evolution or revolution? transforming recruitment and...

Evolution or rEvolution?Transforming recruiTmenT and developmenT of senior execuTives, ThroughouT The world’s leading financial firms

www.barringtonhibbert.comStrictly Private and confidential

2

Michael Barrington-Hibbert is a founding partner of Barrington

Hibbert Associates. He runs our Global Infrastructure Practice and is

responsible for the appointments of COOs, CAOs, CFOs and Global

Product Heads across Investment Banking, Asset Management and

Hedge Funds. He and his team also provide bespoke research to

support talent acquisition.

Michael graduated from the University of New York in the U.S with

a dual degree in Business and Strategic Leadership before joining

Morgan Stanley in New York. After five years in New York, he moved

to London in 2005 to assume responsibility of heading up markets

for a boutique search firm covering mandates across EMEA and

North America. Michael joined Odgers Berndtson in 2007 to set

up the Corporate Infrastructure Practice, where he successfully led

cross boarder searches in Asia, North America and CEEMEA.

Michael is also a REACH National Role Model representing the

Government-backed REACH programme, an initiative to raise the

aspirations and achievements of young black men.

The success Michael has achieved in business was recognised in the

Power List 2010, sponsored by JP Morgan and Thomson Reuters, a

comprehensive compendium of the most influential black people in

Britain today.

Before moving into executive search Michael was a professional

footballer and began his career with Chelsea F.C

29th Floor

1 Canada Square

Canary Wharf

London E14 5YD

T +44 (0)20 7712 1567

michael@

barringtonhibbert.com

MichaEl BarringTon-hiBBerT

http://barringtonhibbert.com

mailto:michael%40barringtonhibbert.com?subject=

mailto:michael%40barringtonhibbert.com?subject=

3coMpany profilE


4Barrington Hibbert Associates is an

Entrepreneurial, Privately Owned, Executive

Search, Leadership Development and

Diversity Advisory firm.

Barrington Hibbert Associates has grown

exponentially since its inception in 2010. A key

component of our strategy is new investment

and the acquisition of complimentary

businesses, which will provide our clients with

a complete human capital platform.

The success of our business is underpinned by three core disciplines:

Executive Search

We offer our clients advice on their leadership needs, conducting

senior level executive search assignments globally, across the

Financial Services sector. The ability to make insightful decisions

about people is today’s most enduring source of competitive

advantage. Barrington Hibbert Associates’s largest service practice

– Executive Search – concentrates on helping clients achieve this

advantage through the identification, assessment and recruitment

of the world’s most talented business leaders.



5Leadership Development

Barrington Hibbert Associates Talent Management is an effective

way for organisations to invest into their up and coming talent, with

a personalised professional development plan which cannot be

addressed by group training or even executive leadership programs.

Diversity Advisory

This area of our business is dedicated to identifying and placing

the best senior leaders from under-represented minority groups

for some of the world’s leading Investment Banks and Professional

Services firms. We also provide diversity training and consultancy

for our clients.

The diversity of our people is fundamental to Barrington Hibbert

Associates’s success. The broad range of experiences, skills and

views of our people are key strengths and critical to the wide range

of services we deliver to clients and understanding the communities

in which we operate.

For more information please visit our website.

www.barringtonhibbert.com

SPecialitieS

Executive Search, Diversity, Talent Management and

Interim Management.

Entrepreneurship is part of the DNA of Barrington Hibbert

Associates; as a result we support various awards that demonstrate

entrepreneurship. We are delighted to sponsor the ‘Entrepreneur

Country Personality of the Year Awards’ in conjunction with

Ariadne Capital.


6introduction


7The role of the Chief Operating Officer (COO) in Investment Banking

has changed dramatically in the last three years.

Historically, COOs in financial institutions were product aligned and

came from operations or finance backgrounds; maintaining balance

sheets, headcount and allocating bonus pools were previously the

order of the day.

Perceived wisdom has since changed. The financial crisis has created

a new model of infrastructure and an increased demand for a new

brand of COOs. Major investment banks now have stand alone COO

roles, which are expected to lead product development, and shape

the strategy of the respective business line.

This paper, was derived from interviewing some of the leading

COOs across the industry based across EMEA, North America and

Asia, in conjuncture of Barrington Hibbert Associates’s experience

of recruiting high level COOs, examines the evolving nature of the

role in the light of the financial crisis, considering in particular, what

qualities and skills investment banking COOs will have to posses if

they are to add real value.

It concludes that in times of market volatility, simply aligning oneself

with the head of product is no longer sufficient. The new investment

banking COO must build relationships not only with other product

COOs, but also with external stakeholders. They must be client

facing and be able to represent the banks complete platform.

A sound understanding of cross-functional business process is now

required, as is the ability to be collegiate and politically neutral;

the days where a COO was simply an executioner for the head of

product have long since passed.


8thE historical contExt


9The role of the COO is grounded in wider debates about the nature

and purpose of the COO role itself. As Bennett & Miles point out,

there are few constants when it comes to role and responsibility:

“the role is structurally, strategically, socially and politically unique

– and extraordinarily situational” 1

Naturally, the job responsibilities and essential skill sets of COOs

vary widely with the specific company and industry sector.

Regardless of these intricate differences, the COO office is a crucial

function in any complex global organisation.

Historically, the COOs role was to make the CEO successful, whether

as an executor, a change agent, a mentor, a partner or even as

an heir apparent. They ensure that the CEO does not have to get

involved in the minutiae of running the internal company operations

and allow the CEO to concentrate on the strategic vision, external

relations and overall corporate governance of the company.

Where the COO office function is shared out amongst a group of

COOs, as is the case in investment banks, there runs the risk that

this relationship between COO and head of product will become too

closely bound. As one interviewee from a leading Swiss investment

bank indicated:

“this results in no coordinated action across and within divisions, and

a lack of free flowing strategic and operational communication”

In some investment banks, this manifested itself in the period before

and up to the financial crisis in 2008. The individualisation of the

COO-head of product partnership, where little emphasis was placed

on long term strategic planning was widely cited as one of the

contributory factors to the accumulation of risk in investment banks.

Conversely, investment banks who had strong COO functions, with

a greater emphasis on strategy and who promoted individuals with

a wider appreciation of the business for example, former revenue

generators, responded well to the financial crisis as they were able

to rely on previously articulated crisis management procedures

across the bank.

1. Bennett, N & Miles, S. “Second

in Command: the Misunderstood

Role of the Chief Operational

Officer”. Harvard Business Review.

May (2006).



10With the historical understanding of the role of the COO in mind,

it is easy to see how COOs have traditionally aligned themselves

solely to the product head; their focus consumed by making their

product division successful. The obvious downside to such a

narrow definition of the role is that in the event of a business line

underperforming, not only would a CEO be replaced, but it was

likely that the COO too would also suffer the same fate. With such

inherent risks in taking on the role, it remained difficult for banks to

attract talent to the COO position.

The paradigm shift currently underway is not only a response to

market conditions in the light of the financial crisis, but a strategic

attempt to attract new talent to the role beyond those with an

operations background; individuals who are interested in the

opportunity to influence rather than control and who can add real

strategic insight and value.

The financial crisis & the changing role

of the COO

In the years leading up to the financial crisis, the COO role was

perceived as being more aligned to the head of product:

“candidates would be taken from operations and finance ... these

COOs were more focused on post trade activities they didn’t posses

the commercial acumen for a business facing role”

– COO, Global Equities, US Investment Bank

The financial crisis has been the game changer for how the COO role

is considered, perceived and performed:

“The issue of the role of a COO is still misinterpreted from a business

head perspective. The role is moving away from reporting, to a more

defined role ... moving away from finance related COOs, to more of

a commercial facing COO who understands how to grow profit and

not just report it”

– Global COO, Sales and Trading, European Investment Bank

A natural consequence of the evolution of the role is that COOs

from operational or administrative backgrounds have started to be

phased out:

“the new COOs are now business managers, and because they have

the product knowledge they are trusted by the business. The role

has evolved into focusing on product development and strategy.”

– Global COO, Electronic Execution, U.S Investment Bank



11The paradigm has shifted. COOs are now expected to not only

provide strategic business advice, but to understand the mechanics

of the product departments they operate in. They must also take

an active role in engaging with management of economic capital,

market share, the profitability of client portfolios and acting as the

banks representative at industry forums and networking events.

What makes a good COO?

The new COO is clearly someone focused on partnering the CEO

through developing a joint strategic vision, and then being the

person that actually implements that vision in practice. Barrington

Hibbert Associates interviews revealed four distinct qualities that

future COOs within financial institutions will be expected to possess:

1. A Wide Appreciation Of Business

COOs are no longer able to survive if they have limited exposure

to other business and product areas. They require developed skill

sets and an understanding of different business processes and

operations:

“a successful COO doesn’t have to be a product expert, but needs to

understand the business to implement. A COO needs to understand

the risk that the business is trading, and to be in a position to

mitigate the risks that business is exposed to. External perception

of market structures, what regulations are taking place that will

affect the business short and long term, i.e. how to adapt business in

challenging economic / regulatory environment to fit that paradigm”.

– Regional CEO, European Investment Bank

However, investment banks that recruit external candidates from

business must ensure that they develop the business as a whole

and do not simply focus on the product or area they have in depth

knowledge of.



122. Client Facing

One of the key shortcomings of recruiting COOs from operations or

administrative backgrounds was that they lacked the commercial

awareness and gravitas to engage with clients:

“COOs are now being asked to meet institution clients; more in

a client relationship management capacity. Again, it’s imperative

that the incumbent has credibility to represent the business in this

capacity”

– Global COO, Credit Trading, European Investment Bank

Moreover, to avoid a situation whereby a COOs role is questioned

when a head of product is underperforming, COOs will need to

develop relationships across product departments:

“a strong reputation will mitigate this if you have both upward and

downward trust and respect”

– Head of Listed Derivatives, European Investment Bank

The independence of the COO is also a desirable feature when

engaging with clients:

“the business needs someone impartial to meet their clients, rather

than just the sales team, to get a clearer picture from the client if

they are happy or not”

– North America COO, leading Investment Bank

The new breed of COOs must be able to represent the company

as a whole to external stakeholders. They will need to have a wide

appreciation of the business and able to speak with confidence on a

number of different industry processes.

3. Developing Internal Relationships

COOs in investment banks benefit from personal flexibility and

subtle communication skills. After all, they must integrate and

function well with the various elements that form the corporate

environment: boards of directors, product heads, regional heads,

external stakeholders and the CEO.

If a Head of Product has global accounts covering different

platforms then a COO can bring them together. The big driver is

managing and delivering projects, developing relationships with

finance, risk, technology and understanding the components that

work within the business.



13“it is important that COOs work together with other product COOs

and be perceived as a team player. COOs can be seen as the civil

service i.e. regardless of what party is in government they still have

to get the job done”

– COO Credit Trading, European Investment Bank

To be successful, the ability to work with internal departments

is critical. A COO needs good relationships not only with their

producers, but across the bank.

4. Politically Neutral

If the COO is to command the respect and trust of his / her

peers, they must be direct and transparent in their words and

actions. Equally however, the COO must not shirk away from

making unpopular decisions for fear of offence. To be perceived

as a collegial figure, and not simply the right hand of the product

head, they must remain politically neutral and make independent

decisions:

“the success of a COO really depends on their ability to be political

neutral, not seen as the CEO’s executioner. They need to distance

themselves from one particular sponsor, and be perceived as being

their own person; and one who will push back on the product head

if they disagree with their strategy if it’s not in line with the overall

group direction. If entering a new role or organisation, it’s imperative

that the tone is set from day one”

– COO, leading Investment Bank

In some respects the COO can be perceived as the ombudsman;

they have to be perceived as being fair. If this approach isn’t applied

it may work against them if the CEO departs. The COOs role is to

broker requirements between groups, for instance, with regard to

bonus structure for performance and penetration of client portfolio.

It may be impossible for the COO to please everyone, but more

often than not, tension and dissatisfaction among staff will be

reduced if the reasoning behind the COOs decision making is

communicated in a clear and transparent fashion.


14a MarkEt drivEn futurE


15The unpredictable nature of the financial markets will likely result

in the COO role evolving further and the future responsibilities of

COOs in investment banks will be market driven. In the light of this,

many of our interviewees identified critical issues investment banks

must continue to monitor and address with regard to the COO role.

Continual professional management training

One way of ensuring that the new breed of COOs makes the

transition smoothly into the role is to provide continual professional

manager support. As one former COO of a leading investment bank

acknowledges:

“a stumbling block for COOs who came through the business was

that they lacked management training. They may have known the

products inside out, but were unable to manage people and make

things happen”

Investment banks should follow the lead of other companies who

are investing heavily in developing the management skills of senior

employees through management training programs:

“all professional managers need professional management training.

COOs need to continually work on their personal skills”

– Former COO, leading Investment Bank

Specifically mapped career progression

Given the historical tendency to promote internal, operations

orientated candidates, the COO role has traditionally struggled to

attract premium talent. In order to attract more diverse candidates,

it is important that the career progression of COOs is mapped out

specifically:

“the agenda needs to be driven by the executive committee,

identifying where COOs are coming from; benchmark skill sets and

review talent management”

– CEO, European Investment Bank

The critical thing is the mandate for a COO it is mapped out in a

governance documentation; i.e. have a matrix reporting structure

with a global head of product, and have a separate line into CFO /

CIO. The mandate needs to be articulated to internal stakeholders to

ensure COO functions are effective.

The reputational risk committee should be chaired by COOs.

Operating committee will review region / new business process and

cover any issues in the division.


“thE nEw coo rolE rEquirEs strong lEadErship, clEar coMMunications skills and thE ability to EMpowEr thE businEss.”


17As the COO role continues to evolve, it will become more attractive

to a greater catchment of talent. The role has considerable benefits;

not only is it an opportunity to develop relationships and apply

expert knowledge, but is an opportunity to build a business sector

and can act as a transition seat for experienced professionals who

want to sample experience of a management role in an investment

bank before deciding whether a more senior role is right for them.

Conclusion

The role of the COO has evolved significantly in the last three years.

The new breed of COOs taking up positions in investment banks

are more strategic and forward thinking than their predecessors.

The new COO role requires strong leadership, clear communications

skills and the ability to empower the business.

Product heads need someone to implement their strategy. A COO

who lacks a sound understanding of the business can result in a

sub optimal division of duties and an ineffective execution of the

strategic plan. Equally, investment banks need to have the foresight

to hire the right COO. They need not be at the height of their career;

an experienced old head can bring fresh perspective.

Recent events in financial markets indicate that power is now

shifting from the financial institutions back to the clients. Going

forward, COOs will need to think outside the box and be able to

identify not only future revenue streams, but also future drivers

of change.

As the debates over economic recovery and banking reform

gather pace, COOs will be expected to engage with key

governmental legislation and regulatory reform; they will need to

liaise with the FSA, attend industry forums and be seen as part of

the business. Offering solutions, building credibility and adding

value are the sine qua nons.


titlE 18

29th Floor, 1 Canada Square

Canary Wharf

London E14 5YD

T +44 (0) 207 129 8018

www.barringtonhibbert.com

evolution or revolution? transforming recruitment and...

Documents