Master in Management Program (2011-2012) EXAM / 103 HRM M1 (Freddy Hochu) Duration: 3 hours

This is an open books exam but electronic devices are not allowed
while some of the junior professionals of his team were doing some additional data gathering and analysis, he was flying back to New York to meet with another client. Since the other seat of his row was thankfully empty, he was left to his own thoughts as he sipped a glass of white wine. Not surprisingly they turned to Alex Born & Co and the Healthcare Group. What did surprise him was that in the relative quiet of the first class cabin, with no immediate pressures, his thoughts drifted to how he was doing at the end of his second year as group head, something he never had enough time to reflect on. The reflections which filled his head were mildly disturbing, because he began to wonder if, in spite of the great year his group had posted, whether he was really doing such a great job of leading the group. Was he creating an organization that could handle the rapidly growing number of clients? Was his group solidifying existing client relationships and rapidly penetrating new ones? Was he positioning the group well for the longer term with clients, vis--vis the intensifying competition, and was he developing younger staff? The Firm Alex Born & Co, with revenues this quarter of $180 million, had been highly successful during the past decade. The firm maintained leadership positions in equity and fixed income sales, trading and research, and investment banking. The firm had 65 partners and operated offices in New York, San Francisco, Los Angeles and Chicago, as well as in London, Shanghai and Hong Kong. The firm tried to maintain compensation and benefit expenses under 42% as a percentage of net revenues, and sought to keep operating margins above 25%, and net income over 10% in order to keep investors and analysts who focused on these metrics satisfied. Profits were generated by a particularly strong showing in bringing rapidly growing firms to the capital markets as well as a booming strategic advisory business, particularly mergers and acquisitions. Much of the firms success was attributed, both by management and by industry observers, to the firms rich traditions and strong reputation among its clients. Alex Born managing directors believed that the trust and confidence of its clients were a key to the firms part and future success. The best way to meet these clients needs was to tackle any client problems or opportunities with team effort and provide long-term service. In fact, Alex Born partners prided themselves on being able to put

When dealing with a case study, remember that there are often more than one answer. Your answer will depend on the assumptions you make and the way you define the problem. There are often too much or too little information. Take educated guess, make assumptions. Always explain your analyses and logic and separate "facts" from opinion:

Please answer the 5 following questions:

1. Provide a general overview of Alex Born & Co from an economic and a HR point of view (2 points) Define the central issues, the main problems that John is facing (3 points) Define goals that John would need to achieve in order to improve the situation. (2 points) Evaluate the options of possible solutions and recommend solutions (5 points) Prioritize your recommended solutions and set up an action plan for John to implement (short-term mid-term and long term) (8 points)

2. 3.

4.

5.

Case Study : John Steal at Alex Born & Co. As the 747 circled and climbed eastward out of Los Angeles International Airport, John Steal began to unwind from the grueling 48 hours in Los Angeles. As managing partner of the Healthcare Group of Alex Born & Co, he had spent two long days defining IPO* possibilities for a rapidly growing pharmaceutical company. Now,
1

Vendredi 10 fvrier 2012

Master in Management Program (2011-2012) EXAM / 103 HRM M1 (Freddy Hochu) Duration: 3 hours

This is an open books exam but electronic devices are not allowed
together a team of outstanding talents drawn from anywhere in the firm to meet a clients needs. With the firms rapid growth and a desire to hold the number of partners relative to the professional staff constant, each recent year saw an increasing number of the firms activities being conducted by vice presidents, and associates. To fill the need for its growing cadre of vice presidents and associates, the firm actively recruited at major graduate business schools in the United States, especially Columbia, Harvard, Stanford, and Wharton. In fact, over 70% of its professional hires in the past five years had MBA degrees from such schools. There had been some lateral hires but the firm preferred organic growth and development. Professionals trained at the firm from day one had excellent technical skills and had the necessary relationships within the firm to help originate and execute business effectively. Thus, the attraction and retention talent is a key factor in the companys continuing success. In this business, characterized by high turnover, Alex Born is certainly the lowest in that industry, less than 4% annually. The Healthcare Group At 45, John Steal headed a group that included one other managing director, seven vice presidents, and 20 associates. John had graduated from Williams College with a major in economics, and received a PhD in statistics from North Caroline State University and had subsequently worked for a large consumer products firm. After three years with the company, he went on to the Harvard Business School from which he graduated with high distinction. He joined Alex Born immediately after business school and was made a managing director ten years later at age 40 and after two years was tapped to be the head of the Healthcare Group, reporting directly to the head of investment banking. Jim Goodnight, previous head of the Healthcare Group, claims that he has no philosophy or grand plan that guides the group operations. Rather, there are some simple premises or principles guide day to day discussions and behavior. The first principles of treating everyone fairly and equally, is based on the companys history. Goodnight has also commented that he enjoys being around happy people, who wouldnt, and that if you take care of your people, they will take care of the company. This group was one of four within the firm which focused on a particular type of industry. The other industry groups were telecommunications, energy, and financial services. Some clients outside these industries were serviced by a pool of bankers, who usually maintained relationships with companies in specific geographic areas such as the Midwest, Southeast, or West Coast. The focus of the Healthcare Group was on pharmaceuticals, HMOs*, hospitals, and biotechnology. While the group had been successful before John assumed its leadership, its performance in the past three years had been nothing short of spectacular. Gross fees had grown at a compounded annual rate of over 30% and its success rate at bake-offs of being awarded business by new clients had grown from 20% to 50% in the last three years. As John ruminated about the group, he recognized all of these as signs of his successful tenure as head of the group. And he added to them the strong relationships he and the other bankers in the group had developed with their clients. They understood these companies well and had earned the respect and trust of their top executives a key to any successful investment banking franchise. Steals Concerns In spite of all these positive signs, John was uneasy as he sipped on a second glass of wine. One source of concern was the other managing director in his group. Jim Hodges was in his mid-forties and had been involved with their healthcare clients for almost a decade. Jim knew the financing issues and needs related to these companies and did an outstanding job in serving them. While he was prolific with new ideas for existing clients, he was not really productive in developing new client relationships, a crucial part of future growth. Nor did he go out of his way to provide guidance to the vice presidents or associates, except when they were working directly with him on a project. John had always suspected that Jim was surprised and resentful when John was asked to take the leadership of the group instead of him. John had always been respectful of Jims opinions, but realized that he had not asked for his help in leading the group. What had evolved was a polite but distant relationship between them.

Vendredi 10 fvrier 2012

Master in Management Program (2011-2012) EXAM / 103 HRM M1 (Freddy Hochu) Duration: 3 hours

This is an open books exam but electronic devices are not allowed
As the group had gown and the pressures on him had built up, he had occasionally wished Jim would come forward and offer to share the burden, but he didnt. He now realized he resented this. In fact, he found himself feeling quite angry. He felt that Jim was profiting handsomely as a result of his efforts, while only doing what was needed to handle their established clients. Having sunk into this reverie, he hardly noticed what he was selecting from the tray of appetizers the flight attendant held in front of him. In fact his thoughts leapt on to his seven vice presidents. All had excellent B-school* credentials, were in their early thirties, and all had been very effective associates. He had inherited five of them from his predecessor and had pushed for the promotion of the other two, including Jane Reynolds, one of a small number of female vice presidents in the firm. The five of them were the workhorses of the group. They worked long hours and got the job done. He wasnt so far away from being a vice president himself that he couldnt remember the frustrations they must have and the stress of the long hours and the constant travel. The hoped-for reward in addition to money: becoming a managing director! Thats what made it all worthwhile. But given the ceiling on new managing directors and the growth in the firm, there was no way they were all going to make it, may be one or two of the seven, but no more. That reminded him of a conversation he had with Jane on another transcontinental flight last summer. It started innocently enough. Hed thought hed show some interest and ask her how things were going. That was something that Jerry Davis, the managing director with responsibilities as general counsel, head of Human Resources and Internal Communication, had suggested might be useful to help understand his staffs attitudes. Anyway, it had sure backfired. Initially Jane expressed concern about business problems did they understand the long-term competitive situation? What could he do to help with the chronic understaffing, she and other vice presidents faced? How could they teach the associates, when they were so busy? When were vice presidents going to get a chance to call on their own clients and start to develop their own relationships in order to develop as senior bankers? All of this, he had heard from the other vice presidents so it seemed like normal griping. But then she got more personal. She was not getting any feedback from him about how she was doing, or about her chances to make managing director. All she heard were rumors. She worked like the devil to the det riment of her marriage. She seemed to think a divorce was a distinct possibility. It had been a
3

disturbing conversation. After all his efforts on her behalf, her complaints had left him feeling angry. Now, six months later, he was wondering was she saying things that his other vice presidents felt but were too afraid to say? If so, he had more problems than he thought. He remembered other event that made him conclude he might also have serious problems with his vice presidents. Nine months earlier, Bill Prince, another vice president, had come to him with the news that he had just been offered a key job in London with a newly formed investment division of a large commercial bank. Because his wife wanted to stay in New York, Bill said he wasnt inclined to consider it seriously. Besides, the immediate compensation was much lower than he was receiving at Alex Born. Yet the offer and the opportunity to make managing director there led to several conversations about his future at Alex Born. In one of them, Bill made a comment which now seemed more ominous than it did originally. John could remember his verbatim: You know December was a really strange time of the year for me. I got a huge bonus. I was one of the highest paid guys at my fifth HBS* reunion. But whats sad is I dont feel good about it. When I got the bonus news in December, I didnt get any other feedback How am I doing, when am I likely to be a managing director? What do I need to prove to make it? John now wondered whether that offer had really been unsolicited or whether it was Bills way of getting attention. As the support tray was cleared away, John reached into his attach case to do some reading and analysis in preparation for tomorrows meeting. But he found it difficult to concentrate. Not only was he wondering about his vice presidents, he also began to recall several recent encounters with his associates. The Associates The 20 associates were all under 30. They all had MBAs from prestigious business schools and had ranked high in their classes. Having been with the firm for three years at the most, they were still learning about banking in general and Alex Born in particular.

Vendredi 10 fvrier 2012

Master in Management Program (2011-2012) EXAM / 103 HRM M1 (Freddy Hochu) Duration: 3 hours

This is an open books exam but electronic devices are not allowed
What immediately came to mind was Jerry Daviss comments at the Managing Directors meeting last year. Davis had said that the associates felt disconnected from the firm and needed more direct contact with the Managing Directors. John had been among the majority who greeted this news with a hoot and a moan. He remembered one of the other managing directors saying, Its a tough world out there; these associates need to learn to swing on their own. We cant coddle them. And John had silently agreed. Even when the chairman had jumped in to support Davis, John remembered thinking, My associates are turned on. They work hard; they love their jobs just as I did! He still believed this was fundamentally true, but now he realized he didnt have any hard evidence one way or the other. In fact, he rarely had time to speak to associates unless they were working on matters of immediate concern to him. John tried to square Daviss information with his own impressions of his hard -working associates. Were his associates that dissatisfied? After all, they were the cream of the crop from their business schools, and they were getting paid very well and were doing challenging work. And nobody was quitting! Yet, on the other hand, he knew he spent virtually no time with them, and Jim Hodges and the vice presidents in the group probably didnt either. They were no rewards passed out for developing associates. Rewards came for developing business. He had to admit it was very different now from his own early experience after joining the firm. Ten years ago, when the firm was much smaller, there were fewer associates and they could find a managing director to whom they could attach themselves and learn. He tried to turn his attention back to preparations for tomorrows client meeting. After all, even if there were real problems with both the vice presidents and the associates, he couldnt deal with them at 39 000 feet. Tomorrow afternoon hed think about all of this some more. The Changing Marketplace Putting these concerns aside was no solution, he realized. Hed been procrastinating in the same way about doing any long-range thinking about his business. David Lipscomb, head of investment banking, had been pressing him for ideas about the longer-term issues in the healthcare industry, but John never had time to think about them. He rummaged through his attach case for the sheet of paper on which he had jotted down several strategic questions he wanted to answer for himself and David: How do we protect our niche against excellent specialists like Chase Hambrecht & Quist and behemoth generalists like Morgan Stanley*? What do the megamergers in pharmaceuticals and related industries like technology mean to our clients and to us? What bothered him most was that he remembered making those notes on a prior transcontinental trip last spring over six months ago. The Time Bind Time that was really the heart of the matter. Whatever else he should be doing sorting out the vice presidents and associates concerns, thinking about the groups strategy there werent enough hours on the day to do it. He was already working too many 12 to 14 hours days, to say nothing of weekends. He was driving the business development effort through his personal contacts with present and futures clients. He also had to get into the details of his projects because the clients were paying for his talent and advice. Besides, he enjoyed it and was good at it. In fact, he recalled how much he resented having to take time out to interview new candidates at Wharton and Stanford last fall even though he knew it was important. And he really disliked being placed on firm committees. It was a nice honor, and indicated that the Management Committee recognized his abilities and contribution, but he needed more work like a hole in the head. As the seat belt sign went on indicating the beginning of their descent into JFK Airport, he reached one conclusion. Jane Reynolds wasnt the only one who had problems at home. If he spent any more time on Alex Born business, he might have to kiss his own marriage goodbye. Barb had said over dinner the other night that shed gladly trade some of his income for more of his time for herself and the two kids. Her repetition of this theme was becoming increasingly vehement. He knew what she was saying because the kids were already 12 and 14 and sometimes he felt like he hardly knew them. He found himself in an increasingly discouraged mood as the plane landed. Maybe there was nothing to be done but to keep plugging along. Maybe he should try to
Vendredi 10 fvrier 2012

Master in Management Program (2011-2012) EXAM / 103 HRM M1 (Freddy Hochu) Duration: 3 hours

This is an open books exam but electronic devices are not allowed
sell Lipscomb on the idea of assigning him a vice president as an operations officer. One of the other managing directors had done this. Oh, hell, he thought Ive spent six hours fretting over all this nonsense, and I still have to get ready for tomorrows meeting

EXHIBIT 2 EXHIBIT 1

SOURCE of applicants for positions filled in 1996 Sales revenue for Alex Born & Co Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
5

Revenue 98 130 170 206 240 295 366 432 502 582 683 803

SOURCE of applicants for positions filled in 1996 Advertisements in non-local newspapers Posting on the Web Employee referral College recruiting External Job line telephone listing Internal promotions Advertisements in local newspapers Internal job book Other (estimated)
Vendredi 10 fvrier 2012

25,0% 20,0% 15,0% 12,0% 9,0% 7,0% 4,0% 2,5% 5,5%

Master in Management Program (2011-2012) EXAM / 103 HRM M1 (Freddy Hochu) Duration: 3 hours

This is an open books exam but electronic devices are not allowed

Morgan Stanley: is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. It operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000.

Definitions
IPO: An initial public offering (IPO), referred to simply as an "offering" or "flotation", is when a company (called the issuer) issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.

HMO: A health maintenance organization (HMO) is a type of managed care organization (MCO) that provides a form of health care coverage in the United States that is fulfilled through hospitals, doctors, and other providers with which the HMO has a contract.

B-school: Business schools.

HBS: Harvard Business School.

Chase Hambrecht & Quist: (H&Q) was an investment bank based in San Francisco, California noted for its focus on the technology and internet sectors.

Vendredi 10 fvrier 2012