INVESTMENT BANKING | Contributed Content, Singapore
Paul Aldrich

How banks can mitigate against deal failures in new senior IB hires


Despite a lack of confidence in US and European markets and economic activity, Asia remains a relatively positive environment for investment banks and the talent pool continues to remain tight. Hiring senior bankers to capture this growth remains challenging with execution risk being a significant factor. Far too many processes fall over in the closing days, right at the decisive moment. Some of the seeds of a failed senior recruitment are sown early; others come out of the blue. Unfortunately, many hiring managers still do not pay enough attention to mitigating against ‘deal failures’.

Here are the top five ways to mitigate against deal failures in senior IB hires.

1. Ensure a clear understanding of candidate motivations

It seems almost obvious to point out that the identification and analysis of the lead candidate’s motivation to move is critical to a successful recruitment, yet it is frequently overlooked and interest itself is taken as a sufficient indicator of motivation.

Surface motivations may be very obvious and are as varied as they are numerous – excitement at the potential of the role; a desire to join a superior franchise or platform; dissatisfaction with their current position due to a change in leadership, reporting, resourcing, strategy or compensation issues; feeling complimented by getting the call, to be entertained, to find out competitor information – yes, candidates do this too! - or just boredom and the need for a fresh challenge.

It is often the more subtle motivational factors that can be harder to tease out: A desire to leave that is born out fear of declining relevance, or success, or a need to move location for personal reasons. It takes the superior skills to get under the skin of the individual and to identify candidates who have compelling reasons to move and who satisfy the bank’s unique hiring proposition.

The motivations should be thoroughly explored ad documented by the search firm and then specifically tested by all on the interview panel.

2. Appropriately manage compensation expectations

The compensation mix between basic salary, bonuses, long term incentives and compensation models can be radically different or geared to different time horizons, but at some level, there must be parity or upside. Some hiring managers hope to bridge any gap through force of argument, but success is rare.

It is useful to understand the compensation priorities of the candidates and their stage in life or personal circumstances.

Presenting an offer without a convincing understanding of the qualitative and quantitative components of the candidate’s best alternative to a negotiated agreement (BATNA) is a clear mistake, and remains too common a reason for late stage collapse of senior hiring processes.

If one bank is in the market paying above market packages candidates often think this is their market value it isn’t unless that particular bank is offering them a role. Also candidates will try and trade on their last significant bonus year even if it is not the previous year. In these instances the search firm must be helping their client manage expectations.

3. Adequately and realistically consider competing bids

Demand for senior investment bankers who can monetise relationships is very high, and understanding and discussing the complete panoply of options in front of the candidate and their opinions of them is vital. Try to be objective for them rather than just market your own opportunity.

Ongoing dialogue with the candidate does not end with their resignation from their current employer. Especially in Asia, other institutions may be happy to attempt to attract candidates away with other opportunities through the gardening leave period. All bankers have their price, either financially or through the changed position, that would convince them to stay.

It is also critical to understand, ahead of resignation, the capability of the candidate’s organisation to address his or her professional concerns, and to engage on these issues head on with the candidate. If the candidate’s mindset is not firmly out the door already when they go into resign, the risk of successful counter-offer is always high.

For the hiring manager it is very important that they have a line of communication to the candidate while they go through the process, to encourage, react and offer supporting argument where required. As resigning candidates can be bombarded by calls from colleagues looking for explanations and frequently switch off their phones, it can be helpful to supply them with a separate mobile. With the candidate tasked with returning calls to this phone at the earliest opportunity, it can prevent those long silences where the hiring manager is left in the dark about the progress of the resignation process.

This is the time to welcome candidates and show them the ‘love’. They have just told their colleagues that they would prefer to work somewhere else and their current management will be making them feel guilty. The pull of their new team at a personal level is therefore important here.

4. Ensure momentum is maintained

Banks need to insure against losing momentum by drawing up a checklist of internal requirements early in the process and addressing the easier components as soon as possible, even before completion of the interview stage. Maintain an awareness of the schedules of stakeholders with key signoffs, and brief them on upcoming approvals so that they can reflect and act more quickly when their signature is actually required.

The capacity to react quickly can also be important particularly in counter or competitive bid situations. Key internal stakeholders should be informed ahead of time if they need to be on standby, whether it is to mark up an offer to persuade or to motivate, or just to offer advice on a last minute query.

Banks are run using complex matrix management with natural tensions often occurring between the global headquarters and Asia regional management, within regions, between business divisions and within business divisions. It is crucial to get a consensus on what a successful candidate will look like and who needs to approve their hire.

5. Find internal consensus

Not all internal interview processes are simple and there may be inescapable diversity of opinion or internal complexity. The key here is to make sure that the candidate is clearly briefed on what to expect. Lack of broad consensus from all relevant stakeholders can lead to inconsistency of messaging to candidates, confusion and credibility issues. Shared agreement on what is being sought is the bedrock on which all successful searches are completed.

Candidates process the information they receive during interviews as they occur and by the end come to a quick conclusion. Rightly or wrongly they expect potential employers to give them feedback equally quickly. Delays in feedback, or other delays in the recruitment process that are perceived to be within the control of the potential employer may send the wrong message and put candidates off pursuing opportunities.

Hiring transformational talent in Asia is not going to get any easier, indeed the challenges are only likely to increase exponentially. Having an integrated business and human resource strategy is still a challenge for some organizations, but even where this is in place there should be a significant focus on hiring plan execution and risk mitigation.

Paying appropriate attention to the above areas is critical and will help to mitigate execution risk. However, hiring managers should also be aware of the following: counter offers; changes in candidates’ personal circumstances; missing details in documentation; inadequate referencing; and leaks.


The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.

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Paul Aldrich

Paul Aldrich

Dr. Paul Aldrich is Managing Partner at CTPartners, a premier executive search firm, in Hong Kong. He has a Doctorate in Business from Durham University.

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