Rob Parson at Morgan Stanley

Paul Nasr is a senior managing director (“MD) at MS in the Capital Markets (funding) area. He has 20 yrs of experience and was hired by Mack (the new boss at MS) to lead the Capital Markets (“CM”) area. Capital Markets is the link between Sales & Trading and the Investment Banking Division (“IBD”) and their main function is to raise funds. Sales &Trading area sale the products that Capital markets originate. Investment Banking and CM are interrelated as IBD gets business such as M&A on the back of the funding but CM also has to originate funds on the back of such M&A deals. The cross sell happens both ways. MS had historically been weak in the financial institutions group that makes up 30% of the market. MS was 12th in the league tables and they had a reputation for constantly changing their coverage person. Paul hired Rob Parson to fill in this coverage position. The Financial institution area within capital markets is the most dynamic and aggressive (cut-throat) and the clients are very sophisticated (as they are banks too). Hence the coverage person had to be somebody with a strong drive and endurance. Paul knew Rob from previous job and he thought that although Rob did not fit the MS’s cultural mould he was the right person for that job. Rob Parson (“RP”) has 10 years of experience in the FI sector.

He is kind of a rebel and has not the traditional background for an investment banker. He dropped out of school for some time, attended a normal (not “Ivy league”) college and then got an MBA. He started working at a commercial bank in the savings and loan business. This area was booming and he performed very well. He worked at 3 investment banks and then joined MS to work with Nasr. Rob joined MS as a principal in the FI area and did a phenomenal job to improve MS’s franchise. He had very good relationships and market knowledge that he applied to move MS from the 12th to the 3rd position in League tables. He was also very proactive in cross selling with other areas. Notwithstanding his great performance he had difficulty integrating in the MS culture, would not engage other and not mentor colleagues to bring them up the ladder. He was a self-starter but also quite an individualist. This raised conflict with his colleagues. Paul has to review him and decide if he puts him up for promotion as a MD. Reviews are done via a 360 performance evaluation that is people above, at the same level and below need to evaluate a person.

Question 1
Does Rob Parson deserve his promotion now? Why?
RP should NOT be promoted to an MD unless he had been expressly told (written or verbally) that this was the agreement. In RP’s case there was an implicit agreement/tacit understanding that if he did a good job he would be on the fast track to become a MD. He has performed extremely well however promotions at higher levels such as MD do not solely depend on 1 year’s performance. They are on the back of consistent production and they are also relative to the firm’s performance. In addition, a MD has to be in sintony with the corporate culture as he will be representing MS at the highest level. By promoting him it will send a message that the individual has priority to the company and thus undermines the integrity of the firm. It would constitute a challenge to the corporate culture. And this was one of Mack’s most important messages: Corporate behaviour is more important the individual.

Question 2
Why is MS engaging in this competency assessment?
Mack as the new head of MS wanted to implement a change of culture to adapt MS to the current fast changing times. He emphasized the “one firm” vision to promote a unified and coordinated approach to their clients. The 360 assessment is part of his new way of doing business. Mack wanted the employees to focus on three main points: Teamwork, Cooperation and Cross-selling. The assessment serves two purposes, the first is to define a new culture and the second to find people’s weaknesses. For this reason the review is done by superiors, colleagues and subordinates to give a comprehensive exposure report on the reviewed employee. Given the variety of people one employee is exposed to (Sales people, traders, investment bankers…) the person does not know who will do the review and give feedback on his performance. Hence the employees need to think first and foremost of the firm and how they can do better and work with the different people. Investment banks such as Morgan Stanley and especially Goldman Sachs have a very strong corporate culture and they would not sacrifice their corporate behaviour for an individual despite his stellar performance. They want their employees to move towards the top right part of the enclosed matrix.

Investment banks continuously do these reviews to determine the top 10% to promote them and the bottom 10% to replace them. Hence they ensure they have the “best” people

Question 3
Can Rob Parson change?
Rob is a highly intelligent, very knowledgeable, very driven and very ambitious person. He acknowledges that he has problems with his colleagues but he is not able to pinpoint what these are. He knows he has shortcomings in his relationships with his colleagues and knows he is different to the traditional MS employee. But he believes that the most important issue is to close deals and does not take care of the “how” you do this. RP may want to change but he does not know how to do this. RP can change but he will require the help of Paul. Paul hired him knowing that he did not fit the MS mould and now he is responsible for letting RP know what his weaknesses are and how he has to address them. Paul has to invest in him and coach him to move him closer to the MS corporate culture.