A New Model for PE Associate Recruiting is Sorely Needed
What's the point of PE firms paying headhunters this much money only to have such a shitshow every year for both candidates and the funds themselves? Everyone I know is just getting traumatized this year for very little spots actually being filled. In previous years you could say the headhunters did an acceptable job facilitating on cycle, but this year clearly shows how "on-cycle" is just a failure of a concept engineered by the cartel that is headhunters.
Just a thought experiment, but what is preventing PE firms from doing their own hiring? They have the incoming class of outgoing analysts joining their firms as associates, can't they just get them to collect the names of the best first-years from their banks to the firm to be interviewed? This is a sure better way to go about recruiting than the currently sh*tshow and embarrassment we do hvae.
Based on previous WSO threads, here are some insights into the current state of PE associate recruiting and the role of headhunters:
Issues with Current PE Recruiting Model:
Headhunter Dependency:
On-Cycle Recruiting Challenges:
Training and Skill Gaps:
Potential Alternatives:
Direct Hiring by PE Firms:
Leveraging Relationships:
Focus on Diversity and Soft Skills:
Conclusion:
The current PE recruiting model, heavily reliant on headhunters and the on-cycle process, is facing significant challenges. PE firms might benefit from exploring alternative approaches, such as direct hiring and leveraging internal networks, to create a more effective and less stressful recruiting process.
For more detailed discussions and experiences, you can refer to the following threads on WSO: - "Do your associates just not care?" - "PE Recruiting: Deciding what firm is the best fit" - "PE Recruiting For Non-Targets" - "Basic Questions About PE Recruiting Answered"
These threads provide valuable insights into the current state of PE recruiting and potential ways to improve the process.
Sources: Do your associates just not care?, From Private Equity Associate to VP in Private Equity, Basic Questions About PE Recruiting Answered, PE Recruiting For Non-Targets, STOP obsessing about windows to jump thru for PE!!!
Why do you think its the HHs that are kicking this off? On-cycle typically kicks off because a fund presses the button, which leads to all other funds also following to avoid APO/BX/w.e. MF from having exclusive first look at the incoming analysts. BX took on-cycle/hiring in-house last year and they still were interviewing at the same time as everyone else, just without the HH layer.
Did BX interview this year yet?
Ignore my title but currently PE sr associate at a UMM shop and have friends at the principal/VP level at a variety of different shops. I think the trend is many firms are going to be doing their own recruiting. Maybe not the biggest guys because of their inefficient HR hierarchy but even at my shop and several other shops, there are serious talks of doing direct hires. Some shops I know are planning to experiment with hiring back sophomore interns that went on top EB/BBs to be back after their analyst stint.
There were groups within certain large cap funds that evaluated and had good candidates in front of them and just decided not to hire because it’s so early.
Why? This is exactly what the funds want. They get exactly the employees they want by being this psychotic.
This is entirely by design. Firms are ejecting their associates out after 2 years and want to lock up replacements as far in advance as possible so they can time it such that there is no business disruption when the prior class is forced out the door. What they're screening for are kids who are deeply invested (personal identity, sense of self worth, ambition) in making it to PE and have enough pedigree to fit the historical pattern of this elitist industry. PE firms claim to be masters of patter recognition, at the end of the day a kid from Harvard and Morgan Stanley with a 3.9 who studied technicals senior year rather than spending time with friends is likely going to do well enough at the job (or at least passively take all the shit that is forced down his throat), and. if he doesn't, who cares it's not a long term commitment the firm is making. They'll just eject him in 2 years.
There is absolutely no value placed on uniqueness or differentiated perspective for junior talent in an industry that literally claims its special sauce is ability to recognize patterns. So yeah, it's only going to get worse until the model breaks, but so far this has been a winning strategy for most PE firms and there is absolutely no reason for them to change it.
Maybe that was the original thought process but it's a common phenomenon now to have associates that just have poor work ethics and lack of technical skillset from cruising their entire analyst stint after landing PE right away. Firms are realizing that the offcycle hires that they could have sufficient character reference + maturity + a deeper understanding of why they want to do PE are much better than the oncycle hires they snatched. Maybe at your firm the oncycle hires have turned out well, but that's universally not the case across the board.
Case study 1: we had an associate who, upon receiving our offer during on cycle, apparently just stopped doing anything throughout their analyst years. They hit our desk and had an extremely rocky start for the first 6 months. They have caught up and are decently mediocre now but looking back, we would not have wanted to hire her given what we know now.
Yep, the firms that go on-cycle all need the grinders who are willing to put in the hours more than anything else. PE is full of risk-averse people ultimately and getting an above-average intelligence kid who has a good resume is fine enough for the MFs because they mostly just need a grunt who can grind out work. If they can make it to the next stage and be personable/bring in business, great they have a strong technical foundation already. If not, then still great for the PE firm cus they got 2 years out of that grinder who did all the bitch work for them. Really a win-win for the MF's and enough of the grinders end up actually being a good long-term fit and actual good investors (remember they don't even need a 50% hit rate for promotions) to where it's still worth it for the MF's who do on-cycle.
I haven’t been involved heavily in recruiting in a long time, but I ran it one year for my firm that is one of the typical on-cycle firms. It used to be the Fall of an analyst’s second year. We knew how they ranked in their class and usually were able to do reference checks in their group before their offer. It was usually a 3-4 week timeline from the initial interview to offer. We would do a first round interview, a super day a few weeks later and then bring back only candidates we were serious about for a modeling test and senior partner interviews. Everyone in the group someone was hired into interviewed the person and it was almost always unanimous on whether or not to extend an offer.
This has become ridiculous. Interviews used to be driven by candidates walking through their deal experience, which they obviously don’t have now. I’m boycotting on-cycle now and am wondering if we should just wait a year. There are plenty of great analysts that will prove themselves after a year of experience regardless of where they went to school or interned.
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