I have been at two different banks in my ~5 years of IB and seems to be the same story when it comes to this…The groups where there is a lot of investment (hiring) always seem to underperform regardless of how much is spent. They are always a “growth area” and the like. In reality it seems like they are being subsidized by the stronger groups.
Has anyone ever seen historically underperforming groups turn things around?
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Based on the most helpful WSO content, turning around historically underperforming groups is challenging but not impossible. Here are some insights:
Management Quality:
Phases of Turnaround:
Challenges:
Investment and Growth:
Examples and Insights:
In summary, while turning around underperforming groups is difficult and requires a strategic approach, it is possible with the right management, phased strategy, and focus on stability before growth.
Sources: Distressed Investing: This Time It's Different, Q&A - Mid-Market Turnarounds, Restructuring Outlook: The Hottest Product Group in Banking, Thoughts on Restructuring Groups?, Distressed Investing: This Time It's Different
It depends. When a group invests and actually turns a group around, it’s very clear as to why. They make a huge hire or a few key hires at the MD level and slowly start taking share from competitors.
More often than not, banks invest in these groups for the sake of investing and don’t target the right people. Take BofA EGRC as an extreme example. Instead of targeting high quality MDs in the space with the ability to win, execute, and close, they proceeded to “invest” by funneling in all the scrub Ds/MDs from their coverage teams and expected growth to occur at the same rate. Note they also did this at the AN/AS/VP level, but these people have very little impact on a group wide turnaround. Bad juniors cannot turn a group around, but they can torpedo an already strong group via poor execution etc.
This isn’t unique to banking - pretty much any bloated industry (tech) does the same thing. Certain groups get all the love and investment, investments are made poorly, employees in the other groups get resentful and leave, and overall quality deteriorates.
TLDR - the groups that not only invest but invest in the right people are able to turn things around.
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