Rich Bello presents a human-resources-focused segment of a hedge-fund investment process, arguing HR should be treated like portfolio management: hire the right people, score and filter candidates through a multi-step sourcing/hiring pipeline, and then manage and retain talent through goal-setting, training, measurement, compensation, and (when necessary) compassionate termination.
Chapters
Now I view the HR part of the process in essence the same as portfolio management. The idea is to have the right people on your team, just like you want to have the right investments in your portfolio. First part of the process is sourcing and hiring the best talent. This is a 10 step process that I love to consult on because it's so important and most firms don't get it right. It's going to go high level here, but feel free to reach out. As I mentioned, it's the most important process for any firm to get right. First thing you need to do is a gap analysis of the team. What's missing? Then you create a very clear job description for who to hire to close the gaps. Determine the best sources to find the talent. Could be other funds, investment banks, interns. Perhaps it's within your own firm. Promote. Then you need to search for the talent. Who's going to do this? Outside recruiters, internal recruiters. Once we have some candidates in the pipeline, the next step is the filtering process. This is basically a screening process. The process entails initial screening, interviews, assessment tests, projects. Basically what you're doing is putting a value on the candidate. And we literally do. We, we look at hundreds of candidates and score them. Those with the highest scores move on to the next stage of the process, which is an interview and then the hiring manager and possibly others. The interviews entail a more detailed scoring process for the candidate. Don't forget the sales process in the interview. Many people do. You need to sell both the firm and the role to the candidate. You can't assume that you don't have competition. I mean like wait, they took another job? But we had such a great interview. What happened? You didn't sell the firm. Make the offer right. You want to be sure that you've got the right market value for the candidate as you don't want to lose out at this late stage due to a below market offer. Once the offer is accepted, then we're going to do some due diligence. Diligence, references, background checks that all checks out and the candidate accepts. We're going to begin the onboarding process now. There's an art to all this. I literally spend the first hour of my day, every day at my firm or route working on this process because it's that important. I've developed a very sophisticated scoring process for this. We're in the process of actually developing software for it. Project entails not only building the software, but also we're writing a book on it and doing webinars and seminars on it. I love this area. Nothing more important than human resources. So once you've hired the team, the hard part begins right now. You need to manage the team. First is you want to set goals for each member of your team so they know what their individual goals are, as well as the mission and goals for the firm overall. Second, you want to be sure that the employees have the proper training in all the firm's important process, as well as keeping their technical and soft skills like communication sharp. Feedback is a tricky and crucial area to get right. Communication is the key here. Remember, you can't manage what you don't measure, and that's especially important for employees. And there must be a detailed review process with a score. You should also score yourself, or better yet, have them score you anonymously. You'll want to be sure that your team is compensated fairly, both for incentive purposes as well as retention. Finally, the hardest part of the role of any leader or manager is one of termination decisions and actually the termination itself. Just like in the investment portfolio, if the employee isn't adding enough value to the portfolio or to the fund, they must go. It's a crucial mistake that managers make. Keeping people on who are not assets of the firm. They keep them on for too long. There are many reasons for this, and it's too important not to master. Of course, any termination must be handled with the utmost of compassion and fairness. Right? You need to help that person move on to the next stage of their career. It's never a good idea to burn bridges.
