Overview
When many people think about the selling of stocks and bonds, they imagine stock brokers -- people who sell securities to individual customers who wish to invest in the financial markets. (See the Financial Planning and Stock Brokerage career profile.)
However, institutional securities sales is an entirely different area of work. People who sell these securities work for an institution (typically an investment bank/brokerage firm) and sell stocks and bonds to other financial institutions, rather than to individuals. Their customers might include:
mutual fund firms, such as Fidelity or Putnam
pension fund firms, such as TIAA-CREF
"buy-side" investment institutions (such as hedge funds, which have small numbers of investors but large amounts of money to invest)
Institutional securities salespeople typically broker deals in the millions of dollars (whereas most stock brokers deal in the thousands). Their customers tend to be demanding and savvy investors. To serve their customers, these salespeople need extensive knowledge about industries and financial markets. In fact, they have to pass rigorous examinations and get a special license before they can work independently.
Many institutional securities salespeople choose to develop expertise in one industry sector, such as transportation or telecommunications, so that their knowledge will always exceed their customers'. Investment management firms (which sell mutual funds to the public) and pension and hedge funds all pay their institutional securities salespeople -- their fund managers, analysts, and traders -- handsomely for their expertise.
To succeed, these individuals need a lot of sales savvy. They use all the techniques and strategies that salespeople in any other field use (although within specific legal constraints, such as those defined by the U.S. Securities and Exchange Commission). That is, these salespeople build relationships with current and prospective clients by:
honing their industry knowledge
gaining their clients' trust
entertaining clients (e.g., wining and dining them, golfing and sailing with them, taking them to sports and cultural events, and buying them holiday gifts)
INVESTMENT BANKING
Overview
Investment bankers (sometimes referred to as "I-bankers") provide financial advice and services to corporate clients. They advise corporate CFOs and CEOs on matters such as whether to:
issue or back stock or debt
acquire other companies (and how much to offer for them)
sell part of their current company (and at what price)
Investment bankers' client companies may be large and established, or they may be new ventures that are "going public" -- that is, selling stock to the public in an initial public offering (IPO) to acquire the capital they need to grow.
Investment banks themselves may be large or small. Moreover, they may be either:
"full-service" banks, which offer financial advice and service to a wide variety of industries (such as real estate)
niche ("boutique") firms, which serve only a specialized part of the financial services market (such as the entertainment field or the high-tech industry)
Most investment banks are located in New York, London, or Hong Kong, and are called "money center banks." "Regional investment banks" -- some with excellent reputations in the industry -- are located in other cities throughout the world.
In investment banking, many people work 100 hours or more during an average week, which means working over evenings and weekends. Investment banking consumes their lives. These individuals make a lot of money, and in return they become "wholly owned subsidiaries" of the banks where they work.
But most investment bankers love finance and the fast pace that characterizes the industry. In fact, they love that speed so much that many of them would consider the three-to-six month time period of the average management consulting assignment to be too long!
Investment bankers typically start their careers with gathering and analyzing data (and proofreading documents to ensure the accuracy of every number). They then move up the following "rungs" of the career ladder:
preparing and helping to deliver presentations to clients
developing and maintaining client relationships
"selling" the bank's services
running the bank itself, or parts of it, such as the mergers and acquisitions (M&A) group. As you might imagine, successful investment bankers need a lot of personal polish, confidence, and a great handshake.
STRATEGIC PLANNING AND BUSINESS DEVELOPMENT
Overview
The phrase strategic planning describes jobs that can vary considerably in their responsibilities, duration, and career path within an organization. Strategic planners explore, design, analyze, or evaluate specific business plans. This work may involve:
identifying and evaluating merger or acquisition proposals
analyzing the feasibility of a new product or service
designing or evaluating new service-delivery processes, new distribution processes, new vendor relationships, or new business alliances
Many people use the phrase business development synonymously with strategic planning. But business-development professionals typically have more of an external focus on:
potential mergers and acquisitions
business alliances
joint ventures
new market opportunities
Some strategic planners work as internal consultants within their companies. They may work on temporary assignments within a business unit while that unit is planning or evaluating new projects. Or they may have a long-term position within a central strategic planning unit of a large corporation, where they evaluate the strategy of the corporation as a whole. Either type of work can eventually lead to general management roles within a company.
During an assignment, or project, a strategic planner might:
compare his or her own company's manufacturing process to that of an industry leader
evaluate the size of a new market, its potential profitability, and barriers to entering that market
consider whether it makes more sense for the company to have its own means of transportation or to "outsource" that function
Some of these projects will come as "orders" from the CEO or head of a business unit, while others will be the strategic planner's own (or his or her manager's) ideas. In this latter case, the strategic planner will have to "sell" his or her idea to an internal customer before carrying out a project.
During a project, the strategic planner gathers and analyzes quantitative data. He or she may also interview current and potential customers as well as people in other companies -- including competitors. The planner then presents the results of this research to his or her internal customer: the head of a business unit, the CEO, COO, vice president of marketing, etc.
As with management consulting, the career path of in-house strategic planners generally progresses through three stages:
In the entry-level stage, strategic planning associates work on assignments under the direction of a more senior member of the group. Their work consists of gathering and analyzing data, then helping to prepare results for presentation to senior management.
In the project-management stage, managers will take ownership for entire planning initiatives. They direct the associates' work and develop and maintain relationships with the business-unit heads who have requested the study.
In the directorial stage, the vice president of strategic planning will work with members of the executive committee (the CEO, president, CFO, COO, etc.) on the most far-reaching strategic issues facing the company. Together, the group determines what the firm's strategic planning operation should focus on over the long term.
The strategic planning VP and business-unit managers will then determine exactly how to go about learning what the company most needs to know in order to recommend a strategic direction.
Unlike other functional responsibilities -- such as sales, marketing, finance, or manufacturing -- the strategic planning role does not have a sharply defined identity. It is defined uniquely in each organization. For example, in many companies, strategic planning constitutes an entry-level position, particularly for newly minted MBA graduates.
In such cases, the organization benefits from the new employee's analytical abilities. And the employee gets a chance to learn about the organization from the vantage point of a relatively high-level staff role. After one to two years, the employee may advance to a line-management position in an operating unit of the company, which can lead to a career in line management.
By contrast, many larger companies have a separate strategic-planning or business-development function that is staffed by professionals who develop their careers specifically within the strategic-planning area.
In considering a career in strategic planning or business development, find out how a potential employer defines the strategic-management role and whether that definition fits with your own career goals.
If you have strong analytical abilities and want a job that will lead to a general management role, strategic planning or business development may constitute a good first step. Many strategic planning jobs have high visibility within an organization. These jobs will let you "showcase" your abilities as well as get familiar with other business units you might like to work in.
However, if you're looking for the variety and intellectual challenge that having many shorter-term projects offers, don't take a position that leads only to a management career path.
And, finally, you'll need to figure out whether you want to work for the strategic-planning/business-development area for a particular company, or whether you'd rather work as a strategic-management consultant in a consulting firm.
How to decide? These suggestions can help:
Review the Management Consulting career profile. See if the interests, skills, and reward values described in that profile match your own.
Think about what kind of lifestyle you might want. For example, do you want to focus primarily on your career, or will you want plenty of free time for family, friends, leisure activities, and other interests?
Many professionals who choose to pursue a business-development or strategic-planning career within one organization do so because it offers reasonable work hours. In large, multinational companies, strategic planners or business-development professionals do travel, but less so than strategic-planning consultants. On the whole, management consultants spend more time on the job because they work for many different clients.
Compare the nature of the work itself. Consultants who want to "make partner" in their consulting firm spend a lot of time bringing in new business. Some people enjoy this "sales" role and find a lot of intellectual challenge in it. As they see it, the work involves collaborating with their clients' top decision makers on the future direction of the client organization.
Other individuals prefer the intellectual challenge of solving complex business problems. They consider the "sales" task onerous. These professionals often prefer working as strategic planners or business developers within an operating company rather than for a consulting firm. (Keep in mind, though, that they still have to "sell" their ideas to other units internally.)
If you're considering strategic planning or business development as a steppingstone to a management career, be sure to work for a company in which this function has respect and visibility and can provide a path to higher management levels
MANAGEMENT CONSULTING
Overview
Having worked with top consulting firms and many individuals who are leaving or who have left management consulting, we've developed a comprehensive picture of this popular field. Management consultants do different kinds of work at different stages in their career. Each stage gives them opportunities to express different interests, provides different rewards, and requires different abilities. For this reason, we discuss each stage separately in this profile.
First, let's talk about consulting in general. The American Heritage Dictionary defines a consultant as "one that gives expert or professional advice." Consulting as a field, then, consists of people and firms that advise clients on virtually any subject. In this profile, we focus on consulting that takes place within consulting firms, although the same information also applies to people who work as independent practitioners.
There are literally thousands of consulting firms in the United States alone that provide advice on everything, including toxic-waste treatment, natural-gas recovery, compensation and benefits, and HVAC (heating, ventilation, and air conditioning), in addition to business management and strategy.
Even within management consulting, the emphasis differs among firms. For example, some companies focus on business strategy. They advise major corporations' top executives on strategic business issues, such as:
acquisitions
new markets
overseas alliances
divestitures (the selling of divisions)
These consulting companies generally serve large Fortune 500 companies. They provide advice, but they don't get deeply involved in implementing their recommendations.
Other firms advise top-level company managers on business strategy but, unlike pure strategy firms, continue working with clients during implementation of the plans.
Still other firms specialize in some aspect of management, such as:
finance
human resource management
business reengineering
information systems
marketing research
manufacturing processes
In any consulting firm, large or small, consultants must pass through several career stages:
Stage 1: They handle "in the trenches" work, gathering and analyzing data and proposing solutions.
Stage 2: If the firm is large enough, they manage consulting projects. For example, they decide what data to gather and what analyses to run, divide the work among team members, develop the client presentation, and manage day-to-day relationships with clients.
Stage 3: In this stage (which in smaller firms is combined with the second stage), a consultant becomes a partner. Partners are ultimately responsible for the firm's project work. But they also manage and maintain current consulting relationships and, most important, generate new business.
Some people wryly remark that as you move up in a consulting firm, you do less and less actual "work." As the saying goes, "first you do the work, then you manage the work, and finally you bring in the work."
Of course, partners in consulting firms work just as hard and travel just as much as junior-level consultants; they're just doing different things. However, this remark does point to the different demands and rewards that you'll find at each stage of a career in consulting.
Let's take a closer look at the three stages by following the links on the lefthand menu.
Stage 1: "Doing the Work"
Management consulting firms use various titles to describe a newcomer to consulting work. "Associate" and simply "consultant" are the two most common. Most people hired into this role have MBAs, though more firms are now hiring people from law schools, other graduate programs and, in some instances, industry.
Many firms also hire new college graduates who show promise. Typically these young graduates work for two to three years with the understanding that they will then attend business school.
An associate's hours can be long and unpredictable. Extensive travel is part of the package, and consultants often find themselves out of town three or four days some weeks. They work with a team, but they still spend much of their time alone, analyzing data and preparing presentation materials
Stage 2: "Managing the Work"
Again, the titles used for people at this career stage vary. However, "engagement manager," "project manager," "team leader," and "senior associate" are typical. Associates advance to this stage when they've demonstrated mastery over skills such as:
fact finding
data analysis
recommendation development
report writing and delivery
management of other consultants and client projects
At this stage, consultants can find themselves in the challenging position of being "player-coaches" -- that is, working alongside other members of their team and managing them. But their top responsibility is to lead and motivate other consultants to perform at their full potential.
In this role, the "buck" stops with the manager, and he or she usually feels intense pressure to deliver. Also, a manager will eventually be expected to manage two cases, which requires the ability to juggle many duties and prioritize time and resources.
Stage 3: "Bringing the Work"
Consulting project managers who show the most promise are elected to partnership in the firm. Again, the terminology varies from firm to firm. People at this level are variously described as "partners," "directors," "principals," or "vice presidents." As owners of the firm, they're charged with making crucial decisions on questions including:
whom to elect for partnership
how many partners the firm should have
whether the firm should pursue a certain line of business or open a new office
Partners hold ultimate responsibility for the projects carried out by others. Therefore, they have to supervise project managers and support their professional development with training and other opportunities.
Perhaps most important, partners are responsible for developing new client relationships and maintaining current ones. No one is likely to make partner unless he or she has shown a talent for bringing in new business.
How do they do this? A partner may have a particular expertise or knowledge base that leads potential clients to contact the firm. Or, he or she may simply be good at forming new relationships with CEOs and other senior executives. Partners write books and articles, attend (and host) meetings for top players in the industry(ies) they work in, give speeches, and entertain and socialize with top executives.
However partners do it, this aspect of their work plays a critical role in keeping the consulting firm going.
Many people who go into management consulting when they graduate from business school and other graduate programs do so with no intention of making the job a career. They plan to stay a few years in the field to keep their career options open and gain exposure to a variety of industries and opportunities. These individuals may not be intrinsically interested in consulting work. Moreover, they may not share consultants' core interests and values, or even have the same skills.
In discussing the interests, values, and abilities of management consultants in this profile, we're not talking about these individuals. Rather, we're talking about "lifers" -- those people who go into consulting and spend their careers there.
If you are considering consulting for a limited period of time as a steppingstone to a different career, we encourage you to think carefully about that strategy -- because it may be less sound than you think.
For example, some people imagine they'll gain exposure to a broad range of industries within a year or two of management consulting. However, they in fact may end up working in only two or three industries during that time. If you fit into this category, keep in mind that it's not as important that your interests, values, and abilities fit the consultant profile as it is for others who want to specifically pursue management consulting as a career.
ENTREPRENEURSHIP
Overview
Entrepreneurs -- people who start new businesses, or take over existing ones and run them in better ways -- may or may not be artistic, but they resemble artists in several ways:
They deal with a "blank canvas" -- in their case, a market opportunity yet to be realized.
They have a strong desire to create and own something lasting and to have decision-making authority over whatever they create.
They're willing to face a greater degree of uncertainty and risk in exchange for autonomy and self-direction.
Entrepreneurs work hard. In the beginning stages of creating a company (and for a long time thereafter), they may not have staff to help them get things done. They're the ones who:
make phone calls
rent office space
buy stationery
visit potential warehouse facilities
crunch numbers
talk with potential investors
design products
research markets
Sometimes they're even the ones who sweep the floors!
Once an entrepreneurial venture has achieved some stability and a predictable cash flow, its founder may have greater control over his or her time. However, that point may be years away.
Successful entrepreneurs are famous for their single-minded dedication to the success of their new businesses. These individuals have immense focus, stamina, persistence, and courage. The creation of a new business can be all consuming, leaving little time for other activities.
Many entrepreneurs describe starting their own business as the purest and most rewarding expression of the "art and science" of business. It gives them the opportunity to establish a working environment that expresses their personal values and creative aspirations. And by owning substantial equity in the companies they create, they have the opportunity to realize considerable wealth while creating jobs and providing career opportunities for others.
Entrepreneurs are not "individual contributors." They're generalists who need a combination of skills to succeed, specifically:
creativity
strategic thinking
ability to analyze markets and financial data
leadership talent
interpersonal effectiveness
What's an entrepreneur's biggest initial challenge? To honestly assess his or her abilities and then figure how to fill in any gaps. Thus, entrepreneurs carefully assemble teams of people whose own skills help complete the picture. These teams include:
managerial partners
investors
board members
employees
The entrepreneurial path appeals strongly to "big-picture," creative thinkers with a penchant for market strategy and a strong need for autonomy and control. At the same time, one of the most important ingredients for entrepreneurial success is managerial experience. Brilliant analysis or a great product idea is one thing; knowing how to motivate and challenge a group of employees during tough times and business uncertainty is another.
ACCOUNTING
Overview
Accountants come in two "varieties":
those who work within a company's accounting department (these individuals may or may not be Certified Public Accountants, or CPAs)
those who work for public accounting firms, whose business is to look at companies from the outside and ensure that their accounting practices are producing accurate information, both for the sake of the company itself and for individual and institutional investors (these individuals generally become CPAs after four or five years working in public accounting -- and passing the CPA exam)
Regardless of which type they are, accountants primarily keep track of things -- often money, but sometimes a company's physical or human assets. For example, a company's internal accounting department tracks all the firm's activities, including:
purchases of office supplies and other assets
sales of goods and services
payment of employees
management of pensions and benefits
compliance with laws
Public accounting firms work to make sure that client companies accurately account for things such as:
assets
liabilities
cash flow
compliance with SEC regulations
investments
pension programs
Thus accounting involves much more than bookkeeping. In fact, internal accounting is essential to the profitability of any business. If a company can't account for its labor and raw materials costs and its sales at all price levels, it can't figure out which products have generated the most profits, which have lost money, and how the various products should be priced.
And public accounting services are vital for ensuring that client companies are following the law, making wise acquisitions choices, and so forth.
Accounting is especially important in industries that are:
regulated (for instance, telecommunications, public utilities, etc.)
characterized by high numbers of financial transactions (such as casinos and personal credit issuers like Visa and MasterCard)
both regulated and heavily oriented toward financial transactions (e.g., stock brokerage, commercial banking, and investment management)
In certain industries, as well as in any publicly traded company, the law requires firms to accurately report their financial "health" so investors can make informed decisions as to whether to buy or sell stock in that company.
In both internal and public accounting, career paths follow a somewhat typical pattern. In a company's internal accounting department, new accountants may start out as auditors (professionals who examine the company's operations and ensure that the firm is following required record-keeping procedures). They would then advance to more senior levels in the financial sector of the firm; for example:
audit director
controller
VP of Finance
Chief Financial Officer
They may also move into general management within the firm, as well as eventually head departments, divisions, and even the whole company.
In public accounting firms, newcomers generally start out auditing client companies and may then advance to:
audit manager (takes overall responsibility for the thoroughness and accuracy of an audit, managing both his or her audit team and the client relationship during the audit)
partner (manages the firm's overall relationship with clients, generates new clients, and takes ultimate responsibility for all work done by the firm for clients)
As in management consulting, the accounting career path progresses from "doing" to "managing" to "generating new business."
ADVERTISING ACCOUNT MANAGEMENT
Overview
Advertising professionals come in two "varieties":
creatives, who dream up ideas for the advertising campaigns that companies use to persuade people to buy their products and services
account managers (sometimes called account executives), who maintain relationships between their advertising agency and client companies and who work as liaisons between clients (the "accounts") and creatives.
If a client approves a creative team's preliminary advertising idea, the account manager works with the team -- as well as with photographers, film makers, and related professionals -- to produce the finished advertisement. During the entire campaign-development process, the account manager stays in touch with the client, smoothing disagreements and reassuring them that the campaign is going to be a major success.
This campaign-development process is fraught with tension, for several reasons:
Creating an ad is hugely expensive.
A single ad campaign can play a major role in a product's -- and an entire client company's -- success or failure.
Product and marketing managers at the client company, as well as people at the advertising agency itself, invest enormous energy and resources in an ad effort. Thus they all have a lot at stake in it. One agency executive likened the client/agency advertising team to a group of people all roped together who jump out of an airplane -- and hope the parachute opens.
For an ad campaign to succeed, the account manager must play several roles:
As a kind of group psychiatrist, he or she smoothes relations between the creatives (who often bring both artistic sensibility and sensitivity) and the client's product managers (whose ownership of the product gives them both power and high anxiety).
As a translator, he or she communicates the client's wishes and helps the creatives narrow their ideas down to one or two that they then present to the client.
As a kind of salesperson, a senior-level account manager will also "pitch" advertising ideas to new firms whose business he or she hopes to gain for the ad agency.
COMMERCIAL BANKING
Overview
Commercial banks perform two main functions:
lending money to businesses and individual customers
providing individuals with checking and savings accounts, car loans, home mortgages, and automatic teller machines (all of which are collectively known as "retail" services in the banking industry)
Such banks come in several varieties:
Small, independent banks provide credit to businesses and individuals in the community. People who work at these banks get to know their customers, review loan applications, know how to tactfully decline applications that don't pass muster, and manage other bank personnel, such as tellers and "back office" personnel.
"Retail branches" of larger banks provide the same services as the independents but with greater resources (and often with greater bureaucracy and less autonomy).
Large money center banks and banking holding companies are global businesses. They lend money to large corporations all over the world, move money to different overnight "parking places" where it can earn the most interest, trade in foreign currencies, invest in the capital markets, manage huge infrastructures, and deal with thousands of personnel.
Whether large or small, all commercial banks have one thing in common: They make a profit by lending money to customers. In fact, the interest that a bank charges for loans constitutes a primary source of revenue.
As part of the lending process, banks must persuade potential customers to borrow money from them rather than from another bank. They do so through various strategies:
offering better terms (lower interest rates) or larger sums
forming close relationships with their customers, much like salespeople do
In other words, banks have to "sell" loans, which are simply agreements to "rent" money to their customers. Thus a commercial lender has to have excellent sales skills: If he or she doesn't make the sale, someone else will.
Small and large banks sell their services and enhance their reputations in different ways:
Smaller, independent bankers work close to home, actively participate in community activities, donate time and money to local charitable organizations, sponsor young people's sports teams, and so forth.
Large corporate lenders travel a great deal, advising and entertaining potential customers, such as CEOs, CFOs, and treasurers in client companies. Banks that have an international presence may work with senior government leaders (e.g., the Minister of Finance) in the country in which they're based.
In a large bank, the "selling" of loans takes place both externally (with individual customers) and internally (with the bank's credit committee). As you can well imagine, banks don't like it when loans "go bad"; that is, when borrowers can't pay back the interest and the principal they borrowed from the bank.
If a loan goes bad -- for example, the business that borrowed the money goes bankrupt -- a bank can secure the borrower's assets by working with bankruptcy attorneys and courts. However, this isn't nearly as profitable as lending to a business that repays the loan, with interest, right on time.
So a lender who works for a large bank needs to convince the bank's credit committee that the potential profits gained by lending to a particular customer justify the risk, and that the risk is manageable. Not surprisingly, there's a tension of sorts between the lender and the committee:
The lender wants to "make the sale" (because part of his or her compensation is tied to how much money he or she lends).
The credit committee wants to play it safe. Therefore, it will scrutinize the lender's "package" from every angle and pick it apart, looking for potential problems.
Thus a big part of a lender's job is to prepare compelling packages and to endure the examination of the credit committee -- something that some lenders dread.
FINANCE IN A CORPORATE SETTING
Overview
Finance professionals in a corporate setting handle many different activities, depending on the level they reach.
For example, at the Chief Financial Officer (CFO) level, the work includes:
helping the company choose an investment bank for a debt or equity offering
helping the CEO determine whether to take the company public (and when) or whether to buy back the company and take it private
arranging lines of credit with banks
determining the value of a company targeted for potential acquisition or the value of an existing business's segment for potential sale
working with accountants on the company's annual audit
forecasting profits and losses
interacting with the investment community
reviewing budgets
helping to set the company's overall strategy
Clearly, the CFO of a company is involved in virtually every aspect of the business.
At lower levels, finance professionals work in the areas the CFO oversees. For example, they:
interact with the CPA firm doing the audit
perform their own audits
track cash flow
prepare and review budgets
work with managers to determine the profitability of certain lines of business
work with information specialists to help design systems that accurately and fairly allocate costs
monitor investments in the company's 401(k) retirement plan
prepare quarterly financial statements
trade the firm's capital for the most favorable return
For more information, see the other finance-related career profiles.
Some finance professionals in corporate settings remain individual contributors, but most move into management positions, often relatively early in their careers.
Obviously, CFOs of Fortune 500 corporations and people who handle the financial side of a small business do very different things. Likewise, the specific duties of a finance professional change depending on his or her number of years in the business.
However, regardless of company size or seniority, finance professionals share similar interests, abilities, and values
FINANCIAL PLANNING AND STOCK BROKERAGE
Overview
Careers in financial planning and stock brokerage cover a wide range of activities. Professionals in these arenas include:
retail stock brokers who sell stocks, bonds, and other investment instruments to individual clients
independent financial planners who help clients decide how much life insurance they should have, what kinds of mutual funds they should invest in, how much they should save for retirement and their children's education, etc.
personal investment managers, individuals who make investment decisions on behalf of clients whose funds they manage (including trust-fund accounts)
private bankers or private client-services providers
Financial planning and stock brokerage differ in:
the training and legal licensing they require
the breadth and depth of their responsibilities
their compensation methods
However, they share a focus on managing the finances of individual clients. This focus contrasts with that of investment-fund management, in which managers make investment decisions for entire groups of people (such as investors in a mutual fund, or employees who have retirement funds). As such, financial planning and stock brokerage are professional service businesses, like medicine or law.
Financial planners help clients make decisions about long-term financial issues. They typically charge an hourly or flat fee -- though some who offer advice regarding mutual funds charge a percentage of the assets a client has invested.
Stock brokers advise clients about which individual stocks and bonds to invest in. They earn their fees on a commission basis: For every purchase or sale they make, the brokerage house they work with charges a fee and pays them part of that fee.
Because brokers work on commission, people sometimes fear that they put "the sale" above their clients' best interest. (Of course, if brokers "churn" clients' accounts -- that is, make trades for no good reason other than to earn commissions -- they violate Securities and Exchange Commission regulations. They also operate against their own long-term interests, since they depend on referrals for new business.)
Personal investment managers are compensated based on the amount of money they manage (their "assets under management"). As a result, they have no reason to make trades that might not be in their clients' best interest. On the other hand, since they earn a percentage of clients' assets regardless of how actively they manage those investments, some clients worry that there's no incentive for these managers to work as hard as they can.
Financial planners and stock brokers need extraordinary interpersonal skills for several reasons:
They're in a position to help or hurt clients dramatically.
Their clients are always suspicious that they may be serving their own interests first.
Their clients aren't highly skilled investors, and may become very emotional when making decisions about their own money.
Therefore, to keep customers and get new referrals from them, professionals in this field have to win their clients' trust. They can do so by:
communicating complex information clearly to clients
using sensitivity and diplomacy in navigating their relationships with customers
GENERAL MANAGEMENT
Overview
General management is arguably the ultimate realization of a career in business. It entails complete responsibility, including profit and loss accountability, for the performance of an entire business or a business unit. A general manager can be:
the president or CEO of a company, or
the head of a division or department within a larger business; e.g., the division manager for the fixed-income group of a money-management firm, or the vice president of the Internetworking business of a global telecommunications company.
General managers typically have cross-functional responsibility; that is, they make decisions that involve the coordination and integration of functional areas such as sales, marketing, human resources, finance, and production. Thus they oversee the individuals in charge of these various areas and coordinate their activities for the good of the larger company. (Of course, in an entrepreneurial start-up, the general manager may not only be the president or CEO; he or she may also lead the company's sales, marketing, and other key operations.)
The CFO may know more about finance and the vice president of marketing more about marketing, but the general manager has to know enough about each function to:
coordinate its activities with the organization's overall strategy, and
plan the business's strategy for going forward.
In a way, a general manager is like a symphony orchestra conductor, who holds rehearsals, hires and retains the talent, conducts during performances, and composes music that the orchestra will play during future engagements.
To accomplish all this, a general manager has to constantly shift his or her attention among:
immediately pressing issues, such as financing, budgets, new hires, union negotiations, relations with the parent company or important customers, and disputes between individuals or departments,
issues that are visible but not immediately pressing; for instance, all of the above plus staffing needs; space requirements; and sales forecasts and their implications for sourcing, production, and distribution, and
issues that are still unseen but crucial to the company's future; e.g., industry and demographic trends; the impact of new technologies on the business; the advisability of entering new markets; and questions of whether to acquire another company, sell an existing division of the business, or partner or merge with another organization.
Clearly, a general manager's job is complex and requires flexibility and quick decision making. One general manager described the work as "juggling hand grenades while pedaling down a bumpy road on a unicycle."
Not surprisingly, most successful businesspeople advise aspiring entrepreneurs to learn the craft of managing while working for someone else before striking out on their own. In fact, one venture capitalist asserted that when someone with little or no management experience starts a new business, the question isn't whether the enterprise is going to fail -- it's when it will fail. The responsibilities of general management are so complex that a single mistake can doom a start-up.
Ultimately, accountability for the success (or failure) of the business rests entirely with the general manager -- which is what many people find so challenging and attractive about the role. How to prepare yourself for this weighty responsibility? Prepare yourself thoroughly -- please read the special section for this business career profile, The Right Path, to learn about the ways you can become a general manager.
HUMAN RESOURCES MANAGEMENT
Overview
Human resources managers oversee the recruitment, training, and compensation of a company's employees. A business is only as good as the people it employs, so human resources managers strive to ensure a high-quality workforce.
Human resources professionals:
design and administer complex compensation and benefits systems
counsel employees on a range of work-related issues
design and manage recruiting programs
work with managers from other functional specialties to make sure each division, department, or team has enough staffing to support the organization's mission
design and deliver training programs addressing a wide area of business skills and issues(or manage bringing in a consultant who will do so)
work to help resolve workplace disputes (especially between workers and managers)
administer pension and 401-K plans
consult when individuals are being terminated or the workforce is being downsized
This profession attracts people who enjoy the interpersonal aspects of business. Not surprisingly, many human resources professionals have a background or strong interest in psychology, sociology, counseling, or organizational behavior.
INFORMATION SYSTEMS MANAGEMENT
Overview
In this age of information and "knowledge work," the systems that businesses use to access, store, transfer, and manipulate information have become increasingly important. If capital is the lifeblood of a business, information systems constitute its central nervous system.
As companies have found it easier than ever to access and use information to make key decisions, they've placed an ever higher value on the competitive edge that information systems can provide. Not surprisingly, they've also placed a higher value on the people who design and manage those systems.
"Information systems (IS) management" is a somewhat confusing term, because it refers to both management of information technology (IT) itself and management of the people who operate IT systems. These people include those who:
write the code that runs the system
enter data into the system and run analyses
maintain the system in the network operations center and fix it when it crashes
design the system's architecture
ensure that the various parts of a system can "talk" to each other
manage the entire IS operation
Professionals in this last role are sometimes called chief information officers (CIOs). They're considered to be at the same managerial level as chief financial and operations officers (CFOs and COOs).
IS management takes place in two settings:
within operating companies that hire one or more professionals to manage the data essential for running the business
in consulting firms that offer IS services. (Several larger public accounting firms have either moved into this area of consulting or have spun off IS consulting operations.)
Obviously, information systems are more vital to some industries than others. For example, financial services, transportation, telecommunications, and some government areas (e.g., the U.S. Social Security Administration or Internal Revenue Service) depend enormously on information systems.
But any company, in any industry, benefits from information systems to some degree. For example, some people maintain that Johnson & Johnson's quick gathering and analysis of sales data on Tylenol helped the company decide not to completely kill the top-selling product after tampering caused the deaths of several people. Had P&G not had access to the systems that enabled it to collect that information, or had the company taken weeks or months (instead of days) to acquire and analyze the data, it might have decided to kill the product completely, thereby losing millions of dollars.
INTERNET BUSINESS DEVELOPMENT
Overview
Business development is currently a major, vital role in companies that are based primarily in the world of the Internet. As the Internet industry invents and reinvents itself, and experiments with different business models, one thing has become clear: Business in cyberspace depends on innovative arrangements for its survival; for example:
alliances
joint ventures
licensing arrangements
novel agreements to co-market products and services
At a successful Internet company, the Vice President of Business Development strives to identify, seek out, and execute these key alliances and joint ventures before competitors arrive on the scene.
Sometimes a business development project goes beyond partnership to actual acquisition of another company. The new acquisition may offer a proprietary technology or a product or service that will augment or complement the acquiring company's existing product or service, making the firm more competitive.
As with everything else in the Internet world, business development operates at a far faster clip than it does in "Old Economy" companies. Acquisition or joint venture agreements that take over a year to develop in traditional companies occur in a matter of months in the atmosphere of the Internet "land rush" -- where "getting there first" and staking out territory is considered essential for survival.
The relentless, high-speed evolution of Internet business models heightens this sense of urgency and accelerates the pace even more. It's not unusual for an Internet company to change its revenue model completely -- for example, going from a subscription model to an advertising model. And every time the model changes, the company has to reevaluate and re-execute its overall strategy, partnerships, and other key dimensions of the way it does business.
Internet business developers work closely with both marketers and product developers. As companies learn more about customers' behavior on the Internet, their marketing strategies change. Those changes, in turn, require new business development strategies.
For example, initial experiences in the market may reveal that a company needs to change its product or service or master a new technology. In response, business developers would need to come up with new alliance, licensing, or acquisition plans.
To navigate in this rapidly shifting landscape, Internet business developers have to be alert, creative thinkers who can seize immediate advantage of new opportunities. In fact, this "need for speed" and flexibility is precisely what attracts the people who most enjoy this work.
Whether this highly charged atmosphere will persist as the Internet industry matures remains to be seen. But for now, Internet business developers have the opportunity to be market visionaries and results-oriented deal makers in a highly entrepreneurial environment. Currently, these professionals have the distinct privilege of being the "driving function" in many, if not most, Internet companies.
Until recently, most business professionals lacked Internet business development experience (given the very young age of the industry itself). What, then, do Internet companies look for when evaluating candidates for the business development role? They emphasize the following:
Strong general business analytical experience. This doesn't necessarily mean unusual financial analysis ability. Rather, it means the ability to analyze and understand markets, market trends, and the implications of emerging market realities for company strategy.
Deal-making and negotiation experience. Internet companies look for new business developers who have skillfully handled business deals in previous work settings. For example, many young professionals who have experience in investment banking (particularly mergers and acquisition), venture capital, or private equity are hired into Internet companies.
Familiarity with the company's product or service and an interest in the technology that will shape its delivery. You don't have to know software programming languages to be effective in business development. However, if your company's product or service involves a rapidly advancing Internet technology, you need to know how changes in that technology will affect your product's or service's position in the marketplace
INTERNET MARKETING
Overview
Marketing (along with business development) has emerged as a driving function in Internet companies. In many ways, the role of the marketing manager in an Internet business strongly resembles more traditional marketing roles in brick-and-mortar companies. For this reason, much of the information below parallels that in the marketing and marketing management business career profile.
In other ways, marketing on the Internet differs significantly from traditional marketing, owing to a unique blend of characteristics that define the Internet world, such as:
a start-up environment
a strong entrepreneurial culture
technology that allows "real-time" market feedback
a lack of marketing training programs
limited budgets
demand for rapid execution of marketing programs
Because the Internet industry is unique, we strongly urge you to read the insider interview with Paige Arnof-Fenn. Paige is Vice President of Marketing at and held marketing positions at Proctor & Gamble and Coca-Cola before heading up the marketing function in two successful Internet businesses. In the interview, Paige describes major differences between traditional and Internet marketing roles.
The job of any marketing professional is to ensure that his or her company's products or services become consumers' top choices in the marketplace. A marketer must therefore be many things:
a psychologist who studies potential customers' behavior
an artist who can identify the visual and linguistic images that will capture consumers' attention
an analyst who uses the most effective statistical modeling to tease out customers' buying patterns
a leader who can manage a team of marketers and motivate professionals in other functional areas while implementing a marketing plan
In the Internet world, marketers also need up-to-date knowledge of technological changes that may affect how their company delivers its product or service.
Generally, the marketing function interfaces extensively with a company's other major business functions. For example:
Internet marketing strategy affects the company's business development strategy (and vice-versa) and the allocation of advertising resources.
Marketing works closely with the company's production or service delivery departments to ensure that product or service specifications will meet consumers' demands.
Marketing professionals must understand the company's finances and the costs and profits associated with a particular product or service.
Marketers have to get involved in the company's long-term strategic planning, including assessing market changes and the potential that new business alliances may bring.
Given the scope of business concerns that marketing professionals interact with, it's not surprising that marketing is often thought of as a "microcosm" of the entire business enterprise. Marketing managers must have strong skills in business analysis and a broad-based appreciation for business as a whole. Therefore, many people see experience in this discipline as ideal training for general management.
People enter Internet marketing careers in different ways. Individuals with business or liberal arts undergraduate degrees, or those who have sales experience, can often find entry-level positions in this line of work. These positions require both analytical ability and creativity.
For mid-level and higher marketing management positions in larger organizations, you may need an MBA degree. Most MBA programs provide marketing coursework in addition to courses in other functional areas important to general management.
Many high-tech companies split the marketing function into two roles:
The product manager serves as the liaison between the engineering department and the sales/marketing function. He or she manages product or service specifications and technical enhancements for end products.
The marketing manager focuses on selling, advertising, and promoting the product.
INTERNET NEW MEDIA/WEB DESIGN
Overview
New media developers for Internet companies design, produce, and maintain the content of a company's Web site. They may work as:
employees for established companies
freelance design consultants
owners of their own businesses that provide Web design and support services to Internet companies
Business on the Internet has visual, auditory, and navigational components. A Web site's content, architecture, and its visual/auditory elements all come together to create the experience visitors have when they navigate through the site. Consequently, the design and presentation of the site are vital for making that experience as positive and productive as possible for customers.
To that end, a new media designer needs:
the strong aesthetic sense of an artist
the instincts of an advertising professional
the facility of a computer expert
All three of these elements (artistry, advertising sense, programming ability) make the "Webmaster" position uniquely challenging.
Most new media designers have dominant skills in one of these areas and develop the others as their career progresses. For example, some designers worked earlier as graphic artists in a non-Internet world; others have a background in print or radio/TV advertising; still others are skilled programmers with an artistic bent.
Yet all three types have something in common: a strong need for creativity and a love of "blank page" challenges.
INVESTMENT MANAGEMENT (PORTFOLIO MANAGEMENT AND SECURITIES ANALYSIS)
Overview
In this profile, you'll learn about four areas of investment management:
portfolio management
securities analysis
credit analysis
quantitative analysis
You'll discover how these four areas work in both "buy side" environments (such as mutual fund management companies) and "sell side" environments (such as investment banks that sell securities to large institutional investors).
Other business career profiles discuss additional areas of investment management; specifically:
financial planning and stock brokerage
investment banking
sales and trading in investment bank settings
Throughout this profile, we'll use the terms "investment manager" and "portfolio manager" interchangeably, though the meaning of these titles can vary somewhat from one financial services setting to another. But in our case, we'll use both terms to refer to professionals who make decisions concerning the buying and selling of securities for a financial services organization.
Investment managers may work for:
mutual fund companies
banks
insurance companies
pension funds
a variety of other financial services organizations
In the United States, the largest employer of investment managers is the mutual fund industry. In a mutual fund firm, investment managers typically are called portfolio managers. ("Portfolio" refers to the group of securities a particular mutual fund holds at any given time.) These portfolio managers work with a team of:
analysts, who perform the research necessary to determine the most attractive investment opportunities
traders, who conduct the actual buying and selling transactions
Most portfolio managers have a background in securities analysis, so let's take a closer look at this career area. (To learn more about the trading side of the equation, see the Securities Sales profile.)
In your research into investment management, you may encounter three terms used to describe different securities analysis roles:
Securities analyst: These professionals do any kind of analysis of securities. However, the term also refers to someone who researches individual companies to make recommendations for the purchase or sale of their stock.
Securities analysts typically have a broad-based business background, and many hold an MBA. They may employ mathematical analysis in reviewing companies, but they also approach business problems qualitatively, considering factors such as:
a company's position within its industry
the financial "health" of the industry overall
its market
its financial health
the quality of its management
In all but the smallest investment management firms, securities analysts typically specialize and become experts in one industry (or possibly a few industries). They follow industry events closely and stay in touch with top management at the companies in which they've invested or are considering doing so.
Credit analyst: These specialists research the credit risk (and investment benefit) involved with the purchase of specific bonds or other "fixed-income" securities.
Credit analysts may come from a variety of backgrounds. Most have undergraduate or graduate degrees in business or a related field. They often learn the skills of credit analysis "on the job" from more senior analysts. Their work requires:
comfort with mathematical analysis
an understanding of corporate financial report analysis
familiarity with and understanding of fixed-income credit ratings
Quantitative analyst: These professionals are specialists on the bond side of investing. They use mathematical models to identify strategies for the optimal purchase and sale of fixed-income securities.
Quantitative analysts typically have a strong background in mathematics. Most have advanced degrees in areas such as applied mathematics or computer science, or even physics and engineering.
Securities analysts of all types work in "buy-side" environments, such as mutual fund companies, and "sell-side" environments, such as investment banks that sell large blocks of stocks to institutional investors.
As on the buy side, analysts on the sell side tend to specialize in one industry. With enough time and focus, they can eventually come to be known as "gurus" on that particular industry. In fact, the most successful of them are highly visible and valued figures on Wall Street.
Given the relatively "calm" pace of business on the buy side in relation to the hectic pace of Wall Street, some securities analysts make the transition to the buy side after learning their craft in a major sell-side bank.
In some settings, securities analysts can work toward becoming portfolio managers. In other firms, the securities analyst role is seen as a senior career position on par with that of portfolio manager: Successful securities analysts become highly valued and well-compensated "stars."
If you have your eyes set on a portfolio management role and you're starting out as a securities analyst, carefully examine the career paths of different investment management organizations.
MANAGERS IN SCIENCE/ENGINEERING
Overview
As technological advances have swept the global economy in recent decades, young people have poured out of colleges and universities with degrees in engineering and science. As they gain experience in the work world, many of them become strong technical experts.
Engineers might gravitate toward a wide range of work, including:
software or circuit board design in the semiconductor industry
product design (for example, creating innovative features for a funky telephone or designing a new unmanned aircraft for the military)
process design (such as improving the way a production or manufacturing line works)
logistics planning (for instance, the complex "just-in-time" inventory management of a large manufacturing firm, or the planning and tracking of ships and planes that deliver parts and distribute products)
Scientists also work in a broad range of areas, including:
biotechnology research
medical devices development
meteorology
oil and gas exploration
chemical product development
agriculture
genetic engineering
space exploration and satellite development
The Big Question
No matter which area an engineer or scientist ends up specializing in, he or she will likely face an important -- and difficult -- question someday: "Should I become a manager of other engineers or scientists?"
This question comes up for several reasons:
In some companies, high-performing individual contributors (that is, those who do engineering or science work themselves rather than through others) have to become managers in order to move forward in their careers and earn higher salaries.
Many people associate the managerial role with higher status, power, intelligence, and so forth. Thus they feel pressured to strive for a managerial job in order to gain all the benefits that accrue with working in such a high-visibility position.
In some work environments, engineers and scientists who sense that they may want to become managers have parallel career paths open to them. Specifically, a high performer might:
work as an individual contributor for a while and then manage a functional area in research and development or production and manufacturing
enter the general management ranks in the high-tech or healthcare and science sectors
But perhaps the question "Should I become a manager?" isn't nearly as important as the question "Do I want to become a manager?" At its core, management means getting things done through other people. Thus people who enjoy managing have very different core business interests than people who enjoy being hands-on engineers and scientists. Management also requires very different abilities from those associated with technical expertise and individual contribution. And, it offers very different rewards.
Many engineers and scientists who decide to make the leap into management enjoy their new role and become very successful. But just as many do not -- primarily because they don't carefully consider every aspect of management before deciding to embark on that career path.
This profile is designed to help you think through the vital question of whether you want to become a manager. The sections on core business interests, abilities, and work reward values will help you separate management's sometimes glamorous image from the facts -- so you can make the decision that's right for you.
But if you're not sure whether you'll eventually want to transition from engineering or scientific work to management, make sure that you don't sign on with a company that only rewards people who do just that.
If You Don't Have a Technical or Scientific Background
If you don't have a technical or scientific background and are considering a career managing engineers or scientists, you'll probably bring some definite strengths to the managerial position. (But you'll also face some tough challenges.)
Some engineers and scientists use "tech speech" -- a way of talking and writing that's understandable and meaningful to each other but not to managers, investors, business partners, and customers. As a "layperson," you could help translate "tech speech" into more accessible language. (If you do end up managing engineers or scientists, don't be embarrassed if you don't understand something they've said; if they can't explain it to you, they need to do better.)
If you lack a technical background, you bring another asset as well to the managerial role: simply having a different point of view. For example, suppose your engineers or scientists are enormously excited about a new, super-fast way of doing something. But you know that there's absolutely no market for the process. You'll be the person who has to widen their horizons and break the news that their breakthrough -- though intriguing -- doesn't yet have an audience.
On the other hand, you'll probably encounter resistance to your ideas from your more technically oriented staff members. They'll test your knowledge, and maybe they'll even use jargon to purposefully leave you out of the discussion. It's crucial that you:
learn as much of what you need to know as soon as you can
express your appreciation for what engineers or scientists bring to your group's work
make your engineers or scientists understand what you bring to the work
ask questions frequently and fearlessly; if you don't understand the answer, ask more questions until you get it
MARKETING AND MARKETING MANAGEMENT
Overview
All businesses need a plan and a process for marketing their products or services, and all but the smallest companies have professionals dedicated solely to this function. Marketing, along with sales, production, and finance, is a core functional area in most companies. Indeed, many businesses -- including some of the largest in the world -- rely on marketing strategy to drive company profits.
Marketing executives have a prominent place among the senior managers of any business. In fact, in many "marketing-driven" firms -- such as large consumer-products companies -- the most senior general managers typically advance to their positions from the marketing function.
Marketing professionals interface extensively with a company's other major business functions. For example:
Marketing strategy affects the company's business development strategy (and vice-versa) and the allocation of advertising resources.
Marketing works closely with the company's production or service delivery departments to ensure that product or service specifications will meet consumers' demands.
Marketing professionals must understand the company's finances and the costs and profits associated with a particular product or service.
Marketers have to get involved in the company's long-term strategic planning, including assessing market changes and the potential that new business alliances may bring.
Given the scope of business concerns that marketing professionals interact with, it's not surprising that marketing is often thought of as a "microcosm" of the entire business enterprise. Marketing managers must have strong skills in business analysis and a broad-based appreciation for business as a whole. Therefore, many people see experience in this discipline as ideal training for general management.
The job of any marketing professional is to ensure that his or her company's products or services become consumers' top choices in the marketplace. A marketer must therefore be many things:
a psychologist who studies potential customers' behavior
an artist who can identify the visual and linguistic images that will capture consumers' attention
an analyst who uses the most effective statistical modeling to tease out customers' buying patterns
a leader who can manage a team of marketers and motivate professionals in other functional areas while implementing a marketing plan
Different marketing professionals take different approaches to their work. They may:
develop strengths in specialty areas, such as market research, marketing strategy, and creativity (as it relates to the language and imagery associated with a product's advertising and packaging)
develop general management abilities
approach marketing as an extension of sales, using direct interaction with customers and the intuition they've developed by working "in the field" to inform their decisions
rely on sophisticated analyses of market dynamics to guide their marketing plans
combine sales and market-analysis approaches
Sometimes different marketing styles can lead to specific careers within the field. For example:
Professionals with a more analytical approach to the discipline may gravitate toward roles such as director of marketing research.
Those who like to combine a sales approach with analysis may head for a position as vice president of sales and marketing.
The more creatively inclined may choose to work with advertising firms or actually join an advertising firm.
Different organizations also emphasize different aspects of marketing. For instance:
Companies known for their meticulous attention to continual and detailed market research reward and support marketers who show interest and facility in that area.
Companies known for their creative collaboration with advertisers value marketers with a strong artistic bent.
Larger organizations offer work in many different marketing specialties.
The individual styles and interests of managers within all three kinds of firms exert a strong influence on the way a company handles marketing.
People enter marketing careers in different ways. Individuals with business or liberal arts undergraduate degrees, or those who have sales experience, can often find entry-level positions in this line of work. These positions require both analytical ability and creativity.
For mid-level and higher marketing management positions in larger organizations, you may need an MBA degree. Most MBA programs provide marketing coursework in addition to courses in other functional areas important to general management, such as strategic planning and organizational behavior.
In a consumer-products company, successful performance in entry-level staff roles can lead to the assistant brand manager role. The assistant brand manager works under a brand manager who has ultimate responsibility for the marketing of a particular product.
In several ways, brand managers' work strongly resembles that of general managers:
Brand managers have profit-and-loss responsibility for the product they manage.
In the case of a high-revenue product, brand managers lead a large team dedicated to that product.
A brand manager can move on to various other positions, such as group manager, in which he or she manages a group of related products. From there, a group manager may advance to various general management positions that involve running whole business areas within the company. Ultimately, a marketing professional can assume the most senior management position with the company as CEO or President.
Professional titles and specific roles in marketing may vary, depending on the organization. For example:
In non-consumer product companies, the title comparable to brand manager may be "product manager." In some manufacturing environments, the product manager gets heavily involved with the manufacturing process itself. He or she is often the one who "shepherds" the product from conception to marketplace.
In some firms with highly technical products, product managers must have a technology background, even an engineering or computer sciences degree. In other such firms, technical background is less important than general analytical and management expertise.
If you have an engineering or computer-related degree and genuinely enjoy technology but are interested in a marketing career, you'll have a competitive advantage as a marketer in a technology-oriented organization. If you don't have a technical degree and most of the product managers and senior managers in the company you're considering do have one, think carefully about whether the company will offer you enough career advancement opportunity.
NONPROFITS (ADMINISTRATORS IN HIGHER EDUCATION, GOVERNMENT, AND HUMAN SERVICES)
Overview
In this profile, you'll learn about administrative careers in three nonprofit areas:
higher education
government
non-governmental organizations (NGOs) that provide human services (such as hospitals, the Red Cross, health-insurance providers, and Legal Aid)
Note: The examples we provide are of nonprofit organizations in the United States, so readers from other countries may need to "translate" from those examples into appropriate NGOs in your own countries.
In all three areas, the primary mission is not profit. Rather, it's to provide a variety of services, including education; government programs such as health care, police, and fire protection; and military defense. Still, to varying degrees, nonprofit organizations use business models to guide their operational processes.
For example, the American Red Cross "spun off" its blood-bank business so that that business now operates as a separate entity from the Red Cross's emergency services. Both operations now run more efficiently.
Moreover, as in for-profit organizations, professionals working in any of these areas may serve either as managers or individual contributors.
PRIVATE EQUITY INVESTMENT (INCLUDING VENTURE CAPITAL AND LEVERAGED BUY-OUT)
Overview
Private equity financial services professionals arrange the financing of businesses from nonpublic sources -- typically private investors or organizations that want to invest in business opportunities that aren't available in the public equities (stock) markets.
Private equity professionals come in two "varieties":
Some work in venture capital (VC) firms (and venture capital divisions within larger firms). They seek out new companies (or business plans describing ideas for new companies) that offer exceptional promise. They then find investors who are interested in funding those ventures.
Others work in leveraged buy-out (LBO) firms. They seek to acquire controlling interests in existing businesses that haven't yet realized their earning potential.
In both cases, these individuals then try either to increase the value of their firm's portfolio companies and eventually sell the companies, or help them "go public" with an initial public offering (IPO) of stock. Both of these moves can substantially increase the value of the equity that the VC firm holds.
Each group focuses on different challenges. For example:
Those working in VC firms need to ensure that a portfolio company receives the funding and expert advice necessary to become a stable and competitive business.
Those working in LBO firms typically take an even more active role in managing the acquired company. Often they introduce a new management team and make fundamental changes in the organization's structure, business processes, strategy, and policies.
Private equity firms tend to be quite small compared to other types of financial services firms. They're staffed by talented financial services experts. Moreover, they tend to recruit employees through networking rather than through more formal and public hiring channels. (However, the large growth of the venture capital industry over the past several years in the United States has prompted more formal recruiting on MBA campuses.)
These professionals enter the field from two directions:
Some start off as analysts. As their major responsibility, they review business plans and identify those few proposals that the firm's principals may want to consider for investment.
Others enter the field "laterally" from related deal-oriented financial services industries (such as investment banking); from management consulting; or from the managerial level in an industry that interests the hiring private equity firm.
Regardless of the entry point, the goal is to become a principal of your firm. As a principal, your compensation largely depends on the profitability of the deals you've initiated and completed. For example, suppose your firm has invested in one of your deals -- whether it's a fledgling company with no product or an existing company seeking second, third, or higher rounds of investing. If the investment generates a substantial profit, you get an agreed-upon portion (the "carry") of that profit.
In VC and LBO firms, people face different sorts of pressures. For example:
Some people have described the role of the venture capital professional as a cross between the "deal-maker" role of the investment banker and the "business-maker" role of the entrepreneur -- with perhaps more emphasis on the "deal-maker" dimension. Successful venture capitalists must, first of all, find a good deal.
This often means looking over as many as two hundred potential deals in any given business area before choosing one to invest in. One venture capital professional we know said, "I'm not doing my job unless I'm on the telephone for most of the day."
Venture capitalists must therefore be skilled networkers and communicators. Having a "big Rolodex" is seen as a major asset in this profession.
Leveraged buy-out professionals face the same pressure to find the one exceptional opportunity amid many mediocre or poor ones. In addition to being able to network and communicate well, these people need sophisticated analytical skills to accurately value companies. They also have to understand the dynamics of a particular market and assess a company's chances of competing successfully within that market.
Once a private equity investment professional identifies an attractive deal, he or she generally works to structure the deal with:
a syndicate of investment firms
the founders of the company being leveraged or invested in
other early-stage investors
The private equity professional then helps align the interests of all these parties so that the investment effort will serve the ultimate good of the portfolio company. Because these negotiations are complex and time-consuming, the investment professional needs a lot of patience, perseverance, and psychological insight, as well as strong negotiation skills.
Once the deal has been structured and executed, the hardest work lies ahead: making the portfolio company succeed. Private equity professionals typically take positions on the boards of directors of their portfolio companies and help guide their management.
However, many people mistakenly believe venture capital professionals take an active role in helping to manage portfolio companies' operations. Usually they don't.
Both venture capital and leveraged buy-out firms often bring new managers to their portfolio companies -- but these are typically seasoned managers who have substantial experience in operating roles within the portfolio company's industry. So, don't assume that getting a job in the venture capital realm will give you experience in managing a small company. Venture capitalists indeed serve as good networking contacts for leads to operating jobs in small companies, but they rarely move into those roles themselves.
PRODUCTION AND OPERATIONS MANAGEMENT
Overview
All businesses have one purpose: to offer a product or service to customers. Thus companies have to figure out the best way to manufacture and distribute their product or to operate their service.
Products come in all shapes and sizes and have virtually infinite characteristics. As just a few examples, they might be:
large (diesel engines and jet aircraft) or small (watches and computer mice)
high tech (microprocessors and magnetic resonance imaging machines) or low tech (paper bags and industrial fasteners) … commodities (fuel oil and frozen orange juice)
differentiated (motorcycles and stereos)
intellectual property (books or computer software)
Moreover, companies target different kinds of customers for different products. For example:
Some companies make products intended for individual consumers, such as eyeglass frames and cold cream.
Others offer products to other businesses; e.g., turbine blades for hydroelectric power plants and automotive fuel injectors.
Whatever the product is -- and whoever the customer is -- the company has to find the best way to
gather the supplies and materials that the product will be made of (e.g., plastics, machine parts, chemical ingredients)
buy or fabricate the machinery needed to make the product
oversee the product's manufacture, quality, storage, and shipment
The production and operations manager orchestrates all this.
Similarly, services come in a rainbow of varieties. Here are just a few examples:
market research
personal shopping
freight shipping
consulting
transportation
restaurants and hotels
electric utilities
As with products, companies that offer services may sell to different kinds of customers. For example:
Some firms sell their services to other businesses; e.g., providing shipping services to rail freight companies.
Others sell services to individual end users; for instance, personal shopping.
Still others -- such as electric-utility firms -- sell to both businesses and individuals.
Finally, some customers are internal to the service company itself; e.g., a firm's market-research group provides research services to that same company's marketing department.
Whatever the service is, the production and operations manager has to make sure that the company has the equipment and staff it needs to deliver that service to customers in a timely and efficient manner.
Production and operations managers grapple with real-world, practical challenges every day -- whether it's the breakdown of an outgoing delivery truck, a delay in the shipment of crucial manufacturing supplies, or a grumpy attitude on the part of a hotel reception clerk.
To juggle their many responsibilities, they have to stay focused on results and need a supremely pragmatic outlook. The results of what they do are instantly visible and measurable, and they're always on the lookout for ways to improve.
PUBLIC RELATIONS AND COMMUNICATIONS
Overview
All organizations have a mission, goals, image, and reputation. Moreover, they all experience events that are important to their employees as well as their customers, business partners, and the general public.
To make sure their image, brand recognition, and reputation remain positive in the minds of employees and outside constituencies, companies employ public relations (PR) and communications professionals. In fact, PR is a major link in an organization's overall business strategy.
The director of PR or communications has many responsibilities. He or she:
plans and delivers press releases, conferences, other media events, and newsletters to internal and external constituencies
represents the organization at industry conferences
responds to inquiries from the press and general public concerning the organization's activities
monitors the media to see what kinds of information about the organization is circulating
responds to media reports about the organization when appropriate
anticipates events that are likely to draw positive or negative attention to the organization and its activities
PR/communications professionals also play a key internal role in keeping employees informed about company activities and inspiring them to achieve company goals. They accomplish this by publishing company newsletters and holding information sessions and other events for employees.
Smaller or more financially constrained organizations may outsource much of the PR/communications function to consulting firms. Even the largest organizations typically call on external public relations firms for major events planning or other specialized services.
Professionals in this field may therefore work:
within a company's internal PR/communications department
in a communications consulting firm
as directors of their own PR consulting businesses
Typically, a PR professional first works for a company under the tutelage of more senior officers and then may become an independent consultant, with or without partners.
RESEARCH AND DEVELOPMENT MANAGEMENT AND NEW PRODUCT DEVELOPMENT
Overview
As a powerful way to increase revenues, most businesses steadily introduce new products and services and/or revamp their existing offerings. The person in charge of these new or modified products or services is called the research and development (R&D) manager or manager of new product development.
People filling one or both of these two roles can be found in virtually any company other than those producing simple commodities for sale to other industries.
Some companies draw a distinction between these two terms. For example, in many organizations "research and development management" refers specifically to long-term idea generation and development of concepts that may ultimately lead to commercially successful products. Some people call this "blue-sky" development -- which is a fitting expression, given the high level of abstraction that characterizes this work.
In firms of this sort, an R&D manager leads a team or department that has one job: to think up ideas for possible new products and services. During this process, the team members don't worry about how profitable an idea might turn out to be. Rather, they try to generate as many ideas as possible, on the assumption that a few of them will turn out to have real commercial value.
Once the company approves a new product or service idea, the manager of new product development (also called a product manager in some firms) takes responsibility for turning the idea into an actual product or service that (hopefully) will score a hit in the marketplace.
However, at some companies, the roles behind the R&D manager and new product development manager often overlap. For example, the new product manager may also have been a member of the "blue-sky" team that came up with the original idea.
Sometimes a product manager doesn't get involved in the development process until the R&D team has created a prototype, or working model, for the new product or service. In this case, the product manager helps integrate the new offering into the financial, manufacturing, marketing, and sales areas of the organization.
This integration means "selling" the idea internally and getting the right people to approve the product and marketing plan before creating a budget for moving forward. Then the product manager works with the production team to ensure that the manufactured product:
looks (and works) like the prototype
becomes available on schedule and at the right cost
has no functional or other problems
The product manager also orchestrates the final "launch" of the product in the marketplace. Launch decisions include:
where the product will be advertised and promoted
what the packaging will consist of
how the product will be advertised
how much the product will cost to buy
In fact, product managers often have a background in marketing or identify themselves with the marketing function. In some organizations, the role of new product development manager is almost synonymous with the marketing role. However, in functional terms, it is at the opposite end of the product development timeline from the R&D manager's "blue-sky" role.
For more information on the product manager role, see the Marketing and Marketing Management business career profile.
Professionals in R&D and new product management typically ascend to management positions from roles as individual contributors in some area of expertise within the product or service area. Examples might include:
an electrical engineer who becomes R&D manager at a computer hardware company
a computer programmer who gets promoted to new product developer at a computer software company
a Ph.D. scientist who becomes head of R&D at a biotechnology firm
In service businesses (which provide intangible offerings such as travel, entertainment, consulting, etc., rather than physical goods), a seasoned manager often ascends into the role of new service development from lower-level managerial roles. Examples include:
a regional manager of a fast-food chain who becomes head of new service development at the corporate level
a successful hotel manager who takes a similar role at the corporate headquarters of a hotel chain
Some large service companies also employ strategic planners and new business development experts at the corporate headquarters level. Individuals in these positions often generate ideas for new programs based on their analyses of market trends and feedback from current customers. Many of them have a strong background in business analysis, and many hold MBA degrees.
As you might imagine, this career attracts people who enjoy and work well in the realms of analysis, concepts, theory, and imagination. It is not a day-to-day "running the shop" or steady-state environment kind of job. And, the people who do this work may have to wait months or even years to see the tangible results of their efforts.
The kind of big-picture thinking required in this arena depends on the nature of a company's products or services. For example:
In manufacturing environments, new product development efforts often focus on how to improve the range and function of a particular product the company sells.
In the service domain, development efforts often focus on how to create or improve services that better meet customers' needs. Nevertheless, in both cases, the work centers on creating bold new possibilities for the company rather than solving existing business problems.
SALES AND SALES MANAGEMENT
Overview
In every business, the sales function is the "engine" that fuels the production of revenue. It also represents the boundary between a company and its potential and existing customers. Success in sales hinges on a salesperson's ability to establish -- and maintain -- strong relationships with customers.
To cultivate these relationships, salespeople need to:
be personable and outgoing
understand customers' needs thoroughly
build a strong link between those needs and the organization's products or services
look for opportunities to customize a product or service to fit a particular customer's needs
help potential customers analyze their businesses and figure out how a particular product or service could boost the customer's productivity or revenues
At its core, sales is a relationship-centered profession. Individuals who find satisfaction and challenge in this work enjoy meeting and influencing people. They like the social aspects of sales. They also enjoy the process of accomplishing a mutual goal with others by negotiating deals that benefit both their company and the customer.
Salespeople travel to customers' locations (and keep in touch by phone) to introduce them to their products and services and to take orders. If a salesperson's employer makes more than one product or line of product intended for different kinds of customers over a wide geographical area, a salesperson will typically represent one product line, in one territory, to one group of customers.
Some sales work involves maintaining relationships with existing customers, and some involves developing new relationships (also known as "cold calling").
In addition to visiting potential new customers, salespeople attend professional conferences and trade shows. There, they host cocktail parties and dinners, display their companies' products at exhibition booths, and answer questions about their companies' offerings.
Many salespeople are employed by the company that makes the products they sell. However, some work as manufacturers' reps (representatives). These individuals act as agents for one or more companies but are not on the payroll of those companies. In effect, manufacturers' reps are entrepreneurs who work for themselves. Their customers are the manufacturers themselves, who pay them a negotiated commission for their sales.
Typically, a manufacturers' rep begins his or her career by working inside a company first, developing contacts with customers who buy their kinds of products. Eventually, they go out on their own. However, not all companies and industries sell through independent reps.
Finally some successful salespeople have an interest in managing others. After spending some years "earning their stripes," they move into sales management (first a small territory or line, then larger areas and/or more important products). They usually make less money, at least at first, but they gain more control over their travel schedule.
Sales professionals also enjoy the autonomy and authority of "owning" the deals they work on. Early in their careers, they have a high degree of independence. In fact, in most organizations, what counts is whether people "make their numbers," not how they spend their time or how they conduct business.
Thus many sales professionals see their job as their own "business within a business" -- a perspective that most other professionals don't have until later in their careers.
SECURITIES TRADING
Overview
The buying and selling of securities is a huge industry in the United States and other countries. Securities come in different forms; for example:
stocks (shares of equity, or ownership, of a company)
bonds (shares of a company's debt)
commodities (oil, gas, precious metals, iron ore, kilowatts, corn, etc.)
foreign currencies
"futures" (contracts obliging a person to buy or sell an asset at an agreed-upon price on a specified future date)
"options" (contracts giving a person the right to buy or sell a security or commodity during a specified time period at an agreed upon price)
"derivatives" (securities that provide payoffs that depend on the values of other assets such as commodity, stock, or bond prices)
People often talk about securities "sales and trading" in one breath, as if the two activities were the same thing. But although securities salespeople and traders can work closely together within the same investment bank or investment management firm, they actually do quite different things. For example:
Institutional securities salespeople communicate with buyers working for banks, pensions funds, mutual funds, hedge funds, etc. and arrange to sell a security at an agreed upon price. In the equities market the sales price is transparent -- known to both parties at the outset of the transaction. In the bond market the price is agreed upon during the negotiation (also true for commodities, futures, etc.)
A securities trader then carries out the actual sales transaction, executing the sale at the most advantageous price he or she can get. In the process, the trader tries to make money for the investment management firm where he or she works.
Some traders gravitate toward the "buy side" of the investment world. Rather than working in an investment bank or brokerage firm, they're employed by an investment management firm. There, they work with portfolio managers and analysts who want to buy securities that they think will appreciate in value. Their firm will then sell such securities later at a profit.
Other traders work for investment banks and trade for the bank's own account. (That is, they don't execute trades for customers of the bank, but for the bank itself.) These traders buy and sell securities in the hope of making a profit for the bank.
Some investment-bank traders do execute trades for bank customers who want to buy or sell particular securities. If the order is to buy, the trader looks for opportunities to do so at a price the customer specifies (or better). If the order is to sell, the trader looks for a buyer -- such as a pension fund or mutual fund -- who will pay the specified price. In some instances, the buyer will be the bank itself. But usually the market supplies the interested purchaser.
Unlike banks, investment management firms operate under certain constraints -- namely, the promises they've made to their shareholders (and to the Securities and Exchange Commission) about what securities a given portfolio will hold.
So a trader who works for an investment management firm may believe that a certain non-investment-grade ("junk") bond or speculative stock is a great buy, but be unable to purchase it because it falls outside the realm of what the portfolio allows. ("Hedge-fund" managers, who trade in the market and manage the money of very wealthy investors, are free to take any and all risks with those funds.)
As you might imagine, traders have to be:
market-savvy, skilled in quantitative analysis, aggressive, competitive, decisive, and -- above all -- comfortable taking risks
talented at negotiating with other traders and "playing poker" with millions of dollars in any given "hand"
Traders generally enjoy the risky nature of their work, and they relish pitting their intuition and knowledge against the market. Successful, satisfied traders find their profession exciting and will tell you that it's not a job for the faint-hearted or for those who can't let go of their mistakes.
When the market is very active, the pace is fast and furious. The trader has to move quickly and decisively, making a trade and then moving on to the next without worrying about what happened in the previous deal. When the market closes at the end of the day, the trader tries to learn from his or her successes and errors. But the opening bell the next morning brings a clean slate. Traders who lose sleep worrying about or regretting their decisions have brief careers.
Securities trading is a bare-knuckled business where only the strongest survive. Unlike investment bankers, most of whom graduate from top MBA programs and come with polish and "presentation," most traders do not have MBAs. Some don't have college degrees or even a high school diploma (though their numbers are dwindling). They're simply bright, confident, competitive people who love playing the financial markets and making money. More particularly, they love trading and the thrill of the trading floor.
When the market closes and the trades of the day are wrapped up, the trader's work day is done. Unlike investment bankers, traders limit their working hours to the time the market is open. This aspect of the career -- which leaves plenty of time for friends, family, and fun -- can be a major attraction for some people.
TRAINING AND ORGANIZATIONAL DEVELOPMENT
Overview
Training and organizational development are specialized areas of human resources management. Therefore, you may also want to review the Human Resources Management business career profile.
Trainers are teachers. They train business professionals and company employees in areas such as:
computer applications
sales and management techniques
time management
They may also train in specialized topics, including:
business strategy
marketing
finance
Organizational development (OD) professionals may teach in similar areas as trainers, but their work often includes helping organizations create effective working environments. Thus they emphasize topics such as:
team building
organizational design
hiring, promoting, and succession planning
executive coaching
change management (preparing and motivating employees for new work systems or processes)
career development
People who are interested in careers in training and organizational development can take two paths:
Working in a company's internal training and development department: Through this path, training and development specialists can gain a sense of continuity and responsibility for the ultimate outcome of their efforts. They play a central role in designing organizational initiatives and in training employees to support those initiatives. Many of them travel infrequently and have relatively predictable work hours.
Working in a consulting firm: Through this path, training and development specialists work with a wide variety of problems and clients. Assignments are more project-based and of shorter duration than those found within a company's training and development department. Consultants also tend to make more money than internal trainers and developers. However, they also travel a great deal. Moreover, at senior levels, they have to constantly "sell" their business to new clients in order to become partners in their firm.
Trainers and organizational development specialists come from a variety of backgrounds. They may have degrees in:
business
counseling
organizational psychology
organizational development
They also tend to develop specific areas of expertise, which may shift as they progress in their careers. Their areas of expertise may include:
team development
executive coaching
succession planning
organizational design
Regardless of their area of expertise, all trainers and development specialists must eventually develop strong communication and presentation skills if they want to advance in the field.