Inside Moelis & Co.: 'Every year we work out who's not right'
Ostensibly, boutique bank Moelis & Co. is still in hiring mode. Speaking yesterday following the release of its fourth quarter results, CEO Ken Moelis affirmed that there's still plenty of "white space" the company can "build to" and said he doesn't just let go of staff because the market is quiet. Liaising with financial sponsors (private equity) firms is a long term game, said Ken: you can't just get rid of people and hire them back again when things pick up.
Ken thinks things are going to pick up, soon. "There is a huge pent-up demand" in the sponsor community, he added. That demand could come roaring back, hopefully soon, if interest rates stop rising. "I think now you’re starting to see people take a view that we are possibly near the end," he said in reference to the rates cycle.
For all his bullishness, though, Moelis & Co. is also cutting pay and has been cutting people. Last year, spending on compensation at the firm was down 42%, but still accounted for 85% of operating revenues as revenues dropped. Headcount was therefore pruned too, but in a judicious manner.
Each year, Ken said they at Moelis & Co. comb through their headcount "and figure out who's not right." - Who doesn't have the "right skillset," who's in the "bottom couple of percentile." Having identified this group, he said Moelis 'proactively addresses' them and gets on with building the business around its stronger and more relevant performers. In an average year, he said 2% of people might go; in a tough year, 3%. It happens all the time: "We do it midyear. We do it all year, by the way. We have these conversations. We don’t wait and do it once a year. But that’s always ongoing. And so yes, the answer to you is that, that process has begun because it’s continuous."
Who isn't right for Moelis? Poor performers aside, it might be anyone who wants to work a 70-hour week or less - Moelis & Co has a reputation for long hours.
Who is right for Moelis? Try senior investment bankers with latent telepathy. Ken recalled a client meeting where there were six Moelis MDs in a room who'd worked together for over a decade. They were able to finish each other's sentences, Ken noted. "In my mind, that’s worth keeping."
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