FEATURE
PAPER
Understanding
the Skills Needed for Careers in Private Equity Investing: Implications for Curriculum Development
The
following paper was presented at the 2006 USASBE/SBI Conference.
It was written by William A Andrews of Stetson University.
Abstract
Using the same framework
for evaluating an investment in a publicly-traded company
versus a privately held company can be a recipe for disaster.
While there is some overlap in the
evaluation process, there are significant additional considerations for investing
in a privatelyheld company that require a broader set of
skills. The article identifies 5 skill-sets that are critical
to successful private-equity investing that are not generally taught as part
of the
finance/investment curriculum in universities. Curricular implications for universities
and
corporate training programs are discussed.
Executive Summary
The skills involved in being a successful private equity investor are much broader than those
required to be a successful public equity investor. A general partner of a large Atlanta venture
capital (VC) firm, summed it up this way, “There is a saying in the industry that it costs $40
million to educate a venture capitalist”, referring to the high cost of learn-by-doing in this
industry. Clearly, in his mind there is a significant gap between those sufficiently schooled in
investing to begin a career in private equity and those who are good at it.
Read
the Entire Paper...
TIP
OF THE WEEK
Selecting High-Performing Employees
"It's hard to get somewhere unless you know where you want to go." In other words, it's hard to reach a goal unless you have defined it clearly. That's certainly true with respect to hiring high-quality employees. Before beginning a search for such individuals, it is crucial to first determine just what it is that a new venture is seeking. In other words, what tasks and activities, specifically, will new employees perform? In the field of human resource management, answering this question implies two tasks: a job analysis - determining just what the job you are trying to fill involves and what activities it actually requires an employee to perform - and competency profiling, or defining what experience, skills, and knowledge are needed to perform it well. In large companies, job analyses can be detailed and lead to highly specific job descriptions, but for entrepreneurs, especially in the hectic early days of anew venture when founders have to do virtually everything themselves, it is usually sufficient for them to simply have a clear idea of what the individuals they are seeking will actually do, and a brief written description of the major duties and tasks they will perform.
Why are these initial steps so important? Because they provide a basis for choosing among potential employees - for selecting the ones most likely to succeed in a specific job. The best choice, all other factors being equal, is the person whose knowledge, skills, and abilities provide the closest match to the requirements of the job. If the founders of a new venture (or those to whom they have delegated the task) have not conducted a careful job analysis and formulated a clear description of a particular position, entrepreneurs often go ahead anyway - new employees are needed and simply must be hired. However, it will be more likely to meet the essential job requirements. Instead, for instance, entrepreneurs may be tempted to choose the people they find most congenial or attractive, or applicants who somehow "stand out from the crowd" rather than those who are most qualified. For this reason, it is best to formulate a clear idea of the specific requirements of any job before beginning the search-and-selection process.
Basic Techniques for Choosing the Best People
Once the task of specifying precisely what's needed has been completed - once entrepreneurs have a fairly clear idea of the skills and abilities they are seeking in new employees - the search for these employees can being. Our experience tells us that in many cases, new ventures do a reasonably good job of assembling a pool of potential employees: the founding team's social networks, current customers, and other sources yield a number of people who could potentially be hired. Choosing among them, however, is another story. Making this choice is a difficult task under the best of conditions, even in large organizations that have human resource departments with experts specifically trained to perform this task. New ventures, of course, lack such departments. Further, serious mistakes - hiring an incompetent or unethical person - can be costly for new ventures, more costly than for larger companies that have greater financial resources. How can entrepreneurs accomplish this task effectively? The answer involves two possible approaches: (1) Entrepreneurs can try to accomplish this job themselves through several techniques that have been found to be useful in choosing the best employees, or (2) they can delegate this function to a company that specializes in it - they can outsource hiring of new employees. Which is the better route depends on the experience and skills of the entrepreneurs, as well as the financial resources of the new venture. Outsourcing various functions can be an efficient way to proceed, but it can prove quite expensive, which is a major problem for a new venture with limited financial resources.
| Robert
A Baron and Scott A. Shane.
Entrepreneurship: A Process Perspective 2nd Edition.
2008. Thomson South-Western. p376-377. |
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CONFERENCES
IIT
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| Who: |
Illinois
Institute of Technology
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| What: |
IIT
Interprofessional Education
Conference
|
| Where: |
Chicago,
Illinois, USA |
| When: |
April
26-27, 2007 |
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IIEE
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| Who: |
Illinois
Institute for Entrepreneurial Education
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| What: |
2007
Youth Entrepreneurship Conference
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| Where: |
Lincolnshire,
Illinois, USA |
| When: |
May
3-5, 2007 |
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USDC
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U.S.
Department of Commerce
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Inaugural
Americas Competitiveness Forum
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Atlanta,
Georgia, USA |
| When: |
June
11-12, 2007 |
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FU
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Fordham
University
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| What: |
The
Fordham University Pricing Conference
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Fordham
University, New York, New York, USA |
| When: |
September
28-29, 2007 |
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ISBE
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Institute
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| What: |
30th
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Heriot-Watt
University, Glasgow, Scotland |
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November
7-9, 2007 |
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CALLS FOR PAPERS
ASBBS
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| Who: |
American
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and Behavioral Sciences |
| What: |
10th
International Conference of the American Society
of Business
and Behavioral Sciences
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| Where: |
Waikiki
Beach, Hawaii, USA |
| When: |
June
28-30, 2007 |
Submission
Deadline:
May 20, 2007
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AGB
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Association
for Global Business
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| What: |
Nineteenth
International Conference
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Marriott
Key Bridge, Washington D.C., USA |
| When: |
November
15 - 18, 2007 |
Submission
Deadline:
June 15, 2007
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FHSU
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| Who: |
Fort
Hays State University
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| What: |
Annual
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| Where: |
Hays,
Kansas, USA |
| When: |
September
26-27, 2007 |
Submission
Deadline:
September 17, 2007
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Federation
of Business Disciplines
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Annual
Meeting
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Hyatt
Regency, Houston, Texas, USA |
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March
4-8, 2008 |
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