate who is in the bottom half of his class at a higher ranked school. It is also to be applauded, that Rae has the bankers use grid sheets for the candidates they interview and having them vote for each of the candidates. This fills two purposes, the use of the grid sheets helps standardize the qualities the bankers are looking for, while voting helps minimize individual biases and subjectivity. There are, however some areas which we find problematic. The differences in relative harshness or leniency shown by the interviewers in the first round leads to inconsistency errors. Although, the comparison of notes might serve to smooth the process out, much as the voting accomplishes in the final rounds. Rae’s pushing the bankers to make hasty decisions might also lead to errors, this might be offset by the use of a deadline for votes. Perhaps the most troubling issue is the use of the informal interviews conducted in the office. The intention of these relaxed sessions are to learn more about the enthusiasm of the candidates and to give them a chance to find out more about the firm; they can be used by bankers to prep a favorite for his official interviews, giving them an unfair advantage.
Evaluation Criteria The evaluation criteria used by SG Cowen were outlined quite nicely in the Associate Evaluation Form. The five areas covered were: * Commitment to Firm * Judgment/Maturity * Interpersonal Skills (Impact/Presence, Communication Skills) * Leadership (Initiative, Motivation) * Technical Skills (Creativity, Modeling, Accounting/Finance, Prioritizing) * Work Ethic (Team Player, Flexibility/Versatility) (15) Commitment to Firm This was the first criteria listed and rightfully so. As a group we feel very strongly that this is the most important qualification for a potential hire. Commitment cannot be learned, and with the propensity for millennials to job-hop, this becomes more important than ever if the firm wishes to have a stable workforce.
Judgment/Maturity
Investment bankers have to show very good judgment in their dealings with customers as they hold a fiduciary responsibility to their clients. Maturity also plays a large role, but hopefully those who lack this characteristic are weeded out in the first round of interviews.
Interpersonal Skills SG Cowen’s style of banking requires a lot of interaction with customers so very good communication skills are a necessity, although first year associates may be able to hone these skills before they become crucial. Presence, however, much like commitment cannot be taught and should be exhibited by potential hires.
Leadership
Leadership skills per se are not obligatory for all hires although the components described in the evaluation form definitely are. Bankers will be required at some point to be self-starters, so initiative is an invaluable quality to have. Motivation is controlled by a great many factors, most of them firmly in the hands of employers so this should not be over emphasized.
Technical Skills While the candidates should have no serious deficiencies in any of the areas covered in the grid it was Rae who felt “long-term success did not come from building models, it came from loving the work, loving to teach and sell, and loving the hunt” (5).
Work Ethic You need to be able to get your job done. The work ethic of new hires is going to be put sorely to the test when they find themselves working long hours with little or no time off. Should someone with poor work ethics slip past the hiring process, the drudgery faced by first year associates will quickly point them out.
Graduate Management Admission Test (GMAT) We are a little disappointed to not see this included in the evaluation form. The GMAT is very good at discovering someone’s cognitive ability, and it has been determined that cognitive ability is one of the best predictors of future job success.
References
References are good for evaluating potential hires. We finally hear from someone beside the candidates, who tend to portray themselves in the best possible light. In addition to verifying information given by the candidates, on occasion we can receive valuable insights from past employers. Also, “hiring managers… said they remove about 21 percent of candidates from consideration after speaking to their professional contacts” (askville.amazon.com.)
Candidates for Hiring At the end of the process there were two positions yet to be filled, and four possible candidates to fill them. None of the four were stand outs, and they all had deficiencies that had put them into the “maybe category. Following is a précis of the four candidates and our group’s decision of which two should be offered a position.
Natalya Godlewska Natalya had an amazing GPA and was currently working on her MBA at Cornell. She had spent four years at CommScan, a company that had developed M&A modeling software used by Wall Street firms” (8). She was very polished and one of her previous supervisors had said about her “This is the person I would want to bring to tough negotiation” (8). She was also fluent in Russian, Polish and German, although this might have been a double edged sword. At Super Saturday, two of her interviewers had expressed problems with her candidacy. One of the associates who had interviewed her felt that she was ill at ease during small talk at the beginning of the interview. A managing director who had interviewed her felt that her imperfect command of English might be off-putting to her managers. However, one of the other bankers felt that her English skill would not be a problem when dealing with customers, “most of our clients think Wall Street types speak too fast anyway” (8).
Martin Street Martin had no previous business experience but his excellent leadership skills more than made up for it. He was in his second year at Wharton and had shown a strong interest in finance. While he came across as bright and articulate he was difficult to schedule for interviews as he had so many commitments at other firms. While he did express an interest in SG Cowen’s area of specialization, and claimed to prefer smaller firms, there were some who felt that he might not accept an offer if one were made (9).
Ken Goldstein Ken interviewed very well and all thought that he would make an excellent catch for SG Cowen. He was so well liked, that it was surprising that he had ended up in the maybe group. It turns out he was married with two young children and had in fact told some of is interviewers that it was “his intention to be able to balance a family with being a banker” (9). This did not jibe with the lot of a first year associate, and any allowances made for additional time off would be seen as preferential treatment by the other first year associates. This could very well be a source of dissension in the firm.
Andy Sanchez Andy was a second-year MBA at USC and had completed his Bachelor’s degree at UCLA. He showed his entrepreneurial skills in his first year of college when he started a business tutoring student for high school achievement tests and SATs. After UCLA he spent three years running the business before returning for his Masters. The business had been wildly successful, earning $400,000 the previous year which Andy had split with an equity partner (9). Unfortunately Andy had an undergraduate GPA of only 2.8. He claimed his business school GPA was better, but was still an unimpressive 3.1. When questioned about his mediocre performance, Andy said that he had spent most of his time running the business and had little time left for academics. Andy did point out that his SATs and GMAT were good and when checked it turned out that they were indeed very good, his GMAT score was one of the highest of any candidate (9).
Our Decision The four candidates were all able although each did have rather serious problems that would have to be addressed. Since all of them are well qualified, we based our decision on those candidates having the least of the potential problems. Natalya possessed less-than-perfect English and seemed ill at ease to one of the interviewers. Her English skills would be offset by her fluency in other languages, especially for a company that had global aspirations. Her apparent discomfort was only commented on by one interviewer and should not be seen as a reason to disqualify her Martin Street on the other hand was both confident and articulate, but his involvement with so many other firms meant there was good chance he might not accept an offer if one were extended. Ken Goldstein would find it difficult if not impossible to balance family obligations with the demands of a first year associate. Andy Sanchez with a 2.8 GPA would not be considered if not for the fact he had been running a $400,000 business at the same time. Also his very high scores on his GMAT correlate much more strongly with future job success than does a mediocre GPA. Taking these factors into account we would tender employment offers to Natalya
Godlewska and Andy Sanchez.