In the following Q&A interview, Barry Sine, director of research for San Diego-based CapStone Investments, outlines his approach to hiring within a boutique investment bank whose compensation model is eat-what-you-kill. He explains why CapStone prefers recently unemployed candidates to employed ones. The firm, which currently employs approximately 50 professionals, is nearing its goal of having 12 to 15 senior professionals each in sales/trading, research and investment banking.
Describe CapStone's build-out and your role as a hiring manager there.
I joined CapStone in August 2008 and have been implementing the strategic vision of our partners in terms of building sales and research. To date, we have hired approximately 20 professionals. We maintain offices in San Diego, Los Angeles, Milwaukee, Chicago, New York and Miami Beach, where I am based. However, in recruiting we are agnostic as to the physical location of an individual and we have people working from home in places like Boca Raton, Fla., Bay City, Mich., Walnut Creek, Calif., and Staten Island, N.Y. This allows us to pursue the best people regardless of location.
How much weight do you give to whether a candidate is currently employed?
We actually prefer recently unemployed candidates to employed candidates. With employed candidates, you are competing against their current employer and you never know when the candidate is seeking an offer for negotiating leverage with their current employer. Unfortunately, there are plenty of highly qualified unemployed candidates out there, and they are often easier to deal with than employed candidates.
Many hiring managers have the perception an unemployed candidate's skills and/or business relationships will be less sharp than someone currently working. Is that something you've found?
Definitely yes. While we prefer unemployed candidates, there definitely is an expiration date just as there is for a gallon of milk. There is no set timeframe but it is about six months.
Initially, an unemployed individual may enjoy a limited amount of free time to unwind after having worked long hours for many years. This is fine and is probably a healthy way to transition. Then, when they embark on a job search, their initial expectations often are unrealistically high. At this point, we find it pointless to engage these candidates. Finally, after lobbing countless emails and waiting for the phone to ring, they become more realistic in terms of current market conditions for talent.
The trick for candidates is not to wait too long before they reach the realistic stage. Our hiring has been mainly institutional sales and research. For salespeople, we want them to have a ready list of clients who were paying them at their prior position and who will tell us they would likely transfer this relationship to CapStone. At some point, perhaps after six months or so, these relationships atrophy, especially since the buy side has relatively high turnover.
For analysts, we want them to be current enough on their coverage universe to be able to resume publishing relatively quickly and have a list of institutional clients who still remember them. Again, if they go much beyond six months, they start to become a little bit rusty and begin to lose significant value.
What in particular could make a jobless professional a stronger candidate than one currently working?
Flexibility. Our model at CapStone is entrepreneurial, low overhead and results driven. We tie compensation directly to revenue. For high energy, high production candidates, this model offers superior earning potential. For others, we are perhaps not a good fit. Jobless candidates who understand the job market and how the financial services industry is evolving are ideal.
Could you share a success story about a candidate you hired who'd been out of work, and who worked out especially well?
Within research, we recently made an excellent hire of a woman who another boutique firm had displaced in favor of a cast-off from a merging bulge bracket shop. She provided us a long list of institutional clients that she was still in contact with and she launched coverage of seven stocks with full, detailed reports soon after her hire. It worked out well for her since she had young children at home and a fully-equipped home office where she preferred to work. So we gained a strong new analyst, and she is able to seamlessly continue her coverage with a lifestyle that balances the importance of spending as much time with family as possible.
For salespeople, the ideal hire is someone with current buy-side contacts, who has been selling a similar research product. We find that these people can slot into CapStone very nicely, and can re-engage and re-leverage relationships very quickly. Because CapStone is an eat-what-you-kill compensation model our payouts are higher than many larger firms where a salesperson is more representing the firm, than their own capability.
How does the industry's realignment affect your business and the career prospects of job-seekers you meet?
One trend we have seen among large firms in the last year is excessive firing without much business rationale and even with a rationale that is more political than strategic.
I recently spoke to one candidate in a second-tier city who had been covering mid-sized institutional accounts. His firm decided to cut 10 percent of its staff, ignoring the P&L implications. He was laid off and the firm reassigned his accounts to salespeople in a larger city. These salespeople were already fully engaged with their existing larger accounts and so did not have time to take on these new accounts. So no one from the firm called these accounts and they stopped paying. It sounds as if the firm actually reduced its income with this type of layoff, and we hear these stories from candidates all the time.
The good news for us is that when large, centrally managed firms make dumb mistakes like this, we can pick up their talent and the profit they had been generating.
What are the two most important steps a job-seeker should take before interviewing with you?
For analysts we want to see a business plan that details which stocks they will cover and when they will roll out. We also look for coverage with some unique focus or edge. As a research director, I want to be able to get a clear picture of how this person will contribute and how they will generate revenue as soon as possible.