Case Preparation Summary* - SG Cowen

Short-Cycle Summary
Who: Chip Rae, director of recruiting at SG Cowen; 30 bankers/interviewers; 4 remaining candidates
What: Chip and the 30 bankers need to determine which two out of the four remaining candidates to
whom they will extend an offer
Why: To achieve the ideal class size after factoring in expected yield
When: Immediately (i.e., before the bankers go home for the evening and preferably before the roads
become much worse due to the falling snow)

Long-Cycle Summary
Issues:
Basic: “How to improve the new hire selection process.” As indicated below, hiring is key to SC
Cowen’s strategy.
Immediate: Selection of two out of four remaining candidates to achieve the ideal class size of 30
Importance & Urgency: Because SG Cowen believes “We are who we recruit”, and also because the
CEO wants the hiring process to be “our most important priority” (“The most important
clients are inside, not outside.”), the basic issue of improving their new hire selection process
is very important. While resolution of the immediate issue is urgent, the basic issue is
relatively less urgent.

Case Data Analysis:

● Causes and Effects:
Cause Effect

General interview protocol and qualitative Difficulty in making perceived “less-obvious” hiring
evaluation criteria (no specific behavioral decisions; hiring process is largely subjective
profiles/questions with which to evaluate
candidates)

Only ~20% (min) - 40% (max) of the

bankers in the room would have interviewed
a given candidate--all others have no choice
but to sit idle during the discussion or
provide subjective input or guesses

High level of bias admittedly inherent in Possible elimination of qualified candidates; possible
hiring process (e.g., Daws) culture of intellectual arrogance; possible hiring of
candidates that do not “fit”

Associates are primary filters for Possible elimination of qualified candidates (see
candidates representing core-schools / assumptions below); perceptions of SG Cowen vary
variability in Associate interview styles from candidate to candidate

● Constraints and Opportunities:

● Consistent way of articulating culture and core competencies/behaviors is limited
● Opportunity to reinvent the selection process given its strategic importance to the firm
● Opportunity to tap a distinctly large pool of qualified applicants due to the economy
● Quantitative and Qualitative Assessment:
● Bankers appeared to agree relatively easily on 26 out of 30 interviewees (~87%)
● 75% acceptance rate among those who receive offers
● ~50% of new associate hires have experience with the company (this is positive)
● Labor is ~50-60% of SG Cowen’s costs
*Our analysis focuses primarily on the basic issue, though the immediate issue is minimally
addressed.
 ●A disproportionate degree of difficulty is encountered when making hiring decisions
for “middle ground” employees
● Missing Information and Relevant Assumptions:
● Variability in Associate interview styles is indicative of a lack of training and process
● Not all bankers consistently use the current tool for evaluating candidates
● SG Cowen does not have specific behavioral profiles for each job or job family
● Target school and team captain strategy (etc.) is effective

Alternative Analysis (focus: basic issue):

● Alternative Generation: (description of different course of action)
1. Force a decision regarding the four remaining candidates as soon as reasonably
possible (immediate issue) and then work to redesign the selection process ahead of the
next recruiting season by developing a behavioral profile and associated interview
protocol and evaluation form.
2. Make a decision regarding the remaining candidates (immediate issue). In preparation
for the next recruiting season, invest no more than a little time to improve the selection
process (e.g., evaluation grid). SG Cowen already fills half of its Associate positions
with those who have had experience with the company (i.e., interns and/or experienced
analysts) and enjoys a 75% offer acceptance rate among those who don’t. “If it ain’t
broke, don’t fix it."
3. Take a step back and develop an ad hoc behavioral profile on the spot and then make
decision regarding the final candidates using the improvised profile (immediate issue).
4. Delay the decision and reconvene the discussion re: the remaining candidates with only
those who interviewed them (consider ad-hoc profile).
● Decision Criteria: (description, weighting, and brief rationale for criteria chosen to evaluate
alternatives listed above) (Focused on Basic Issue)
● Cost: there should be some accounting for what the new selection process will cost the
company to develop, however, as quality recruitment is central to the company’s
performance, this criterion can be weighted very low (5%).
● Time: developing and validating a new selection process can be as big or lengthy of a
job as one chooses to make it. As with cost, this time is weighted relatively low
because of the underlying company objectives at stake. However, in a company trying
to aggressively expand, time spent developing a new procedure of any kind is a
valuable commodity and could be waited slightly higher than cost (5%).
● Strategic fit: to what degree does the proposed alternative contribute to the
accomplishment of SG Cowen’s strategy? The CEO has stated that the company needs
to maintain its business focus while expanding geographically. Many senior bankers
have indicated how each hire fits within the overarching company strategy. The
company itself is the result of a US acquisition by a European firm. All of these factors
contribute to forces that could distract the company from primary business targets, and
adding a new program development could dilute focus even further. For a company
trying to grow while maintaining quality, maintaining the underlying business focus
and employee unity is critical. Decisions that would tend to distract from day-to-day
operations should be ranked lower in this category than decisions that enhance business
performance or at least don’t detract from it (35%).
● New employee turnover: if newly hired employees are leaving the company, then the
original problem of not having a good selection process is not only still unsolved, but
there is also the possibility that a new change has actually made the underlying
recruiting issue even worse. Any decision needs to have the highest possible chance of
solid recruitment (20%).
● Productivity of all employees: this is the heaviest weight for decision criteria. It is
important to remember that the reason for pursuing a valid and effective selection

*Our analysis focuses primarily on the basic issue, though the immediate issue is minimally
addressed.
 process in the first place is to make the company money. Everything any HR or OB
tactic aims for should be to that end. Finding the ideal selection process is not an end
or solution in and of itself. For this reason, all alternatives should be evaluated based
on the estimated long-term effect of that alternative on the permanent productivity of
all employees, including new hires. This is the highest weight (35%).

● Alternative Assessment: (use the table below to weigh the alternative courses of action you
generated relative to your decision criteria) Scale: 1 to 5, 1 (worst), 3 (status quo), 5 (best)

Alternatives Decisi
on
Criteri
a
Cost Tim Strategic New employee Productivity of all Total
(5%) e fit (35%) turnover (20%) employees (35%)
(5%
)
1. 1 1 4 4 5 4.05
2. 3 2 3 3 3 3.3
3. 3 2 4 3 3 3.85
4. 2 1 4 4 4 3.75

Preferred Alternative:

Based on the alternative assessment above, the preferred alternative is to force a decision regarding the
remaining four candidates and redesign the selection process ahead of the next recruiting season.
Although this will cost more time and money to pursue, the redesigned selection process will have the
greatest potential to identify the most qualified candidates. A more systematic, behavioral process
will result in more objective decisions consistent with SG Cowen’s strategy and objectives.

Action and Implementation Plan:

The new hire selection process can be redesigned and implemented using a five phased approach:
Plan, Generate, Construct, and Execute, Evaluate and Refine.

Phase 1: Plan (~1-2 weeks) – Once Rae chooses to redesign the process, he should first create a plan
for conducting the redesign project and secure buy-in from senior management. This plan would
consist of, first, identifying critical incidents and associated top-performer behavior by conducting
focus groups with cross-profile representation of stakeholders for each job family. Second, key
behaviors should be clustered into 3-6 core competencies. Third, the draft behavioral profile should
be vetted by senior management. Fourth, the final behavioral profile should be used to create an
interview protocol and evaluation metrics.

Phase 2: Generate (~8-10 weeks) – The key activity in this phase is conducting the focus groups.
Rae should create an appropriate pool of individuals who demonstrate or recognize top performance
for a given job family. Rae should be the facilitator. The output of this phase is an approved
behavioral profile.

Phase 3: Construct (~2-3 weeks) – During the Construct phase, the final behavioral profile will be
used to create an interview protocol and quantitative evaluation metrics. The interview protocol
should include high-yield, behavior-based questions, key words, and probing questions. Rae should

*Our analysis focuses primarily on the basic issue, though the immediate issue is minimally
addressed.
also create training materials for interviewers and incorporate core competencies into campus
presentations.

Phase 4: Execute (Begins next recruiting season) – Do it and use it!

Phase 5: Evaluate and Refine (Ongoing) – Both Rae (HR) and senior management should evaluate
the effectiveness of the new selection process by tracking and reviewing employee metrics such as
retention rates, employee morale, new hire performance ratings, etc. SG Cowen should leverage key
learnings to refine the process going forward.

*Our analysis focuses primarily on the basic issue, though the immediate issue is minimally
addressed.