A student told me the other day that getting a job depended more on who you know than what you know. While I would agree that it helps to have contacts or friends in the business, I don’t agree with the emphasis on “who” rather than “what”.
The finance industry is pretty meritocratic these days. It was not always so. The merchant banks and stockbroking firms of the old City of London, what my friend Philip Augar described as “gentlemanly capitalism” was a very chummy world of public school boys who often knew each other. The best you can say for that system is that people depended on personal knowledge to verify other people’s “good character” ie there was a lack of information. This is still often the case in business round the world. The worst you can say for that system is that it was corrupt, nepotistic, amateurish and incompetent. It has been swept away by deregulation, which allowed the US banks and a few Europeans to wipe out those old fashioned firms. As you can tell, I’m not nostalgic for that world.
Today the big banks hire from the best universities. Possibly they have moved too far in the direction of “credentialism” (excessive reliance on certificates, diplomas and degrees awarded by other institutions) but it’s a rational way of dealing with the fact that far more people want to work in these firms than there are places. The banks assume, as other employers do, that a good university degree tells them something useful about a person, at least in respect of their intellectual achievement. This requires those universities to be highly selective in who they admit, otherwise their degrees would lack credibility. A former boss of mine from many years ago described himself as a “self-confessed academic snob” because he only hired people with really excellent academic qualifications from top schools (he was American by the way). He did build a very successful research department so he may have had a point.
So a good qualification is a helpful start in getting to an interview. But it isn’t enough. Many jobs require more than just intellectual ability, though that is very important in finance. For many roles you need so-called “soft skills”, a term I dislike because it implies that they are in some way less important than the “hard” skills of academic achievement. But the most successful people in life usually have both and in particular are often very good sales people – at least when selling themselves.
Soft skills are hard to signal without meeting somebody. You can show evidence of team work from sports or other collaborative activities. But it’s hard to show what sort of personality you have without a face to face meeting. So there is still a subjective side to hiring people. And there is no doubt that many people hire people like themselves. I have a former colleague who was in the army and he naturally warms to people with military, especially army, experience. But he wouldn’t hire somebody just because of the regiment they were in. It might help in getting an appointment with him though. (For what it’s worth I’ve been very impressed with the ex-military people I’ve met in the finance world, especially in management and in sales.)
For the so-called milk round hires, when banks hire analysts en masse, the process is deliberately as impersonal and rule-bound as possible, to ensure efficiency and fairness. The process is run by HR, who know that individual bankers cannot always be relied upon to be objective or to put the time needed into preparing for interviewing. When going for lateral hire jobs, the decision is usually closer to somebody in the business and that can mean a more informal process. In a boom, when hiring is done in a desperate hurry, a CV that drops onto the desk may be enough to land a job. In a slow market, like now, people are much more careful and the value of contacts lies not in getting a fast track to the job but in gathering market intelligence about who is hiring, what they’re looking for and how best to prepare. These are important aspects of getting a job, even if you have a great CV and excellent brand name university credentials.
Unfortunately good academic credentials are not sufficient. I have interviewed people with very good degrees from famous universities who were inarticulate or unimaginative and occasionally seemed not to be all that smart. So we have to allow for some imperfection in the credentialisation process. That’s why, if somebody comes across a really good candidate, they might pass them on to a colleague for consideration. But they will do it because they’re genuinely impressed, not just because they went to the same school. If you want to protect your own reputation with colleagues or clients you need to be very selective with your personal recommendations. Incidentally this is one reason I’m doubtful of the value of recommendations on LinkedIn but more of that on another occasion.