Case analysis : SG Cowen – New Recruits

1. What are the key decision points used by S.G. Cowen in making hiring decisions? What is your evaluation of the process used by the firm?
SG Cowen utilized a well‐developed, tiered process to make hiring decisions on potential candidates. SG Cowen first conducts informational sessions at on‐campus recruiting events to describe the firm, its benefits and steps in the recruiting/hiring process. They use these first‐round interviews, in advance of the formal recruiting process, to assess how serious candidates are about the opportunity. SG Cowen then reviews the resumes submitted by interested students and holds open, on‐campus interviews. The firm also selects some of those interested students specifically for closed interviews. The pool of initial candidates is narrowed down to a few candidates through a second round of on campus interviews. The first key decision point for SG Cowen is to select candidates who are best qualified to make it through the “Super Saturday” final selection process in New York City. Recruiters focus on identifying candidates that possess the skills to succeed in the company’s day‐to‐day operations and have the personality to fit the organization’s culture. During the Super Saturday event, the thirty candidates are each interviewed by five senior bankers. Following the interviews, the senior bankers gather to determine which candidates should be extended offers. At this final key decision point, the recruiters focus on the candidate’s potential for growth. Sometimes the HR manager may try to push a banker to be more decisive about a potential candidate by saying, “If you could only take one new associate to the CEO’s office with you, which one would it be?” Or at the other extreme, “If I can’t place her, she’s going to be yours, how do you feel about that?” (Delong and Vijayarghavan, 2006, pg. 6). This emphasizes SG Cowen’s team‐based approach to recruiting. Recruiters aren’t simply recruiting candidates they think, it would be a good fit for them personally, or for someone else, but for the firm as a whole. Overall, I believe that the selection process used by the firm is quite effective in predicting which candidates will enjoy long‐term success at the firm and fit with the organization’s long‐term strategic focus. The process utilizes individuals from different levels of the organization who bring the experience and expertise to make the most appropriate decisions at key points. Associate level employees are better able to gauge immediate skill set and culture fit, while senior managers can better detect qualities for growth and long term success within the organization and collaborate to make final hiring decisions from a pool of final candidates. The process also provides checks and balances to minimize biases and ensure thorough candidate vetting. Since senior bankers are responsible for the Super Saturday selection process, the associate level employees refer only employees they are confident can hold up during the Saturday selection process. “Interviewers knew they would be held liable for the quality of candidates they brought back for Super Saturday, and their own reputation was diminished if they wasted the time of senior bankers at the firm interviewing candidates at Super Saturday who were clearly not appropriate.” (Delong and Vijayarghavan, 2006, pg. 5). It is important to consider the effectiveness of SG Cowen’s hiring process through measures of reliability and validity. Reliability refers to the consistency of candidate evaluation across both time and different interviewers. Perfect reliability, or perfect consensus, is rarely achieved primarily due to deficiency and contamination error within the interview process (Gomez‐Mejia, Balkin, Cardy, 2012, pg. 179). Deficiency error (omitting a component of the domain that should be measured in the interview process) is reduced by staging the interview process and including participants from different levels and departments in the organization. As referenced on pg. 15 of the Harvard Business Review article, SG Cowen employs a standard interview evaluation form which helps facilitate a structured interview. Questions are consistent among interviewers and specify the complete breadth of criteria to be evaluated. Contamination error occurs when a measure includes unwanted influences, such as time pressure from other job duties or comparing an interviewee to the candidate that preceded (Gomez‐Mejia,Balkin, Cardy, 2012, pg. 179). Although the nature of the Super Saturday process can lead to some inherent time pressure, and interviewees may bring their personal biases into the process, SG Cowen does mitigate this risk utilizing group consensus and accountability. Management explains that contamination error is reduced during the Super Saturday selection process by making sure that bankers do not relax standards and hire candidates that may be “good enough for the firm” but “not good enough for my group.” (Delong and Vijayarghavan, 2006, pg. 6). All good selection tools will have content validity: that the content of the selection method (for example, an interview or test) accurately represents the job content (Gomez‐Mejia,Balkin, Cardy, , 2012, pg. 180). SG Cowen’s high‐pressure, intense and highly interactive interviews are representative of the challenging situations the candidates would encounter when actually working at the firm. As a result, their recruiting methods can be said to have high content validity. Another measure is predictive validity: the extent to which the scores of selection tool correlate with future job performance measured later. Since the firm has used this recruiting process for several years, they can go back and evaluate how successful the process was by measuring job performance of those they recruited this way. Presumably, it is they would find a high correlation between those that scored well and were selected from Super Saturday and those who performed well on the actual job, once acclimated. However, it should be noted the article does not provide explicit data (such as employee turnover) supporting this assumption.

2. What is your evaluation of the criteria used by this organization in making hiring decisions?

SG Cowen’s hiring criteria is sound. It emphasizes fit, entrepreneurial skills, job comprehension, and long term commitment to ensure that it recruits successful candidates that contribute to the firm long‐term. The firm sees itself as more of a boutique firm, emphasizing customer service and a personal touch. Employee‐culture fit is important for the firm to continue to be successful in its chosen niche, and the hiring criteria reflects such. Investment banking has been described as a cut‐throat business which places a huge emphasis on character, drive, and commitment. Hence, fit being rated very highly in SG Cowen's hiring criteria to assure themselves potential employees will be able to prosper in such a competitive and demanding environment. Bill Buchanan, head of Equity Capital Markets, articulates the firm’s market strategy well; namely, that it aims to be a “service leader” and not a “volume leader” (Delong and Vijayarghavan, 2006, pg. 2). Buchanan further states that “the human element, specially their creativity and energy, is why they are chosen as financial advisors” over other firms. SG Cowen expects that prospective employees will be able to maintain the hands‐on, high attention approach to investment banking that SG Cowen has built a reputation on. Entrepreneurial skills are also highly valued, because as Buchanan puts it, “the type of person who does well here doesn’t want to be told what to do. We want the self‐starter.” (Delong and Vijayarghavan, 2006, pg. 7). Investment banking is an industry where financial advisors have to scope out prospective clients by making cold calls, doing research about potential and current clients, staying on top of new technology and health care. All of these skills are entrepreneurial. While investment banking is a very lucrative career, SG Cowen wants to make sure that prospective employees are not in it for the wrong reasons, which Kim Fennebresque, SC Cowen’s President and CEO, describes as “dazzled by dough and by stature” (ibid). The job requires long hours and weekend work, which not everyone wanting to become a banker realizes or accepts. Junior employees as well as senior bankers are expected work extended hours. Ensuring that prospective employees understand that long hours come with the job is important to SG Cowen, thereby ensuring long‐term success of their new hires. One interesting and significantly important decision the firm took in ensuring they are getting top quality hires is the choice of recruiting from second tier schools, instead of trying to compete with bigger firms in top tier schools and getting middle of the class students. So SG Cowen focused in top 25 schools where they could be a bigger player and attract more interest from top students. Chip Rae, Director of Recruiting, states, “senior management eventually saw the wisdom. We are hiring at the top of the class, and these students also tend to be more loyal. We are not missing much by not going to the top schools.” (Delong and Vijayarghavan, 2006, pg. 4). SG Cowen’s junior bankers conduct the first round of interviews to ensure that practical, job‐related skills are addressed. Senior bankers focus on fit and personality, as it is largely a function of management to assess these intangible qualities. The interview process moves logically from hard skills to soft skills as candidates advance. Because senior bankers have different philosophies in what they perceive to be a successful future hire, Rae had all interviewers fill out a standardized worksheet and support their vote with comments about each interviewee. This provides a safeguard against the interviewers using too much subjectivity. “While some bankers are specially tough,” Rate states, “others are specially easy and want to be generous with their assessments of all candidates. This is where you see the beauty of writing comments.” At the end of the first day of interviews, two or three of the interviewers get together to discuss their evaluations of the candidates while they are still fresh in their minds. To increase objectivity, personality or skill tests could be added to SG Cowen’s hiring criteria. These could possibly increase content validity and predictive validity. Just like choosing candidates from second tier schools has been successful for the firm, scientific data can be used to convince senior bankers that personality and or skill tests are both accurate and beneficial.

3. Which two candidates would you select if you were a member of the recruiting committee?
I would select Natalya Godlewska and Martin Street as my top picks. Natalya is a strong candidate all‐around. The only negative comment from the interviewers is that her language skills and accent may be perceived negatively by clients. This, in today’s world, is less and less of a concern as doing business globally has become a way of life. Natalya has proven that she is more than capable of doing the work required, and has the personality and assertiveness to relate well with clients. She has also been described as having a “can‐do attitude,” and this suggests that Natalya possesses the right combination of traits that will lead to success. Performance is a factor of ability times motivation (Lee, Junghyun, Ph.D., Class Lecture). Martin is also a strong candidate. While his lack of business experience is noted, it is more than compensated for by his leadership experience in the military. He was also president of two student organizations and possesses a “dynamic personality” that will be a huge asset for our firm. I believe that Martin’s experience shows that he is a quick learner, which Cornell team captain Gregg Schoenberg cites as a characteristic that predicts success. “Wall Street doesn’t have the patience to allow someone to develop slowly,” he said. (Delong and Vijayarghavan, 2006, pg. 4). Martin displays confidence and his speech is articulate. Both of these attributes would position Martin well to succeed in the firm’s customer‐service driven business model. I wouldn’t select Ken Goldstein due to the demanding schedule that the job requires. It wouldn’t be fair to Ken to put him into the position to work such long hours with two small children at home, and in the end, both parties may end up frustrated. I also wouldn’t select Andy Sanchez because, although he has demonstrated excellent business skills as an entrepreneur, he represents something of a flight risk. Wall Street offers its challenges for the ambitious, but with a business already netting $400,000 in profits each year, Andy’s attention may be divided or easily steered elsewhere. His business school grades, which were a concern for some recruiters, indicated that his attention had been divided while in school. Andy was honest about that, to his credit. Given the demands of the business and the influence that it may still have on him, would recommend bypassing Andy in favor of a more traditional, banker candidate.

References
Delong, Thomas & Vijayaraghavan, Vineeta (2006). SG Cowen: New Recruits. Harvard Business School, 9‐402‐028.
Gomez‐Mejia, Luis R., Balikin, David B., & Cardy, Robert L. (2012) Managing Human Resources (7th ed.). Upper Saddle River, New Jersey: Pearson Education Inc.