On the trail of the headhunters

  • 07 Nov 2001
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Your long term business partner, your consultant, your career adviser, your friend who puts you in a taxi at midnight. Whatever you call them, headhunters are keen to stress that they provide a multi-faceted service to the financial industry. And right now the pressure is on for recruitment firms to prove their worth. Their practices and services are coming under far closer scrutiny as the slowdown bites and they find themselves just as vulnerable as their client base. Quentin Carruthers visits the recruiters to report on their unique view of the banking world.

Against a backdrop of economic slowdown and job insecurity, boutiques are doing battle with global firms in the world of executive search and recruitment for financial services. At one end of the scale are the likes of TMP Worldwide, which has a $4bn market capitalisation and is included in the Nasdaq 100 and S&P 500. Its internet recruitment site, Monster.com, was the 39th most visited site on the internet during October. Global recruiters like TMP are described by one consultant as being in a magic circle, which includes US firms Korn/Ferry, Heidrick & Struggles, Russell Reynolds, and Spencer Stuart, as well as the Swiss firm Egon Zehnder.

At the other end of the scale are the executive search boutiques, such as Jared James, Mantaray Partners, Napier Scott and Wellington. Mantaray has only eight staff, a mix of ex-market and recruitment specialists including a former lawyer and ex-bankers. Yet Lee Thacker, director of Mantaray Partners, is able to claim that his firm pretty much dominates the securitisation search market.


Be they big or small, the recruiters agree that times are grim and headcount freezes have set in well before winter. "It is difficult to know to what extent headcount freezes have been caused by recession, the time of year, or September 11," says Mark Pettman, banking division manager of Michael Page City. He remains optimistic, however: "For most banks, January 1 is a fresh sheet of paper. Revenue targets and headcounts will have been set and may be reasonably aggressive for next year."

All firms have identified pockets of activity, and Bradley Rood, managing director at Jared James, adds: "A headcount freeze does not equal a recruitment freeze, because there is always replacement and upgrading going on."

Upgrading, though, is politically sensitive for those bulge bracket investment banks that are making large scale reduncancies at the same time. The opportunity is being taken elsewhere, as Rood explains: "The bulge bracket firms have on balance reduced their headcount. But there are other types of institutions building up. For example, Japanese banks and some Canadian firms are expanding their presence in London. Mid and small sized firms are now able to acquire expertise that wasn't available a year ago, at a lower cost, allowing them to expand product ranges."

Shaun Springer, consultant at Napier Scott, agrees that some banks have taken the opportunity to steal a march on the bulge bracket: "While many of the so called bulge bracket firms have had sporadic hiring over the year, the large Europeans have been hiring aggressively and continue to reap the rewards in market share. This seems to be continuing into 2002 judging by the intentions we are hearing from our client base."

Dee Symons, head of investment banking and capital markets executive search at TMP Worldwide, adds: "There has been significant repositioning on the investment banking side and realisation of an appropriate headcount. The activity on the search side of the business has been commensurately lower this year than last. It is either big picture strategic hiring, needed to build new businesses or it is upgrade hiring, stripping out the bottom 10%-15% and hiring better people. There are also event-driven, one-off hires."


"18-24 months ago the talk was of high yield," says Rood, "12 months ago it was credit related, and during the early part of this year it was asset backed securitisation in Europe."

The talk now is about derivatives and debt capital markets origination, as well as the demand for better quality individuals. "More and more institutions are merging their sales forces, integrating product areas and focusing on their clients. The demands on the skill sets of individuals is increasing, so that they need particular knowledge of products such as structured derivatives," says Rood.

The fixed income market has driven recruitment in 2001, but Richard Gander, fixed income specialist at Wellington Consulting, warns: "It is not a boom market. I'm neutral, not bullish." One development suggests that hiring will pick up in the new year is the number of strategic hires made over the last three to six months. "It implies that they will hire people underneath them," says Gander.

Corporate finance and equities divisions may have borne the brunt of the headcount culls, but David Carrier at Wellington Consulting reports that there has been some activity in the equity capital markets: "We have seen switching from the sell side to the buy side," he says. "They would not have considered it before, but they will now so that they can stay within their specialised sector." The buy side mostly comprises asset managers, but not the hedge funds where recruitment has tailed off for the moment. According to Carrier, internal cost structures have reached a fine balance between the high returns promised to investors and the high compensation required to bring in the star players that can make those returns.

Geographically speaking, the hot destinations are Italy and Iberia, as well as Germany, where the situation facing the Landesbanks has thrown up a specific recruitment event. Emerging markets are also showing some promise, as Springer notes: "We expect to see an increase in emerging market activity, which has started to pick up at this year's end. Investors are perceiving certain markets, mainly EMEA, as potentially less risky than their own."

The securitisation market continues to develop in terms of both size and sophistication in Europe, and indeed Italian securitisation has already proved to be a fertile source of recruitment activity. Morgan Stanley and Lehman Brothers are considered the two leading players in securitisation in Italy, and according to Mantaray's Lee Thacker they have the strongest client coverage in the region. "Within Italian securitisation there is a community of about 40, based mostly in London but increasingly in Milan," says Thacker at Mantaray Partners. "The leading performers in Italian securitisation teams will expect compensation of $1.5m plus and execution staff will see levels in the upper quartile of the market at $400,000-$750,000."

Not every area within securitisation promises to maintain such rewards. "There is a shock coming to the securitisation market in 2002," says Thacker. "Vanilla retail mortgage backed securitisation is experiencing tighter pricing and amounts paid will reduce. It is the old 80/20 rule, that only 20 people out of a 100 perform. At the other end of the scale, CDOs and whole business securitisation is growing, with new recruits coming from leveraged finance, principal teams or even including the brightest vanilla product guys."

At Alexander Mann Global Markets (AMGM), the recruitment consultants conduct a monthly market outlook, scoring and plotting their sectors between zero and five. All lines have headed in a general downwards direction since the first quarter, but commodities was given an uptick and a 3.5 rating in October. "The downturn in the financial markets has not deterred our energy clients from their business plans," said Colleen Quilty in her appraisal. "There are, however, greater opportunities to be found on the industry side of the business than on the investment banking side."


"The people we want to hire are the ones who don't want to leave their jobs," says Rood at Jared James. And in bear markets, the chances of prising candidates out of their current jobs is becoming even harder. Bankers are more risk averse and unwilling to give up their political capital to move to a new firm and prove themselves all over again without guarantees, which are often unaffordable in such market conditions.

The question that investment banks are facing is what level of bonuses should they pay their fixed income teams, to make absolutely sure that they hang on to them? Napier Scott's Springer suggests the answer: "Every dog has his day, and the fixed income market is not expecting to suffer for the poor performance of the once more glamorous equity and corporate finance markets," he says. "Needless to say we are likely to have a number of very disgruntled individuals as the bonus round begins in earnest at the end of this month."

The countdown to the Christmas bonus puts a natural stop on recruitment towards the end of the year, as Pettman says: "Bonuses are very important. People don't want to buy out bonuses at this time of year. If you buy in people now you dilute the bonus pool."

But Rood argues a case for buying out bonuses: "There is an opportunity cost of not bringing someone in now if you do not want to buy out their bonus. If the individual doesn't join before March next year, then you will have lost a quarter of their expected annual revenues of say £5m for the sake of not paying out say £200,000."


Money, more money, is at the heart of the matter when it comes to persuading someone to go or stay, and negotiating the compensation packages is a vital part of recruitment skill to close deals. "In the UK there is a tremendous focus on base salary. Everything is triggered off it as ratios. In the US it is the total compensation package, including base, bonus and stock options," says David Atkins at Monks Partnership, part of PriceWaterhouseCoopers. Monks Partnership conducts compensation surveys across 420 different posts within financial services.

Job titles, particularly in the US, serve as a compensation guide. But job titles are not perfect. The biggest problem, according to Atkins, is to get some size measure of the operation: "You may have two people with the same title of fund manager, but one may be running a fund with far greater assets than the other. There is no weighting. It is the same problem when you try to break down fund management into different specialisations, such as engineering equities compared with pharmaceuticals."


An increasingly important issue is why some individuals are unable to reproduce their performances when they move banks, and to what extent performance is down to the bank itself rather than the individual. "Banks like Goldman Sachs and Morgan Stanley have managed to institutionalise their brand, so that even if their people leave the business the client franchise probably stays behind. With second tier banks, the franchises may be built more on the particular executive," says Dee Symons at TMP. To address the issue, TMP offers a tailor-made product that can analyse, among other things, the soft and hard reasons behind why people and teams make money.

Greg Patel, head of capital markets at Norman Broadbent, believes that many recruitment mistakes are made in investment banking, where recruitment has been devolved to untrained line managers. "There is no focus on professionally assessing personal competencies such as leadership, communication, interpersonal skills, innovation and resilience," he says. "People are being hired based simply on their market performance record. Recruitment failure costs the industry a fortune."

Patel suggests that investment banks should learn from other industries that take the HR function more seriously. "Look at the commercial banks or companies like Mars," he says. "They run assessment centres and each job has a defined set of personal competencies as well as professional."

He says that if you ask a colleague why someone left or failed, they never mention the work: "They'll say that the person didn't communicate with staff or management, or couldn't adapt to what was thrown at them, or that they didn't have the personal equipment."

The HR centralisation of the management of recruitment will see investment banks pay the same amount of attention to recruitment as the rest of the industry does, according to Patel: "Banks will move towards fewer, more tightly controlled supplier relationships and improved, professional HR influence."


In investment banking, hiring has been traditionally handled by line managers. This decentralisation was striking. A global bank, with perhaps 40 managing directors in each of London, New York and Asia, might have been working with over 100 recruitment firms. "Investment banks are veering more towards having central, preferred supplier relationships with 10-20 firms," says Greg Patel at Norman Broadbent. "It's an expenditure-control issue as well as one of quality. You are not using your commercial leverage unless you reduce your number of providers. As the companies and clients consolidate, it no longer becomes practicable to have so many suppliers."

Suppliers can only be reduced so far, however, as executive search and selection firms are naturally restricted by their 'hands-off' constraints, preventing them from using their own client base as a source of candidates in rival client search operations.

Rationalisation is beginning to have an effect on the approach of recruitment firms: "As clients get fewer, you need to own the relationships," says Symons. "You're either working for them or not, and when you are you try to provide as broad-based and value-added a service as possible for them. High level consultative business and executive search is just one element of the service."

One example of a value-added service offered by Norman Broadbent is HR consultancy. This involves assessment, training and development programmes at all levels, and is led by Dr Elizabeth Marx, occupational psychologist and author of works such as Breaking Through Culture Shock. Napier Scott's performance ratings (from both a staff and products perspective) scored by buy side clients are another such service, and Springer reports that it is proving ever more popular.

The main problem facing recruiters, aside from the market downturn, is one of credibility, according to Springer: "Last year may have been a record year for our market but it was probably accompanied by being a record year for their client's disapproval of how they conducted their business," he says. "The perennial complaint of recruiters not understanding the markets in which they work has been exacerbated by the increasing complexity of the markets. A headhunter that understands the products and can rationalize the technical ability of a candidate is nearly becoming more valuable to the client than the candidates they seek -- and certainly more rare."

Napier Scott's strategy, continues Springer, is to be long term specialists in a particular set of sectors that allows the firm to manoeuvre within the capital markets as particular markets move into or out of popular focus."

Executive search consultants will typically be former market professionals, and Gavin Bonnet, chief executive of AMGM, describes how vital the mix of market and recruitment expertise is:"On every desk we have a mix of recruitment and market experience," he says. "The search business has evolved and firms that have not recognised that shift have found the markets extremely difficult. The days of shifting bodies around the market have gone. Our aim is to build strong relationships with our clients and this will only be achieved if we can add true value over the long term. Our spread of products and depth of relationship has meant we have weathered the storm better than many and have once again seen an increase in revenue year on year."


Recruitment personnel are moving between recruitment firms, as the headhunters turn in on themselves, and the industry is consolidating too. Whitehead Mann, for example, is at an advanced stage in its proposed acquisition of recruitment firm Baines Gwinner. The transaction is intended to be completed by the end of November. Chris Leslie, co-chairman of financial services at Whitehead Mann, describes the Baines Gwinner business, which has offices in London, New York and Hong Kong, as "very complimentary in style and approach. The attraction is that there is no overlap".

Whitehead Mann has been on the acquisition trail, having bought in February this year the Change Partnership, a coaching and mentoring business. "Demand for coaching has been buoyant and continues to grow strongly," reported chairman Peter Foy, presenting Whitehead Mann's interim results at the beginning of November.

"It is very good news that there is consolidation in the industry," says Patel at Norman Broadbent. "There are too many suppliers. There needs to be a smaller number of companies that make a reasonable return on capital. There will be further consolidation." *

  • 07 Nov 2001

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 317,793.98 1355 8.72%
2 Citi 301,114.13 1092 8.26%
3 Barclays 259,580.63 846 7.12%
4 Bank of America Merrill Lynch 258,842.43 934 7.10%
5 HSBC 224,273.23 905 6.15%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 29,669.98 55 6.95%
2 UniCredit 28,692.62 136 6.73%
3 BNP Paribas 28,431.90 139 6.66%
4 HSBC 22,935.49 112 5.38%
5 ING 18,645.88 118 4.37%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 14,593.71 79 10.38%
2 Goldman Sachs 11,713.19 63 8.33%
3 Morgan Stanley 9,435.23 48 6.71%
4 Bank of America Merrill Lynch 9,019.27 40 6.41%
5 UBS 8,763.73 42 6.23%