Most would say Is leading financial firm a challenge? It is one of the coolest jobs where all profits are yours and losses are of the society. Do we need leaders for this?
Jokes apart, some people are taking this seriously. Harvard Business School Professors Paul M. Healy and Boris Groysberg have created an exec program for leadership in fin firms post the 2008 crisis:
A worldwide economic crisis. Intense scrutiny from board members, customers, and government regulators. Expanding global markets. Public protests aimed squarely at your industry.
Running a financial institution, never easy to begin with, has quickly become one of the most difficult leadership challenges that an executive can undertake, requiring mastery of talent management, change management, and ethics.
“The business today is much more complex than ten or twenty years ago,” said Harvard Business School Professor Paul M. Healy in a recent interview. “The firms in the business have much more complexity in the types of the risks they are managing, in the types of diversity of the businesses they are in, in terms of how global they are.”
Realizing that the headaches and rewards of these leaders are somewhat singular to their field, Healy and colleague Boris Groysberg have created an HBS Executive Education program called Leadership in Financial Organizations. Combining a mix of case studies, lectures, and interactive exercises, the program is designed for high-level managers or executives at banks, insurance companies, asset management or private equity firms, or hedge funds.
They say leading fin firms is different:
“Leading a financial institution is very different from leading any other kind of institution,” says Groysberg. “If you become a leader in a manufacturing company, for example, all you’re basically going to have to do is manage. When you become a leader in a major financial institution, you must do several major things and do them really well. If you’re a trader, for example, you have to trade, you have to lead, and you have to manage. You have three jobs.”
One way leadership of a financial firm differs from others is in the emphasis that must be placed in recruiting and retaining talent.
“It always fascinates me how an investment banker who has spent months and months and months analyzing a particular deal between two companies can spend only a few minutes making a hiring decision for his team, when the firm is sometimes paying millions of dollars in guaranteed compensation,” Groysberg says
This compensation bit is a surprise for even those in finance.
What issues do they cover in their program?
Other issues of importance to the leader of modern-day financial organizations to be discussed in the program include:
Growth strategy. One key question financial leaders must decide is whether it is better to grow the organization organically or via mergers and acquisitions. “I think people would be surprised by the batting averages of most institutions,” Groysberg says. “So, so many acquisitions are not successful.”
Risk management. Even a cursory reading of recent headlines shows how vulnerable financial firms can be in this interrelated world, making risk management strategies crucial to success. “We’ll spend time talking about leading through crises and about what we have learned from recent events,” Groysberg says. “We’ll look at how we can deal with it if we have to go through another crisis. Considering what’s happening in Europe, it’s a good time to start doing that.”
Globalization. Financial leaders must realize the increasing importance of doing business not only in New York, London, and Tokyo, but in the emerging markets of India, China, and Brazil as well. “I think many companies are realizing that their track record of going outside their home country isn’t great, because, to be completely honest, not that many of them have inclusive cultures. It might make sense for someone who works in London, for instance, to attend our program in Mumbai. It will let them be in a different environment and build different relationships.
Apart from this some humility is the need of the hour. Even after such a huge crisis, execs like JP Morgan chief Jamie Dimon say regulation will hurt banking!!