A minute for your feedback please

Monday, April 25, 2011

Learn from the best-select industries for their good practices

While poring through several annual reports and cases, it struck me that certain functional expertise is fungible across industries. Once I kept an eye out for such cases, a large number of examples struck me which I am sharing in this post. They do seem obvious once mentioned but in simplicity is beauty.  Any feedback is appreciated.

  1. Transfer pricing expertise in taxation is best learned from MNCs which structure their transactions carefully to minimize tax impact. For example, News Corp, GE, Reliance(now)
  2. Mass training can be mastered from those in industries with high standardization & attrition(retail, telecom, IT) or those with regulatory compulsions(banking)
  3. Segmentation in marketing can be best picked up from telecom companies, Google(which even gets location based information!!) etc
  4. Physical distribution masters are the FMCG companies
  5. Get forecasting skills from industries with wafer thin margins like commodities, FMCG,retail. 
  6. Learn project financing/execution skills/compliance from infrastructure companies which successfully navigate a web of SPVs 
There are certainly many more examples but this is all I can think of for the moment. 

Thursday, April 14, 2011

Open letter to those wanting MBA to change careers from IT to Corporate Finance

One of the few disadvantages of being in a Bschool like IIM-A is that random people befriend you on Facebook, you are accosted for advice at family functions etc. While I  generally like to give a 1-1 advice(or direct to the person who can best help), some themes are recurrent. Recently, I sent a longish mail to a friend who had secured admission in a Tier II Bschool known for its good acads/experience but not so stellar placement. He was targeting a position in Corporate Finance, and so I was giving some pointers/views on that. I am sharing that mail(personal details redacted) for readers to benefit. Before hate mail starts pouring in, let me make it crystal clear that this is person specific but I think this will apply to a large chunk of people(hopefully not in Tier I colleges though like IIMs), and that was the only reason for posting this to help people take an informed decision.

As I write this, you must be all charged up about going to.....speaking to alumni etc. I can empathize being in the same shoes a year ago. Since you are heading on the MBA path, these are the things you should keep in mind. You may see me as a role model for pursuing MBA despite good career options but remember this, IIM-A could never have made me worse off..but ....can make you worse off in case you do not fit well in your new career. I was not changing careers, you are
  1. Very competitive, even more than the IIMs:- They say it is easy at the best schools(where even poor acads will get a decent job opening) and at the worst(where students attend only for the degree). But remember you are in the type of Bschool where with maybe 2%ile more, your classmate may have been in a top tier Bschool(IIMs/XLRI/FMS/SP Jain etc). You can bet that they would work harder here because they know that if they slacken off, they may not get a second chance
  2. Not all people get into finance in roles of their choice:- Search naukri.com/monster.com for finance roles and you will see a large variety of them. Very few roles demand MBAs, and even those roles often do accept CAs/MComs/BComs with experience. For the kind of roles you will be offered, remember that even CAs/MComs will be competing with you, if not at entry, at later points in your career
  3. Indian companies v.s the rest:- Finance roles typically demand long working hours with late sitting till evening to polish off that latest analysis for the boss' meeting tomorrow. If you are in a remotely accounting like function, expect to sit late. Due to their SAP/ERP/outsourcing, MNCs do not face the problem to the extent Indian cos do
  4. Always second best thoroughout the career:- Playing catch up with a MBA from 2 tier institutes without brand recognition, means that professionally, you will always be thought of 2nd best fir compared to those from the top Bschool. And because corporate  finance is not a sales function with clearly measurable targets/results, recruiters often prefer to play safe by recruitment of those with stellar academic credentials/those who have worked for great companies before(say ITC/GE in finance).
  5. Always being under high pressure: Finance people are under high stress because the business units expect quick, complete and correct information, and ever improving turnaround times/efficiencies. And last minute requests are common.And if you deal with the auditors, well you had it
  6. Corporate finance is NOT a 9-5 job:- In corporate finance in IT cos/elsewhere, you will NOT just make fancy reports sitting in AC office for the field to implement. You will often need to design the report format itself(it is NOT a simple job and needs agreement from end users etc), need to work independently and quickly to gather all the data, and will need amazing Excel/PPT skills to work quickly on the fly. Work will typically come in at 5:29pm just when the office day ends at 5:30
  7. You will need to learn & unlearn:- With the new tax, accounting, auditing,IT etc norms changing, the finance function has to adapt FAST or else risk being outsourced partly or fully. Nearly all IT cos have amazing IT based automation solutions for accounting, reporting, financial analysis etc. In the Tata group companies, they have reduced their finance function to very few people(just 4-5 CAs and some IIM/XL MBA for the reporting work). If you do not learn, your job may be outsourced and even then the new IT company may prefer to employ a Bcom over you
  8. Presently, You have no competitive advantage in finance:- Much as it pains me to say this, you do not seek for knowledge, have great MS office skills or that 'interest in finance' enough to sustain an intelligent conversation in finance. You think these rough edges will go off in MBA. Trust me, they don't, unless you do self study, which is something you are not used to. Remember that the college needs to support so many students. It does not have time for 1-1 mentoring
  9. Your past experience will go waste:- This is not relevant experience for a finance role EXCEPT a bank job involving credit analysis of the industry.. 
  10. Unlike me, you do not have a good 2nd option if this fails:- REMEMBER that the Indian economy is pretty shaky still-the stock market fluctuations are testimony to that. I agree that corporate finance jobs are relatively safe(companies still need to deal with banks/do financial analysis), but the laid off people from other finance roles may fight for them, and then the competition will really become tough. Know that you may not have an IT option to return to, considering TCS/Infy/Wipro etc have plenty of fresh grads to choose from
  11. Corporate Finance is routine:-90%+ of the work will be mechanical and routine, like your job
  12. Growth prospects are dicey unless you do exceptionally well and from what I know of you, you may do well but not well enough to overcome that 2nd rung MBA tag.

Wednesday, April 13, 2011

So should summer interns get prorated stipends?

Its that time of the year(Apr-Jun) where the 2yr MBA students from Indian B Schools fan across the globe(OK not all places mostly India/Singapore/HK/USA/UK) to spend(or party away depending on your orientation) their precious summer break between first and second year. Typically, atleast in the IIMs/XLRI/FMS/SP Jain and other top tier institutes, the internship stipend is prorated to the base pay. So for a base pay of Rs 24 lakh/p.a for example, the 2 month stipend would be Rs 2lakh/month=Rs 4 lakh. Generally, accommodation and airfare is also given as an additional onetime relocation allowance for interns but not for the final offer. Company policies do vary-its mostly the consulting and investment banking companies which pro rate the stipends-with others giving barely enough to live in the city of work.

Without examining the technical merits of this-whether a particular student X is delivering value to his company Z-let us see the assumptions behind this pay scale. The assumption seems that the summer intern will be active from Day-0(like any other full time employee) and will produce work of equivalent quality-if not at start then atleast from the mid/end. But the proposition of pay for work goes against the very tenets of summer internship being an academic requirement as against a work sampling program. Still, given the extreme level of competition to lure the best students to intern with(and eventually join) them, cos go to all levels. And the base Western scales are huge amounts for us Indians because we can live cheaply abroad(Ok most of us).

So while the purpose of the internship may not justify proration, look at 2-3 factors supporting pro ration
  1. Working hours-in these jobs, interns typically work 12+hr days.
  2. Work itself MAY be routine/boring/monotonous
  3. You pay peanuts you get monkeys
So I guess in balance, proration seems the way forward provided the person delivers.