Sunday, 30 August 2009

Culture clash?

The FSSC report Graduate Skills and Recruitment in The City has the following quotes (p 45) from a graduate recruitment manager at an investment bank
Sales managers prefer graduates who are academic, with some interest in finance but more social skills with extra-curricular activities e.g. being the Head of the rugby/cricket club. They’re less fussy on the degree subject, but quite fussy in terms of the university they have attended – Oxford, Cambridge, LSE, Imperial.

The [derivatives] trading/research side is much more focussed on the technical. Many of our senior managers are from French universities, with experience of engineering schools and ├ęcoles polytechniques in France. They look for expertise in engineering, maths, qualitative [quantitative?] finance. They like Oxford, Cambridge, Warwick”.
This quote resonated by an interview with a former Lehman's executive published in the Sunday Times on 23 August, Lehman Brothers failures exposed:
"Instead of reviewing the bank’s risk management systems, the executive directors would have ndless meetings discussing the corporate dress code as Fuld was a stickler for appearances. A angerous lack of awareness about the technical financial products the bank was playing with didn’t elp matters."
Most people employed in finance are involved in sales and marketing activity, and so the soft skills needed for these roles are frequently highlighted by employers to the likes of the FSSC and Universities. However, the core of the banks' business is is highly quantitative, to quote from p 14 of the FSSC report:
“…[banks] need high level maths skills because that’s how the bank makes money – vanilla roducts have very little margin.”
The financial innovation (or more accurately, the re-introduction of derivative products into financial markets) since the 1970s has changed the nature of banking, has the culture of banking kept up?

Perhaps a solution is to separate financial institutions into "traditional banks", undertaking lending and M&A activities relying on sales and marketing skills and "speculative banks" specialising in trading, derivatives and risk management. However, this is not the only model. Many manufacturing firms, particularly pharmaceutical and oil companies, are based on core expertise in science and engineering but where the majority of employees are involved in sales and marketing. So it appears the cultures can co-exist.

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