lehman brothers (2004 edition)
TRANSCRIPT
Inside
rGuid
eLehman Brothers2004 Edition
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Lehman BrothersISBN: 1-58207-319-8
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Table of Contents Lehman Brothers at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Bottom Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Industry Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Organization of the Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
On the Job . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Investment Banker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Salesperson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Trader. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Research Analyst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Workplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Lifestyle and Hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Workplace Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Vacations and Perks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Career Path. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Insider Scoop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Getting Hired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
The Recruiting Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
The Interviewer’s Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Interviewing Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Grilling Your Interviewer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
For Your Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Recommended Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
The Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Et Cetera . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Lehman Brothers at a Glance
Headquarters
Lehman Brothers745 Seventh AvenueNew York, NY 10019Phone: 212-526-7000www.lehman.com
Key Differentiating Factors
• Historically, Lehman’s strength has been in fixed income, but the firm hassuccessfully shifted its business toward higher-margin areas such as M&A andunderwriting, and the acquisition of Neuberger Berman makes it a player inasset management as well.
• The firm employs what it calls a Best Operator Strategy, building high-marginbusinesses, growing European business, and streamlining back-office andcorporate functions.
• Management has been together for more than 20 years.
Primary Competitors
BofA Securities, Citicorp, Credit Suisse First Boston, Deutsche Bank, GoldmanSachs, Merrill Lynch, Morgan Stanley, JPMorgan Chase
In the Recruiter’s Words
“We’re looking for people with distinctive problem-solving and analyticalabilities. There’s equal weighting on people’s leadership skills. We’re looking fora proven track record of leadership. We’ll look at people’s backgrounds and askthem to give examples of significant leadership roles. Another area is initiative.Another aspect is, absolutely, we’re looking for people who work effectivelywith others to achieve a goal.”
“We want to have an environment where the team comes first. . . . We have oneP&L at the firm. If there’s a trade or a business or something to do for a client,as long as overall it’s positive for the firm, we’ll do that.”
1
At a Glance
In the Interview
Show evidence of leadership. Lehman hires individuals who will be futureleaders at the firm. Think about your background and how you havedemonstrated this ability, and be ready to talk specifically about that.
What Insiders Say
“I’ve noticed Lehman goes more for the well-rounded candidate rather than the one with straight A-pluses. It makes the firm more personable. I don’t meet too many people who strike me as bookworm-type people.”
“If you can take constructive criticism, Lehman’s willing to take people fromzero to 60.”
“Lehman’s pretty technology-savvy, which eliminates a lot of the grunt work.That means that analysts here start at a much more advanced level. I’m not sure that’s true at all firms.”
The Career Ladder
• Undergraduates enter a two-year analyst program.
• MBAs enter as associates.
Anticipated Hires, 2003–04
Lehman does not release information about anticipated undergraduate or MBA hires.
2
At a
Gla
nce
Estimated Compensation, 2003–04
Analysts $50,000–$60,000 plus discretionary bonus
Associates $80,000–$90,000 plus discretionary bonus
Source: WetFeet estimates.
The Firm
• Overview
• The Bottom Line
• Industry Position
• Organization of the Firm
3
The Firm
Overview
While Lehman’s roots go way back—the firm started off as a dry goods store
in 1850 and founded the New York Cotton Exchange—its modern history
begins in 1994 when its stormy marriage to American Express ended in
divorce. American Express had bought the bank to create a financial super-
market, combining it with Shearson, a brokerage business run by Sanford Weill
(now of Citigroup). The underlying economics looked good, but many Lehman
employees couldn’t adjust to Shearson-Lehman and vice versa—and many left
the firm. AmEx spun Lehman off to the public in 1994.
Those early years as an independent, public company were tough, but so were
the management skills of CEO Richard S. Fuld, Jr., who reined in expenses,
broadened the firm’s business mix, and ultimately undertook a major restruc-
turing that put the daily operation of the company in the hands of a manage-
ment committee.
Results have been very positive—even during troubling times. After 9/11,
Lehman was forced to evacuate its headquarters in the World Financial Center
adjacent to the Twin Towers, scattering 6,400 employees among 42 different
sites, including a hotel. The year’s results were the second-best ever in terms of
revenues. “On the business side, we put up strong numbers out of a hotel,” an
insider told us in 2002. “What people feel now is that [our success] is not about
our brand-new headquarters. It’s about people.” Lehman has since moved into
a 32-story tower in Rockefeller Center.
Lehman’s strategy is to focus on strong relationships with select companies. It
calls this the Best Operator Strategy, using revenue and costs to drive decision
4
The
Firm
making, targeting high-margin products, applying technology to all areas of its
operation, and creating value by broadening the categories in which it com-
petes. Unlike its competitors, however, it isn’t trying to be all things to all
people. “Our aspiration is not to be the biggest, but to be the best in those
markets in which we choose to compete,” says a senior recruiter.
The strategy continued to pay off in 2002. Despite a tough market, Lehman
continued its ascent up the rankings in equity research, from 13th a few years
ago to second; saw fixed income produce a record $2.6 billion in revenues; and
reported its third-best year in terms of revenues, despite unfavorable market
conditions. The firm also dramatically expanded its asset management capa-
bilities by acquiring Lincoln Capital Management, forming a partnership with
women-owned Milestone Capital Management, and, in August 2003, more than
doubling total assets under management with the acquisition of Neuberger
Berman, a 1,200-employee firm founded in 1939. The deal is expected to close
in the fall.
Acquiring Neuberger “sort of completes one of the areas that’s been a high
focus area—wealth and asset management,” says an insider. “We think
Neuberger brings assets which we can integrate and grow further. [The deal]
gets us to the revenue mix that we feel is very diversified across businesses and
across borders.” Analysts say that Lehman’s stock and bond research will
provide Neuberger a bigger net for customers and that the acquisition will
reduce Lehman’s reliance on bond trading.
Insiders stress that despite this growth, the culture hasn’t changed. “To be big
for the sake of being big doesn’t make sense,” CEO Fuld said in a BusinessWeek
Online interview after the acquisition. “Then you’re an elephant. And elephants
spend 98 percent of their time eating. We don’t do that. We spend 98 percent
of our time running the business.”
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The Firm
Insiders say the firm doesn’t need the bureaucracy
other firms require because management has been
together for so long (more than 20 years in many
cases) and knows the business so well. “From a
business point of view, it allows us to get things done
very quickly,” one tells us. The management structure
is flat: “Titles exist because we need them, but they are
meaningless when it comes to our day-to-day
interaction,” says an insider. This should be good news to enterprising recruits,
who want to join a bank that gives them room to stretch. “You hear people say
they have plenty of rope to run with, but not so much to hang themselves,”
says an insider.
Lehman looks to campus recruiting to fuel its momentum. The firm’s success
in equity research is a case in point. “Those people who got us from fifth [in
2001] to second [in 2002] have been home-grown people,” says an insider.
“We’d much rather hire in people and train them ourselves than go out and hire
somebody from another firm.”
Unlike many of its competitors, Lehman offers its bankers opportunities to
move laterally within the organization and considers this cross-fertilization a key
to its success in staying focused. The firm has a strong practice in Europe (27
percent of overall revenues) and the United States and is targeting Asia
(currently 10 percent of revenues) for growth.
Insiders don’t feel that the size of the bank gets in the way of developing
relationships. “Even though it’s a pretty large bank, each department feels pretty
small,” says an insider. “I don’t feel like I’m at a large place where I don’t get to
know people well.” Rotations help people build networks throughout the
organization. And when you come to work, expect to work. “We’re very hard
working,” says an insider. “People don’t slip out and go to the gym or put their
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The
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Titles exist because
we need them, but
they are meaningless
when it comes to
our day-to-day
interaction.
“ ”
feet up on the desks and tell jokes. While we do have lighthearted moments, we
grind it out with a healthy sense of competition.” Employees own more than 30
percent of the bank, providing further incentive to work long, hard, and smart.
The Bottom Line
Lehman has a strong culture that encourages people to take initiative. Lehman
insiders like that it’s a down-to-earth environment, focused on building market
share in the areas in which it competes, with plenty of opportunity to move
around. “They look at the analysts and associates as the people who are going
to be leading Lehman in ten years,” says an insider. “The firm puts a lot of
faith in your judgment and maturity, and expects a lot in terms of your work
capacity and stamina,” says another. Everyone is expected to perform and to
take on as much as they can handle, and the firm boasts that its people are the
most productive on the Street. The upside is that because “you have more
responsibility, people have more reasons to get you up to speed fast,” says an
insider. The pace is fast and the expectations are high. If you’re looking to build
a long-term career at a bank, don’t mind the added pressure of a smaller
balance sheet, and can handle the opportunities offered by a bank with a strong
franchise, lean operating environment, and a focus on teamwork, Lehman may
be for you.
7
The Firm
Industry Position
While Lehman consistently ranks in the top six on the league tables, it’s caught
behind the commercial bank franchises, with Citigroup and JPMorgan Chase
holding down the one-two spots in many categories. In 2002, Lehman saw its
market share surge in global IPO issuance, M&A, and leveraged loans, and also
gained market share in secondary trading and global issuance of common
stock, high-yield debt, and fixed income. Financial results for the first half of
2003 have been excellent, thanks in part to a strong bond market, but market
share has been tougher to gain. For the first half of 2003, market share gains in
U.S. asset-backed securities (1.5 percent) and global asset-backed securities
(1.8 percent) were offset by market share declines in U.S. high-grade corporate
debt (1.2 percent) and global bonds (3 percent). Lehman’s rankings paint a
similarly mixed picture. The firm climbed from seventh to third in global asset-
backed securities and placed second in long-term debt, for instance, but saw its
ranking in U.S. mortgage-backed securities fall from third to sixth. Over the
long term, however, Lehman’s trend has been to gain market share even with
the economic downturn.
8
The
Firm
9
The Firm
U.S. debt and equity 4 5 146.2 8.4 Citigroup
U.S. long-term straight debt 4 4 62.2 9.7 Citigroup
U.S. long-term debt 2 3 128.9 9.0 Citigroup
U.S. high-yield corporate debt 6 6 5.6 8.4 Citigroup
U.S. high-grade corporate debt 4 3 34.4 9.8 Citigroup
U.S. mortgage-backed securities 6 3 40.3 8.2 UBS
U.S. asset-backed securities 3 6 25.0 9.1 Citigroup
Global bonds 3 2 27.4 10.0 Citigroup
All municipal bond issues 6 3 13.8 6.9 Citigroup
Global debt & equity 6 6 166.9 6.1 Citigroup
Global asset-backed securities 3 7 26.2 8.3 Citigroup
Global high-yield corporate debt 6 6 5.8 8.2 Citigroup
*First six months of the year. Source: Investment Dealers’ Digest, 7/7/03.
Lehman Brothers First Half 2003 Industry Rankings
Rank 2003*----------------- -------------------------------------------Category 2003* 2002* Amount ($B) % of Market Top Firm
Other Rankings and Awards
2002 All-America Fixed-Income Research Team
Institutional Investor named Lehman Brothers the top firm for the third year in a
row. Lehman ranked first with 35 analysts, including 12 on the first team and
ten on the second, with CSFP and JPMorgan Chase tying for second with 31
analysts.
Source: Institutional Investor, www.institutionalinvestor.com.
2002 All-America Research Team
Lehman jumped from fifth in 2001 to tied for second (with Merrill Lynch) in
2002 in Institutional Investor’s annual ranking, trailing Citigroup. Lehman took 52
positions; Citigroup took 53. Fourth-place CSFB had 44 positions.
Source: Institutional Investor, www.institutionalinvestor.com.
International Financing Review “Bank of the Year,” 2002
Project Finance International “Bond House of the Year,” 2002
WetFeet’s 2003 Student Recruitment Report
In WetFeet’s 2003 Student Recruitment Report, students (MBAs and undergraduates)
ranked Lehman the number two on-campus recruiter overall and number one
among investment banks.
10
The
Firm
Organization of the Firm
View from the Top
Lehman Brothers is a public firm, with employees holding a little more than a
third of its stock. CEO and Chairman Richard S. Fuld, Jr., works closely with
Lehman’s executive committee and board of directors. The executive commit-
tee, composed of head bankers and traders, manages the firm’s day-to-day
operations. The executive committee guides Lehman’s strategic direction. In
2002, Lehman expanded its executive committee from six to nine members.
Despite criticism from industry observers, Fuld has steadfastly maintained that
Lehman is dedicated to management by committee, reiterating that teamwork is
a key ingredient of Lehman’s success—and he’s practiced what he’s preached.
View from the Middle
The firm divides its businesses into three areas:
• Investment banking, which includes equity underwriting, debt underwriting,M&A, and private equity
• Capital markets, which includes equities and fixed income
• Wealth and asset management, which provides services to private clients
Lehman hires MBAs into the investment banking, fixed-income, equities, and
wealth and asset management divisions. Undergraduates join the investment
banking or capital markets divisions or come into corporate as members of the
information technology, operations, or finance teams. Unlike some other banks,
equity research at Lehman is part of capital markets and not a stand-alone
11
The Firm
division. Lehman stresses its organization’s integrated nature, as all divisions
work together to develop and market products to the firm’s clients. Each
business division comprises smaller teams that focus on specific industry
groups, financial products, or markets.
View from the Bottom
At the ground level, Lehman is structured with teamwork in mind. “Lehman is
much less hierarchical, much less regimented in terms of what they expect
from you,” says an insider. “It’s not all based on titles here. At Lehman, your
career path is about responsibility.” Another insider counsels newcomers to
meet as many people as possible. “One thing that is asked over and over again
is, ‘Find this info.’ You’ve got to find the people in the bank who have what you
need. Meeting people across the firm is key.”
Groups from each of Lehman’s major divisions overlap to form project teams
made up of everyone from analysts to managing directors. For example, a high-
yield underwriting for a health care company might bring together professionals
from the firm’s high-yield (product) and health care (industry) groups in
investment banking, plus representatives from debt, capital markets, fixed-
income research, high-yield trading, and private-client services. According to
insiders, deal teams at Lehman tend to include no more than four or five
people, so team members have to pull their own weight. “Lehman’s deal teams
are much flatter than at some firms on the Street,” says one insider. “Because
the teams are so much flatter, everyone has a lot of responsibility and has to
pull together to make a deal happen. You’re not just a cog in the wheel.”
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The
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On the Job
• Investment Banker
• Salesperson
• Trader
• Research Analyst
13
On the Job
Investment Banker
The investment banking division is organized around industry coverage groups
and product groups. The industry coverage groups maintain Lehman’s client
relationships and partner with the appropriate product group to execute each
deal. For example, the health care group (industry coverage) will work with
equity capital markets (a product group) to execute a biotech company’s IPO
and then work with the M&A group to advise the company on a merger. The
primary businesses in investment banking are mergers and acquisitions,
underwriting of debt and equity, and private equity. In creating deals,
investment banking projects combine the number crunching required in
accounting and finance with the verbal skills necessary to create cogent,
comprehensive marketing documents.
Typical Projects
I-bankers typically work on four to six deals simultaneously. Both analysts and
associates provide research, analytical support, coordination, and some client
relationship management for these projects. One insider says, “The difference
between an associate’s work and an analyst’s work can be very gray. It depends
more on personality than a strict delineation of responsibility.” In general,
analysts focus on a deal’s prosaic aspects, such as creating public information
booklets (PIBs) and running comparative analysis reports (comps). Associates
tackle both analyst- and associate-level projects in their first year, but they have
more bottom-line responsibility than analysts do. Also unlike analysts, associates
interact extensively with a client company’s financial officers, lawyers, and
accountants. Typical tasks include:
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On th
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b
• Creating PIBs—internal documents thatconsolidate all the relevant information fora deal, such as SEC filings, research reports,trading history, and press mentions.
• Running comps, which involves dissectingthe 10-Ks and 10-Qs (the annual andquarterly reports that companies file withthe SEC) from eight or so companies in anindustry, describing trends in the financials,and analyzing how the client’s financialstatus stacks up to that of the competition.
• Writing a fairness letter for an acquisition in progress. This letter is a legaldocument that states the firm’s opinion that a deal is fair to the targetcompany. The document is often lengthy and can require an enormousamount of number crunching by analysts and associates to produce thesupporting data.
• Building spreadsheet financial models, such as pooling- or purchase-analysismodels, for an M&A deal.
• Structuring deals for clients and helping companies determine how large adebt or equity offering should be, when to initiate a stock buy-back program,or whether to pay for an acquisition in stock or cash.
• Performing due diligence.
15
The difference between
an associate’s work and
an analyst’s work can
be very gray. It depends
more on personality
than a strict delineation
of responsibility.
“ ”
On the Job
A Day in the Life of an I-Banking Associate
7:45 Decide four snooze alarms are enough. Out of bed, grab a bagel, andhead for work, picking up a copy of The Wall Street Journal on the way.
8:45 Arrive at work and check voice and e-mail messages. Pull up intranet tocheck stock prices of client firms.
9:00 Dive back into last night’s unfinished project, a sales memo for a newmedical device company’s equity offering. Since this memo helps thesales force answer investors’ questions about why they should buy thestock, it’s important to provide lots of good, big picture info and handynumbers. Call the library for stats on the diabetes market.
10:00 Study the new materials and integrate statistics into the sales memo.Proof the memo for errors and typos.
11:55 Rush the finished memo to the VP on the deal. Need to get it to himbefore lunch.
12:00 Grab a sandwich from the cafeteria downstairs and bring it back to thedesk to eat.
12:20 Start working on a purchase model for a pharmaceutical merger in thepipeline. Go through the proxies for similar transactions, looking fordiscrepancies in numbers that will help determine some of theassumptions.
3:00 The VP returns the equity-offering memo with corrections andcomments—nothing too extreme. Spend the next few hoursincorporating the VP’s comments and finalizing the sales memo.
6:00 Take the sales memo, complete with all of the necessary appendices,down to production. Ask them to prepare 100 copies for the sales teamby tomorrow.
6:30 Brisk walk outside. Got to do something to keep that blood flowing tothe brain!
8:00 Back at desk, call for a pizza delivery, because it’s going to be anotherlate night. Start working on a discounted-cash-flow (DCF) analysis foranother M&A deal, this time for a managed care company.
12:00 Enough is enough. Turn off the computer and head home.
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Salesperson
A Lehman salesperson acts as the relationship manager for a particular client
base. As the middleman between the client and the firm, the salesperson is
responsible for developing a relationship, marketing the firm’s products, and
making sure that the client has access to the firm’s products and services.
Institutional salespeople work with institutional clients; private-client services
salespeople work with high-net-worth individuals. Both groups cultivate their
client bases, using the firm’s research and breadth of product offering to attract
new business.
Typical Projects
The main business of the sales department is to manage client accounts. A
sales-person’s responsibilities include making sure trades are executed, delivering
research products to provide timely investment advice to clients, and keeping
clients inform-ed about market dynamics. Depending on the product group,
typical projects may include providing clients with general economic forecasts,
analyzing the perform-ance of individual stocks, or marketing a new stock or
debt offering to a client. Salespeople often accompany clients to the industry
conferences and road show presentations that Lehman sponsors to sell
particular securities. Often, salespeople act as company spokespeople and
facilitators, putting the client in touch with trading, research, and investment
banking. Typical tasks include the following:
• Developing and maintaining relationships with clients.
• Apprising clients of market performance and fluctuations.
• Reviewing research analysts’ ideas to identify new deal possibilities for clients.
17
On the Job
• Presenting deal options to clients.
• Attending road shows for client companies’ initial public stock offerings.
• Responding to client calls during market hours.
A Day in the Life of a Salesperson
6:00 Stumble out of bed and hit the road. Burrow into The Wall Street Journal
on subway.
6:45 Get to work on the floor amidst hundreds of edgy traders. Pull upBloomberg screens to check out trading in London and Tokyo markets.So far, so good.
7:15 Attend the morning sales division meeting about the market’s performance.Research news since closing time yesterday. Nothing earth-shattering.
8:15 Return to desk and leave voice mail messages giving clients performanceestimates based on this morning’s meeting. Tailor each call to includeonly those companies relevant to the client’s particular business.
9:30 Opening call.
9:45 Grab some breakfast en route to a morning meeting with a researchanalyst and a client.
10:45 Call accounts to let them know how their stocks are trading. For once,everyone is happy.
12:00 Attend a road show lunch at a midtown hotel for a biotech firm hopingfor an IPO. Don’t think the market’s going to be that receptive. Hopethe I-bankers in charge know enough to wait.
2:00 Return from meeting. E-mail sales memo on new convert deal tomanaging director who’s on the road.
2:30 Meet with a Lehman research analyst and a corporate-client team topush some new health care offerings in pipeline. Review stockpossibilities with the client and then answer questions. These managersare sharp. All the right questions.
3:15 Practice cradling three phones on my neck and talking into the rightone. Still got a way to go on this one. (Never did like headsets.)
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4:00 Finally, the market closes. The thrill never seems to wear off when itopens; ditto the relief when it’s over. Attend a meeting with sales teamto preview next week’s new deals.
5:20 Day’s done. Time to head home!
Trader
The trading division is made up of traders, market makers, and sales traders. A
trader will buy and sell stocks for a client or, in the case of proprietary trading,
for the firm’s own account. A market maker buys and sells securities for the
firm’s account in order to ensure a liquid market for a given security. A sales
trader in equities or fixed income acts as a liaison between the institutional
salesperson and the trader. The sales trader’s task is to help clients buy and sell
large quantities of securities.
Typical Projects
Unlike in investment banking, there are no strictly defined projects in trading.
Titles have less importance, too. Your responsibility is based on your exper-
ience, not on your position in the desk’s hierarchy. “It’s what you can handle,
not what degree you have,” says one insider. In general, traders execute trades.
The projects are much shorter than in banking, and they vary according to a
trader’s specific function. A trader may receive an order to sell a large chunk of
stock and then work the order over several days, persuading salespeople to shop
the order to potential buyers. Market makers are responsible for setting the
19
On the Job
price of a particular security according to the market. A preoccupied Nike
market maker who fails to recognize that the company’s stock has dropped four
points, for example, is still obliged to honor his or her obligation to buy shares
at the older, higher price. This kind of oversight reduces Lehman’s gains, as
well as those of the trader and his or her team (remember, “one firm”). In
particular, fixed-income traders must keep abreast of economic data, Treasury
bond yields, political trends, and information about companies that might affect
the price of a bond.
A Day in the Life of a Trader
6:00 Monday, Monday. That’s reason enough to catch a cab instead of takingthe subway. Read The Wall Street Journal on the way.
6:45 Gulp down extra-super grande coffee on way to desk. Check outBloomberg to see what’s happened in Thai corporates overnight. ScanCNNfn for more news.
7:45 Turn on squawk box to listen in on the global fixed-income divisionmeeting. Lehman’s chief European and U.S. economists give overviewsof fixed-income markets. Once the big stuff is done, they’ll break outinto smaller meetings to discuss individual markets like corporates ortreasuries.
8:15 Back to the desk. Call up Thai client to update him on market news ofthe day.
9:30 Market opens—start watching that screen.
10:00 Phone starts ringing with salespeople looking to get more informationon specific bonds. Throw a couple of big fish their way.
10:45 Get call from brokers who are selling securities between Lehman andBear Stearns. Sell position to broker for a cut of the profits when retailbuys it.
12:00 A fellow analyst has pulled duty to place the desk’s lunch order. Vote forChinese. Majority votes for deli. Order a roast beef sandwich.
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12:30 Answer calls coming in from trading wire while sneaking bites ofsandwich.
1:00 Sit in on meeting for new deals and market indices.
1:30 Call back broker from earlier this morning. Lift an offer on (buy)100,000 shares of stock at market price for a client in Boston. Take theopportunity to exchange information with a broker on best deals he’sseen.
2:00 Call client to inform him of the completed transaction. Convince him tobuy new swap product the desk has. Good work. Hope it gets noticed.
2:45 Hit a bid on (sell) 200,000 shares of stock in computer software firm.Make a juicy profit. Report back to the client.
3:00 Call some clients to look for new deals. Check market prices to seewhat’s feasible.
3:45 Make several calls to confirm the GTC (good till cancel) orders. Executesmaller buy and sell orders.
5:00 Take a tour of the floor. Chat with some guys at the desk about theday’s business.
6:30 Head out. Everyone in the elevator is making plans to go out. It’s stillearly, so why not?
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On the Job
Research Analyst
Providing support for all of Lehman’s other divisions, the research department
is divided into fundamental and overview research:
1. The fundamental group is the larger of the two and focuses on specific
industries and industry groups.
2. Overview research consists of a handful of strategy and political analysts
who study general market trends around the world.
Fixed income and equity each have separate research sub-units or product
groups. Within fixed income, the groups include high-yield debt (junk bonds),
high-grade debt (investment-grade bonds), mortgage-backed securities,
government market and Federal Reserve securities, and strategy research, which
advises clients on the hottest sectors for investment. Within each product
group, researchers analyze specific industries. For example, high-yield
researchers study casinos, television, cable, and telecommunications. They also
coordinate with the high-yield group in corporate finance and with traders and
sales. Equity is broken down into industry groups, each covering its own
universe of stocks trading on the New York Stock Exchange and NASDAQ.
Typical Project
Specialists in fundamental research focus on long- and short-term opportunities
with clients from specific industries. They often juggle information from three
or four companies at a time. The overview generalists do not report directly to
customers but rather provide a longer perspective—the big picture in global
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market trends for sales, trading, and investment banking. MBAs are typically
hired as associate analysts. (Unlike those in other I-banking divisions, almost all
professionals in research are called analysts.) Their primary function is to help
senior analysts keep track of market trends, specific industries, or developments
within individual companies. Whereas senior analysts divide their time between
examining company documents, talking to clients, sharing research with sales
and trading, and helping corporate finance bring new issues to market, associate
analysts spend a lot of time crunching numbers and gathering documents.
Qualified associate analysts usually get promoted to senior positions within a
couple of years. Research tasks can include:
• Digging through Bloomberg for industry and product developments in thefixed-income market.
• Contacting or visiting clients to present estimates on a market’s or stock’sperformance and to make buy or sell recommendations.
• Tracking performance of client companies.
• Writing up summaries of internal meetings, industry trends, and markettrends.
• Drafting formal research reports for review by senior analysts.
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On the Job
A Day in the Life of a Research Analyst
6:45 Rise and shine! Time for a healthy breakfast of powdered donuts andscalding-hot coffee.
7:30 Elevator up. . . . Smile while walking past traders and salespeople intothe little world of research.
8:00 Attend the morning meeting of research and sales. The research staffgoes over new earnings releases and acquisitions of companies, lettingthe sales force know how these will affect the price of bonds.
9:00 Write up a one-page summary of meeting and the general consensusregarding bonds. Post it on the intranet so the sales force can read it,and post another copy for electronic delivery to clients.
10:45 Take a call from the CFO’s office at a major supermarket chainreporting new information. Interim period results are out! Examine statsto determine the effect on bond prices.
11:15 Write up summary of findings. Hand it over to a senior analyst, who willcontact institutional clients who own shares in the supermarket. Heropinions—and the clients’—need to be incorporated into a more formaldraft.
11:45 Listen in on a conference call with a senior analyst to discuss clientfindings with traders and then with sales.
12:30 Lunchtime. Ride down in elevator with senior analyst on her way to aclient lunch. Detour at the cafeteria, pick up a chicken enchilada, andshuttle back up in the elevator.
1:15 Wipe food stains off a company’s financials and get to work on thosenumbers.
3:00 Another senior analyst from the consumer group cruises by looking forthe new ROE figures for Company X. No one here but us chickens.Hop to and get him the info before he’s turned the corner.
4:30 Sit in on a meeting with banking to discuss whether the timing is rightfor a big retailing client to do a high-yield deal. Instinct says the marketwon’t be that receptive now. Suggest waiting till the first quarter.
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5:15 Write up a summary of the meeting. In this job, you need to secretly likebeing a court reporter. There’s a lot of writing. Circulate copies to senioranalysts.
6:00 Senior analyst takes off. Pull up your screen and begin some seriousnumber crunching, making spreadsheets for Wednesday morningmeeting.
8:30 Call it a day. Head to the gym for an hour, and then go home.
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On the Job
The Workplace
• Lifestyle and Hours
• Culture
• Workplace Diversity
• Compensation
• Travel
• Vacations and Perks
• Training
• Career Path
• Insider Scoop
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The Workplace
Lifestyle and Hours
Insiders at Lehman tend to downplay the long hours, but they do so only in the
context of banking: Expect to average 85 to 90 hours regularly and 100 or more
during crunch times. “Your hours depend on the type of work you’re doing, your
group, and your team members,” says an insider. For instance, M&A work can be
very time intensive because it’s so unpredictable, often requiring last-minute
scrambling. Financings, on the other hand, follow a fairly set schedule, which is
easier to plan for. For those who work on the trading floor, expect to come in
around 7 a.m. and leave between 5 and 6 p.m. During that period, “You have
zero privacy,” says a trader. “I have no free time between 7 a.m. and 6 p.m. during
the week. I don’t have a lunch break. I eat lunch at my desk. Adjusting to that was
a little difficult.” All-nighters and weekend stints are far less common in sales,
trading, and research than they are in investment banking. “I think the perception
is that a new hire in banking may necessarily have more of an intense and
stressful day than sales and trading. They’re both intense and stressful,” says an
insider. “When you’re in front of a bunch of screens, it’s very, very intense. When
you’re working on a sales or trade with millions at stake, those moments are
extremely intense.”
Across the board, bankers are expected to have the client’s interests as their first
priority, which often means that sleeping and living are a second, third, or fourth
priority. “The schedule will be aggressive and variable,” says a recruiter. One
insider asserts that having a life is realistic, but this will certainly depend on what
you consider “having a life”: “I have three children and manage to make time for
them each month. For the most part though, I’m gone well before they wake up,
and they’re asleep when I get home. But I make allowances so that there is a day
here and there where we can maintain that connection with home.”
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Culture
Insiders at Lehman say it’s fast paced and intense, with plenty of opportunities
to move around and take on projects. Teamwork is essential. “People who have
done extremely well here know how to work with other people. It’s an absolute
requirement and not something you learn,” says an insider. The firm is leaner
than competitors, with a relatively flat structure. As a result, there’s a built-in
incentive for those with experience to bring those coming into the bank along
quickly. “It’s a small organization that has to compete against bigger ones, so
there’s an underdog mentality—every win is a big win. And everyone is hungry.
There are great opportunities for growth,” says an insider. Many enjoy the
down-to-earth attitude that pervades the office. As one insider describes it,
“There’s a lot of mutual respect among all levels, but it’s not a blind faith thing.
You are allowed to question someone above you.” Says another, “That
question-asking is really rewarded, and so are persistence and adaptability.”
“We have gone to a BlackBerry society,” says an insider, referring to the hand-
held, wireless e-mail device. “Most bankers have gone from 20 to 30 voice
mails a day to one or two.” The dress code is formal. Within the headquarters,
“The floors are very light. There are tons of windows. The cubicles are smaller
than at a lot of other buildings. A lot of things are very high tech. They’ve got
vending machines on every floor,” says another insider. Another says, “We have
a great support staff. There’s a lot of stuff that’s taken care of, and it’s done
right. I feel I can really trust the people I work with. I feel the people are really
generous. People are generally working with people they like. That enhances the
supportive environment. People want to be there.” Another says, “I consider
the people I work with, 99 percent, friends. We don’t go out often together, but
there’s such a mutual respect. I like the people I work with.”
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The Workplace
Sharing work with others is a familiar theme among insiders. “We always try to
make sure other groups are referred to for opportunities. People are pretty
selfless,” says an insider. Says another, “On the banking side, for us, it’s about
all-the-time, year-round, roping in other teams around the client. It’s not about
protecting a client for yourself.”
Workplace Diversity
Lehman has a chief global diversity officer and a global manager for diversity
recruiting. It formed a Diversity Council in spring 2001, which is chaired by the
firm’s COO. The firm has five employee networks—one each for Asian, Latin
American and Hispanic, female, African American, and gay and lesbian
employees. These networks conduct mentoring programs, panel discussions on
career development, and other programs, and each is developing an interactive
website. The firm targets diverse populations, recruits at historically black
colleges, and participates in conferences for the National Society of Hispanic
MBAs and the National Black MBA Association. The firm offers domestic
partner benefits for same-sex couples. “It’s a very difficult industry for women,”
says an insider. “I don’t think that has anything to do specifically with Lehman.”
That said, the firm has a women’s initiative. Lehman is actively trying to
support women who aspire to senior management roles, and it offers a very
generous three months of maternity leave.
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Compensation
Compensation at Lehman is competitive with that of other firms on the Street.
“We don’t want anyone to join because we’re paying a little more, or because
we’re playing a little less,” says a recruiter. “We’ll be very competitive. We’d like
to take the compensation piece out of the decision-making process.” An insider
adds: “They’re not going to pay you the most, and they’re not going to pay you
the least. They’ll pay you the average.”
We estimate Lehman will start analysts at $50,000 to $60,000 in 2003 to 2004 and
associates at $80,000 to $90,000. Bonus amounts depend on the firm’s success
and vary by performance; recruiters indicate that bonuses will be similar to those
at other firms on the Street. Associates receive a percentage of their total
compensation in stock, depending on seniority. Lehman offers a 401(k) but does
not match employee contributions. The company also has a flexible spending
plan that allows employees to use pretax dollars for day care, elder care,
transportation, and commuting expenses and for nonreimbursed health care.
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The Workplace
Travel
Travel demands vary widely, depending on division, industry group, and
financial product. According to insiders, analysts in investment banking travel
10 to 20 percent of the time, more frequently in the second year of the
program than in the first. Road shows, which analysts and associates usually
attend a couple of times a year, require visits to numerous clients in several
cities on a very tight schedule. During such a trip it would not be unheard of to
have an early-morning meeting in Chicago and an afternoon meeting in Los
Angeles, followed by a red-eye flight to Europe. In general, the smaller the deal
team you’re on, the greater your chance of travel, as there may not be anyone
else available to go.
The amount of travel for sales analysts and associates is substantial but
depends on where their clients are based. In research, senior analysts travel
quite a bit, but travel time is modest for junior analysts, especially at the
beginning. Traders rarely travel.
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Vacations and Perks
“Management considers it very important for people to take vacations at all
levels,” a recruiter tells us. Lehman offers most of its employees—including
analysts and associates but excluding upper management—three weeks of
vacation a year. Insiders say they don’t feel managers are counting the vacation
they’ve taken or looking over their shoulders when they miss time for being
sick. However, few people in the industry make use of all their vacation time,
and when they do, they don’t expect to stray too far from a phone. “If
something comes up when you’ve planned your vacation, you’re expected to
use your judgment, and your judgment better be in favor of the client. That
applies across the board—analyst, associate, or managing director,” says one
insider.
Lehman counts a subsidized fitness plan among its perks. It has partnered with
New York University on a part-time MBA program, fully paid for by Lehman.
It does not have a specific tuition reimbursement program, but it pays for job-
related courses. If you work after a certain time, you’ll get dinner and can take a
cab home for free. The Lehman Brothers ID gives employees free or
significantly discounted admission to many of New York’s museums and
cultural centers, and those working at company headquarters at Rockefeller
Center receive a discount at “pretty much every retail establishment” there, says
an insider.
Maybe the best perks are those that “just pop up,” says one insider. “The
managing directors get tickets to a lot of the events going on in the city and
will throw you a bone every once in a while. So you can go to Lehman’s box at
the U.S. Open or at the Knicks game.”
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The Workplace
Training
Training for analysts and associates is conducted at Lehman headquarters in
New York City. Lasting anywhere from three weeks to several months, training
introduces analysts and associates to the firm’s management and philosophy and
teaches basic financial, analytical, and networking skills. Insiders cite Lehman’s
training program as one of the best in the field: Simply completing Lehman’s
training program makes you more marketable. In addition to training, Lehman
assigns each new hire, including summer interns, a junior and a senior mentor.
As you continue with Lehman, your training continues, too. As a sign of the
firm’s commitment to leadership development, Lehman implemented a
leadership training program in 2001 for managing directors, senior vice
presidents, vice presidents, and assistant vice presidents. The firm also offers
additional training opportunities outside the formal programs. “Each group I
know does periodic trainings for people all the time,” says an insider.
Training for Undergraduates
Analysts joining investment banking, private equity, and public finance start
with five weeks of training and are then placed in product or industry groups.
Analysts joining the equity and fixed-income divisions enter a two-year program
called START (the Sales, Trading, and Research Training Program), which
begins with a four-week classroom course that covers accounting, financial-
statement analysis, bond math, and computer programs. START analysts then
participate in rotation programs that expose them to various product groups
within the division. After several weeks, program managers work with the
analysts to match them to a specific product group where they remain for two
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years. Analysts joining the operations, finance, information technology, and
credit-risk management groups receive training specific to their functions. Once
placed, “it’s up to the groups in how they will train you,” says an insider.
Training for MBAs
Associates entering investment banking, sales, trading, research, and private-
client services receive four to five weeks of initial classroom training followed
by a series of rotations. After the rotations, associates are placed in groups
based on their preferences and the firm’s needs. Insiders tell us that this
opportunity to get practical experience in several areas before joining a group
permanently is an invaluable part of the training process.
Career Path
Opportunities for Undergraduates
Analyst programs last two to three years for sales, trading, and research and
investment banking. The firm has a special program with New York University
that enables exceptional candidates to continue to work at the firm while they
get MBAs. Candidates in the START program gain exposure to sales, trading,
research, and structured finance within equities and fixed income, and they play
a role in choosing where they end up. “The fact that they’re so accommodating
of individual interests is a really nice feature of Lehman. You don’t find that
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The Workplace
everywhere on the Street,” says one third-year analyst. At the same time, you
won’t have total control over which job you get—and if you’re one of those
who doesn’t get his or her first choice, you may grow frustrated.
Opportunities for MBAs
Associates are recruited heavily on campus and join for the long haul—the firm
is looking for its future leaders and will groom associates to climb the executive
ladder as assistant vice presidents, vice presidents, senior vice presidents, and
managing directors. The firm has tracks where associates can specialize and
tracks where they can rotate. “We believe in a generalist program,” says a
recruiter. The firm does allow for some preplacements in areas looking for
specific skill sets, but Lehman thinks a generalist program is more beneficial to
candidates overall. Promotions to vice president usually occur after three to
four years based on performance.
Opportunities for Summer Interns
Undergraduates will find summer opportunities in all geographies in investment
banking, private equity, fixed income, and equities and in corporate functions,
including operations, finance, information technology, and credit-risk
management. The analyst program lasts ten to 12 weeks and gives interns a
head start in landing full-time jobs at Lehman after college. Ditto MBAs, who
also find that an internship at Lehman is a good way to get a full-time job after
graduation. The firm believes this is the best way for you and the firm to get to
know each other. Lehman offers ten- to 12-week programs in the United States,
Europe, and Asia in investment banking, private equity, fixed income, equities,
public finance, and private-client services. During the summer program,
classroom training and social events bring the groups together for fun and
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learning. Regardless of their division, summer
associates are sure to be wined and dined and offered
extensive contact with senior management.
Opportunities for Midcareer Candidates
Although Lehman Brothers relies heavily on tradi-
tional campus recruiting of analysts and associates, it’s
certainly possible to be hired in the midst of your
career. Those with particular industry or product
expertise are becoming more and more valued on the
Street. “We’re hiring everywhere,” a recruiter tells us.
Insiders say that job opportunities in global markets are also increasing as
investment banking becomes more international.
International Opportunities
Lehman offers opportunities in Europe and Asia. “Asia will be a very important
part of World Capital markets soon. China getting into the WTO will be an
important first step. We’re not in a rush. We see more opportunity in Asia than
in Latin America. We’ve had that view for awhile.” The firm also continues to
build in Europe, where it has a robust practice. The firm has a centralized
system for letting people know about opportunities elsewhere. “No one should
be afraid to put their hand up and say they’d like to do something else,” says a
recruiter. Lehman’s philosophy is that “success in one place leads to success in
another place.”
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The Workplace
People who have
done extremely
well here know
how to work with
other people.
It’s an absolute
requirement and
not something
you learn.
“ ”
Insider Scoop
What Employees Really Like
Carve your niche. Lehman is a scrappy competitor—note its Best Operator
Strategy—and offers an entrepreneurial environment, which sets it apart from
the more established, entrenched firms on the Street. Insiders tell us that if
you’re enterprising and enthusiastic, you can make a meaningful impact. “At
Lehman,” says one insider, “you can develop your own niche or expertise in an
industry and be the go-to person.” Another, referring to the responsibility given
to young bankers on project teams, says, “As a junior banker at Lehman, you’re
shepherding the process.”
Opportunity. Insiders feel that climbing the corporate ladder at Lehman doesn’t
mean climbing a regimented organizational chart. “You get to step up earlier in
your career. You’re not a cog,” says an insider. “If you work hard and perform
well, you will be compensated for it,” says another insider. “I don’t feel like I’m
hitting my head on any ceiling,” says another, adding, “If you can step up so
that you’re talking to clients and doing the advanced modeling work, you can
have a significant impact. You don’t have to be a gofer.”
Mobility. Unlike some of its competitors, Lehman wants its employees to move
around and considers the resulting cross-fertilization a competitive asset. “I’ve
never heard of a firm where you are moved around so much if you want to
be,” says an insider. And when you move, you’ll have opportunities to make a
difference. As one insider who transferred to the London office says, “I knew
I’d be part of generating ideas from the very beginning.”
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Experience. Insiders say learning the basics of finance is one of the best aspects
of working at Lehman. “Lehman’s well known for having one of the best train-
ing programs on the Street,” says an insider. Insiders also report that working at
Lehman opens doors. “There’s no way I’d have the job I have now without
having been at Lehman,” says one former insider. Employees also say
investment banking is great preparation for anything from trading on your own
account to starting your own business. “In this industry, you’re privy to so
much information,” says an insider. “It’s a real education.”
Watch Out!
Lean and mean. Though its compensation is competitive, Lehman’s strategy
means you might not get some of the perks its competitors might offer. “The
firm is pretty careful with costs in comparison with … other banks. Some
people would rather work at a bank that pays for your lunch every day,” says an
insider. “The way that translates to your life as an analyst is you’ve got a lot
more responsibility from an early stage,” says another insider—meaning more
opportunities to learn, but also more opportunities to work harder than your
peers elsewhere.
Formalwear. In February 2002, Lehman returned to a formal dress policy.
“Nobody likes it,” says an insider. “I almost cried when I heard we were going
business formal, but I’ve adjusted. What really annoys me about it is that Dick
Fuld, at the quarterly earnings announcement, was wearing his shirt and tie, but
wasn’t wearing his jacket.”
Lehman first. Lehman stresses its team culture. As one insider puts it, “There’s
a saying at Lehman: one team, one dream. And it’s true. They really mean it
when they say, ‘Be a team player.’” Candidates interested in their reputations
rather than the good of the firm or client won’t find a big stage at Lehman.
This isn’t a star system like that at Morgan Stanley. “We’re a strong company
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The Workplace
that does not let the personal interests of the individual supersede that of the
firm; that’s not acceptable,” says an insider.
Political influence. According to a report by the Center for Responsive Politics,
which tracks campaign contributions, Lehman Brothers was President Bush’s
second-biggest contributor among investment banks (after Merrill Lynch) as of
July 2003 with $152,500 in individual and PAC contributions. If you’re a
Republican, you may not be bothered by these contributions, but Democrats
might be.
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Getting Hired
• The Recruiting Process
• The Interviewer’s Checklist
• Interviewing Tips
• Grilling Your Interviewer
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Getting Hired
The Recruiting Process
When reviewing résumés and interviewing, Lehman recruiters look for clear
evidence of problem solving, leadership, initiative, personal presence, and the
ability to work on a team. In making hiring decisions, “We think about people’s
intrinsic smarts, intrinsic leadership abilities, and their presence,” says a
recruiter.
At the undergraduate level, Lehman looks for “distinctive” candidates. The firm
recruits on campus at core schools (e.g., the Ivy League), but it actively looks
for candidates from noncore schools as well. The firm’s goal is to find the best
candidates in North America, period. Lehman claims that it has an infrastruc-
ture for recruiting at many undergraduate schools that its competitors don’t
have. At the graduate level, Lehman recruits at the top business and law schools
and PhD programs. Qualified candidates submit their résumés and, if chosen,
move on to a half-hour, first-round general interview on campus. A second-
round interview takes place either at Lehman’s offices or on campus. “We have
different structures depending on the division,” says a recruiter. “There are
many times we make the [hiring] decision on campus. Sometimes it makes
sense to do interviews on-campus. Other times it makes sense to fly people
back to the office.” Expect to talk to one person at a time during the
interviews.
Although the vast majority of analysts and associates in the United States end
up in New York, a limited number of positions are available in Chicago, Los
Angeles, and San Francisco. These offices can be desirable because they permit
a lifestyle slightly more relaxed than the New York grind. Lehman also hires a
lot of people into its offices in Europe and Asia.
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Getti
ng H
ired
On-campus interviews consist of a half-hour meeting. If a trip to New York is
deemed appropriate, you’ll go through a day’s worth of meetings with employ-
ees who range from associates to senior vice presidents. (By the end of a full
day, candidates have often been interviewed by as many as ten or 12 profes-
sionals). Offers are usually made within the week. Those seeking positions
abroad will interview for a specific office, but if hired may spend an initial
period of time in New York. You can find recruiting contacts for specific
schools at www.lehman.com/careers/americas/contacts/school.shtml.
If Lehman Brothers does not recruit at your school, your best bet is to send
your résumé to the recruiting department. The firm has a list of names on its
website (see “Recruiting Contacts,” in the next chapter).
Special Information for Undergraduates
Lehman recruiters say that the firm “looks at candidates holistically.” The
analyst program is a two- to three-year, up-or-out program depending on
division. In 2003, one insider estimates that on the banking side, half of this
year’s class are happy, 25 percent are okay with their jobs, and 25 percent are
disappointed. “I think that’s something you take a chance on when you’re hired
into the generalist program. You know you’re going to have a job. You just
don’t know if you’re going to have a job you like. You’re taking a chance.
Maybe 30 percent of people don’t get their number one choice.”
Special Information for MBAs
Lehman actively recruits at the top business schools. An insider advises MBAs
to enroll in one of these schools, attend a Lehman one-firm presentation and
on-campus workshop, talk to second-year summer associates, and seek out
recent alumni for informational interviews. For MBAs who are new to
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Getting Hired
I-banking, the best way to get experience is through Lehman’s summer
associate program. At the end of the program, Lehman extends full-time offers
to all summer interns who are deemed exceptional performers.
Special Information for Midcareer Candidates
According to insiders, the best way for midcareer professionals to get into
Lehman Brothers is by focusing on the important industry and product groups
at the firm. A high-tech or telecom specialist who speaks fluent Cantonese has
a much better shot than a finance generalist does. But any previous experience
at a bulge-bracket firm, private equity shop, or other markets-based business is
generally a strong selling point. Top talent is always in high demand across
divisions.
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The Interviewer’s Checklist
Insiders say they are looking at five specific areas in hiring:
1. Problem-solving and analytical abilities, such as intelligence, common
sense, business sense, and good judgment
2. Leadership, as in the ability to motivate others, head a team, and promote
an idea
3. Initiative, such as energy, work ethic, and a drive to excel
4. Teamwork (“It’s critical to understand you’re part of a team”)
5. Personal presence, or “self-confidence, assertiveness, humility” and “the
ability to understand one’s own strengths and weaknesses”
A recruiter says, “We’re looking to bring in the future leaders of the firm. We’re
trying to take a much longer view.”
Several hires tell us they joined Lehman because of the firm’s open-minded
approach to candidates with varied backgrounds and interests. As one insider
puts it, “They were very accepting of my liberal arts background; I didn’t feel
like I had to hide it.” At the same time, insiders say that Lehman does value
candidates who know how to network and play the political game. According to
insiders, recruiters recognize those who “talk the right way” and who can
“shake hands with the right people” naturally, without having too much
attitude. One insider has this advice for new recruits: “You should focus on
making yourself and your name very evident in the bankers’ lives. Don’t make a
nuisance of yourself, but don’t make the bank make all the effort.” Says another
45
Getting Hired
insider: “I think it’s important to relax [in your interview]. The interviews are
personality searches. . . . If you get your interviewers to like you as a person, if
you show you’re curious, eager, interested, inquisitive, you’ll do well—I think
that’s what got me in the door.”
Interviewing Tips
1. Insiders insist that you must know why you’re going into investment
banking before you walk into your interview. Once on the job, there is no
time for soul searching. “When you’ve slept two hours a night for the last
two nights, you do start thinking, ‘Why am I here?’” says one insider.
2. Know Lehman’s history. Understanding where the firm came from, such
as its relationship with American Express, and what it’s faced in the last
few years, such as moving out of the World Financial Center, indicates an
interest in the firm that interviewers want to see.
3. Prepare clear answers to basic questions about your academic and work
experience that demonstrate your problem-solving ability, team
orientation, leadership, initiative, and analytical ability.
4. Understand why you want to work at Lehman, and come prepared with
questions that are genuine and demonstrate a desire to learn more about
the firm.
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5. Take some time to look through Lehman’s website. The site was
redesigned in 2002 and has a lot of good information, including day-in-
the-life profiles of bankers, anatomy of a deal, and testimonials. There’s
even a financial glossary (a good way to make sure you can talk the talk) at
www.lehman.com/careers/americas/glossary.shtml.
Grilling Your Interviewer
Recruiters expect good questions from top candidates. While you’ll want to
create your own, here are some sample questions that will put you a step ahead.
• Why did you choose Lehman Brothers over the other firms on the Street?
• Describe the type of mentorship new analysts and associates receive.
• What are the key differences between the training programs in sales, trading,and research; corporate finance; and public finance?
• What are currently the hottest product areas at Lehman?
• How open is the firm to letting junior employees implement new ideas orproducts?
• How has Lehman had to reposition itself when competing for business withmega-firms like Citigroup and BankAmerica?
• How concerned are you about SEC inquiries into the potential spinning ofIPOs?
47
Getting Hired
For Your Reference
• Recommended Reading
• The Numbers
• Et Cetera
49
For Your Reference
Recommended Reading
“Review of the Year 2002”
This report by International Financial Review (IFR) is excellent for anybody
interested in banking as it explains market conditions in 2002 and singles out
award winners. Those applying to Lehman should read the section on “Bank of
the Year” (“Playing by its own rules”), which covers Lehman’s strategy, the
strength of its culture, its recent success, and, briefly, its history to explain why
IFR named it Bank of the Year. We highly recommend that aspiring bankers
read other sections of the report as well, which discuss issues many banks are
struggling with, such as the ethical crises in investment research and increasing
regulation.
Source: www.ifrmagazine.com/ifr/roy2002two.html.
“Lehman’s Fuld on Why He Made a Deal”
In an interview, CEO Richard S. Fuld, Jr., describes why the firm bought asset
manager Neuberger Berman for $2.63 billion after years of going it alone. “We
have embraced a philosophy of growing organically,” says Fuld. “That’s why
this acquisition is momentous in itself.”
Source: BusinessWeek Online, 7/23/03.
“Lehman to Buy Neuberger in Deal Worth $2.6 Billion”
Analyzes and explains the Neuberger deal, including how the acquisition will
help Lehman diversify its revenue stream (by increasing its fee-based business
revenue) and reduce costs (by merging back-office operations).
Source: Landon Thomas, Jr., The New York Times, 7/23/03.
50
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“Trio to Thrive on Market Rally; Goldman, Morgan, Merrill Stand to Gain, while
Bond Houses Could Falter”
This article provides great background on the dynamics of Wall Street, arguing
that Lehman’s success during the bear market could turn if the bull market of
2003 continues, thanks to the domination of Goldman, Morgan, and Merrill in
the IPO and M&A business.
Source: Aaron Elstein, Crain’s New York Business, 6/30/03.
“The Street’s No. 1 Obsession”
A strong article about how the League Tables are manipulated; Lehman’s
mentioned because it got League Table credit on the sale of PwC, a deal
for which it didn’t offer any real advice.
Source: Andy Serwer, Fortune, 5/26/03.
“Why Lehman Needs a Strategy for Asia”
Though a little old, this article’s focus on Lehman’s strategy in Asia provides a
great overview of the firm, with sidebars that cover its history in Asia and the
United States.
Source: Fiona Haddock, Asiamoney, 4/02.
“After the ‘Darkest Year,’ a Changed Wall St.”
Though Lehman gets barely a mention, this review of how events in 2001 and
2002, from 9/11 to accounting scandals, transformed Wall Street provides a
useful background on Wall Street today.
Source: Patrick McGeehan, New York Times, 9/8/02.
51
For Your Reference
The Numbers
52
Personnel
Total number of employees, 2003: 13,247
Source: Lehman Brothers quarterly earnings report. Number as of 5/31/03.
Net revenues 4,000 3,269 22
Non-interest expenses 2,937 2,393 23
Net income 738 594 24
Earnings per share (basic) $2.96 $2.23 33
Source: Lehman Brothers quarterly report; WetFeet research and analysis.
Lehman Brothers Financial Highlights
1st Half 2003 1st Half 2002 Change($M) ($M) (%)
Investment banking 792 20 913
Capital markets 2,803 70 1,945
Client services 407 10 411
*First half of 2003. Source: Lehman Brothers quarterly report; WetFeet research and analysis.
Revenue by Business Category
Net Revenues----------------------------------------------------2003* ($M) % of Total Change (%)
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53
Et Cetera
Key People
Richard S. Fuld, Jr., Chairman and Chief Executive Officer
Jonathan Beyman, Chief of Operations and Technology
David Goldfarb, Chief Financial Officer
Joseph M. Gregory, Chief Operating Officer
Jeremy M. Isaacs, CEO, Europe and Asia
Bradley H. Jack, Chief Operating Officer
Herbert H. McDade, Head of Global Fixed Income
Robert S. Shafir, Co-Head of Global Equities
See www.lehman.com/who/bios/index.htm for biographies of senior
management.
Recruiting Contacts
Recruiting contacts for each of the departments are listed on Lehman’s website:
www.lehman.com/careers/americas/contacts
www.lehman.com/careers/europe/contacts
www.lehman.com/careers/asia/contacts
Lehman also lists recruiting contacts for specific schools:
www.lehman.com/careers/americas/contacts/school.shtml.
For Your Reference
54
Major Offices
New York
World Headquarters
745 Seventh Avenue
New York, NY 10019
United States
London
European Headquarters
One Broadgate
London EC2M 7HA
United Kingdom
Tokyo
Asia Pacific Headquarters
Aki Mori Building
12-32 Akasaka 1-chome
Minato-ku, Tokyo 107-6036
Japan
Locations for all of Lehman’s offices can be found at
www.lehman.com/who/offices/index.htm.
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WETFEET’S INSIDER GUIDE SERIES
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