Archive for October, 2010

Undergrad Wins INFORMS Prize in Operations Research.

October 27th, 2010 by under Articles for the Smith School, Supply Chain and Ops. No Comments.

John Silberholz, Dr. Bruce Golden, Michael Silberholz. Source: John Silberholz

I wrote this article for the Smith School about an amazing Smith undergrad named John Silberholz who won a prestigous prize in Undergrad Operations Research and who is starting is own company in energy frequency regulation, Enertaq.

Silberholz and Golden developed a close mentor-mentee relationship that was driven by their passion for analytical problem solving. Golden (who usually sleeps from 5 a.m. to 1 p.m., schedule permitting) and Silberholz would often stay up late discussing their research over the phone.

Silberholz says he was hooked on research ever since he was introduced to optimization problems as part of his senior project in high school. “I’m really drawn to the practicality of a problem. I want what I solve to be meaningful.”

Smith provides many opportunities for talented individuals to shine at all educational levels.

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Be a Case Interview Detective: David Ohrvall Teaches Smith MBAs how to Crack the Case

October 21st, 2010 by under Career Search, Consulting. No Comments.

Crack your case interview with a framework and tips by David Ohrvall. Source: MBACase

The Smith Office of Career Services and the Consulting Club brought another wonderful speaker, David Ohrvall, founder of Crack the Case, to run an extremely informative workshop on how to handle case interviews.

Case Questions

His approach was different from Marc Cosentino, who visited more than a month ago for a case workshop of his own.  Whereas Cosentino’s presentation was more about the process of thinking through a case, Ohrvall’s workshop focused on the translating those thoughts into a communication structure.  Some of the most important takeaways from Ohrvall’s workshop were:

  • Think about the case as if you were a crime detective
    • You arrive at the scene of the murder and there are five suspects…given the physical evidence, who do you want to interview first?  What questions will you ask?
  • Think about your presentation as an output-oriented endeavour
    • How will you communicate the structure of your thought process and analysis
  • Split your paper into three sections for Facts, Data, and Analysis
    • Facts are background info on firm such as size, revenue, the problem itself, etc.
    • Data are usually numbers info about the problem itself
    • Analysis is for writing out your thought process
  • Before beginning analysis, repeat back the basics of the facts and the problem and ask for confirmation.
  • Structure your thought process into bucket categories and then split them up into smaller parts
    • Ex) A problem of decreasing returns can be divided into Profit, Demand, Complements, and Suppliers
      • Profit is divided into Revenue and Cost
        • Revenue is divided into Price and Volume
        • Cost is divdied into Fixed and Variable
  • Have a FRAME:
    • Form a Plan
      • Use 2-3 sheets of paper (1 for presentation, 1 for scratch)
      • Develop a consistent approach
    • Read your audience (speed up and slow down to match your interviewer’s pace)
    • Anchor your hypothesis (ask yourself where you want to start and go with it)
    • Mine for data (ask 2-3 questions per bucket category)
    • End the Case with Data and with a Decision
  • Make sure to SPEAK:
    • State your assmputions and communicate what you’re thinking
    • Pick your metrics (e.g. population, sales)
    • Estimate quickly with round numbers (based on general estimate or your own life observations)
    • Assess your approach and Answer
    • Keep Exceptions and Next Steps in Mind
  • Analysis can be thought of in terms of different Zones
    • Strategy (Are numbers going up, down, stagnant, etc.; Structure of the Industry)
    • Operations (What are income statement trends?)
    • Organization (People, systems, measurements, processes)
    • Finance (Cash, Debt/Equity)
  • Begin with qualitative issues by asking questions that display logic and depth (7 min)
    • Don’t be too specific in your first questions (e.g. Was sales growth down in particular product categories?)
  • Dive into the quantitative numbers (data, estimations, equations, charts/tables) (7-10 min)
    • Leave the Quantitative Pool with an Insight (based upon the bucket structure you started with, what are the implications of your data insight?).   State it and then dive back in!
    • When doing an explanation that requires math, talk about your reasoning as you do the math step by step.  Do not jump into the math and leave silence (interviewer becomes disengaged) and then explain it all in order afterwards.
  • When you leave the data pool for the last time, bring your Insights together in a “So What” (i.e. identify core issues and present recommendation) (2 min)
  • Your answers may be challenged.  Be comfortable taking push back and be comfortable adjusting your answers if you are way off.

Behavioral Questions

Ohrvall’s advice was not limited to case interviews.  He also provided advice on dealing with behavioral interview questions (e.g. when was a time when you had to convince someone difficult to work with?):

  • State your Results First.  Before explaining the situation, state what the outcome was as a way to grab the interviewer’s attention.  Then briefly state what you did.  Then go into the description of the problem, your actions, and return to the results.
    • List the main points (e.g. priorities, principles, skills, what you learned, etc.)  first and then develop those points through the narrative
  • Don’t let your description of the situation crowd out what makes you distinctive
  • Communicate your IMPACT by focusing on these points:
    • Individual Contributions
    • Management or Leadership
    • Peruasion
    • Analytic Thinking
    • Challenge-oriented
    • Teamwork

David Ohrvall is the founder of MBACase and the author of “Crack the Case: How to Conquer Your Case Interviews.”

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Home Depot VP Holifield visits Smith: Insights into Transforming Supply Chains

October 18th, 2010 by under Career Search, Supply Chain and Ops. No Comments.

Mark Holifield, Senior VP of Supply Chain, Home Depot. Source: Home Depot

Last Friday, Mark Holifield, Senior VP of Supply Chain for Home Depot, spoke at Smith’s Supply Chain Forum and Industry Day, which was organized by the MBA’s Supply Chain and Operations Club, the undergrad’s Supply Chain Management Society.

If you didn’t make it then you really missed out, but here’s a nice summary with some of my thoughts.

Holifield gave an engaging talk about Home Depot’s transformation from its high growth phase to its maturation.  Holifield shared that business development used to be driven by building new stores and capturing new market share.  With almost 2,200 retail stores across the United States, Home Depot transformed the home improvement and construction industry in 25 years (it was only founded in 1978!).

Engineering Supply Chain Transformation

Once they had penetrated all of their markets, the company turned its attention toward improving productivity, mostly through supply chain management.  Home Depot’s strategy was based upon four factors:

  • Improve In-Stock Inventory (studies of the Fast Moving Consumer Good industry show that retailers lose 4% of sales to being out of stock)
  • Improve Inventory Efficiency and improve Cash Flow
  • Decrease Logistics costs
  • Focus on providing service and delivery to retail stores

Home Depot developed an optimal flow network of distribution centers and developed Rapid Deployment Centers to handle goods whose demand could be most easily predicted:

  • Direct to Store (traditional means of distribution; handled 23% of COGS, the remainder handeled by the three new centers)
  • Rapid Deployment Centers (goods with predictible supply and demand, sent with full truck loads)
  • Stock and Pick Distribution Centers (goods with unpredictble supply and demand, full truck loads not required)
  • Bulk/Lumber Distribution Centers

Home Depot’s initiative has paid off so far.  From 2001-2o09, it was faced with negative growth in inventory turnover (i.e. higher inventory turnover is better because the faster you can sell your inventory, the faster it gets turned into cash).  That inventory turnover began to increase during recession is all the more impressive because the firm would have to drop its inventory levels faster than its sales were dropping (InvTurnover = Inventory/Sales).

Managing Change / Managing Culture

Holifield said that one of the most difficult aspects of this internal transformation was adapting the new technology and processes to the old culture.  Admitting that he mistakenly underestimated how important the cultural shift would be for Home Depot workers, he created a direct report position to provide change leadership within the firm.  The person tapped to be the first VP of Integration and Change was a long time Home Depot employee who had moved up from the retail floor and had worked in almost every retail and distribution position in the firm.

What I appreciated the most about his talk was his description of how to handle change.  He said that large scale improvements require People, Technology, and Processes to change simultaneously.  People have to transform as much as the mechanical systems that were employed in order to get them used to new methods of replenishing stock or handling goods.  Noting that a system moves only as fast as its slowest part, Holifield said that it was important to not ramp up technology until people are up to the task.

I Need a Stamp like This….

While the talk was informative overall, the most humerous part, which also gave great insight into the company, was Holifield’s recollection that retail store managers were given stamps that read “BULLSHIT.”  When corporate sent directives that managers knew would be impractical, they stamped the papers and sent them back for review.

Supply Chain Industry Day

After Holifield’s talk, Smith students talked with recruiters from 27 firms, including DuPont, Hilti, John Snow, Lockheed Martin, Target, and Unilever.  It was a great opportunity to look for internships.

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You Get What You Pay For…wait a minute, didn’t we learn this already?!

October 16th, 2010 by under Economics, Finance, Real Estate. 2 Comments.

Overwhelmed with Work? Be careful what system you use to get through it. Source: Alex Bannykh, Royalty Free Photos

I took a break from preparing for our MicroEcon final (one of three exams this week!) to read the Washington Post and I saw an article about home foreclosures that is particularly salient to our studies, the economy, and people’s lives.

In Short: You Get What You Pay For

In the past few weeks, there have many reports about financial companies and mortgage servicers freezing their foreclosure processes to review tens of thousands of loans that may have been improperly foreclosed upon.  Facing millions of foreclosed and delinquint home loans, financial institutions have been struggling to handle the large volume and hired specialized mortgage servicers to handle the paperwork.

Today’s Post article reported on the incentives that these servicers faced, which encouraged them to focus on speed over quality.

If this sounds familiar, you’re not alone.  Just as mortgage brokers and securitizers were paid on the volume of home mortgages that they originiated or securitized, respectively, mortgage servicers were paid on the basis of how many homes they could foreclose.  Moreover, credit-ratings agencies give higher grades to mortgage service firms that have higher foreclosure turnover and give lower grades to those that have hold onto delinquint loans.  The large volume also pushed many servicers to hire people that were unfamiliar with the industry and who may have been more given to error.

From my classes at Smith, we can analyze this in the framework of Moral Hazard, specifically, the Principal-Agent problem, in which the principal and the agent have different goals, but the principal’s outcome is dependent upon the agent’s actions.  In this case, mortgage servicers had an incentive to foreclose upon as many homes as possible, regardless of whether it was in the interests of their client or the homeowners upon whom they passed judgement.

In class, we’ve learned that well designed incentives can align the interests of the principal and the agent.   Yet, these contracts often lead to a particular outcome, namely, that “YOU GET WHAT YOU PAY FOR!”

Furthermore, contracts are only efficient insofar as:

  • The principal can costlessly observe the actions of the agent
    • Not feasible in this case, since financial institutions were overwhelmed already (the reason for hiring the special servicers in the first place)
  • The agent will not be penalized for acting in the principal’s interest (i.e. no income risk – my classmates may recall this weekend’s Problem Set 5, Questions Supplement, Problem 1)
    • Not feasible in this case, since special servicers competed against each other for foreclosure portfolios based upon their processing rate.  Fannie Mae actually imposed a $100 fee for every day that Fannie was not notified of a home that had finished the foreclosure process.

So, we obviously haven’t learned anything and the consequences are wide ranging.

  • Homeowners are suffering even more (it was hard enough already with the confusion of foreclosure and unresponsive servicers who were overwhelmed with volume).
  • Financial institutions now have hurt their reptutations again, are stuck not moving any foreclosures at all, and may have opened themselves up to further lawsuits.
  • Investors in these institutions suffer as the value of their claims decline in response to these outcomes.
  • Special Servicers may lose future business because they have damaged their reputations.
  • I also expect the foreclosure freeze to weaken the recovering housing market as home sales slow in reaction to uncertainty: Who properly owns the title?  What does this mean for home values? etc.

At Smith, our Econ, Finance, Accounting, and Human Capital Management classes have all touched on the credit crisis and the structure of  incentives that contributed to it.  I’m glad that the frameworks we are studying help interpret current events.

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Interview Advice: Behavior vs. Inference

October 13th, 2010 by under Career Search. No Comments.

Prof. Jeff Kudisch. Source: Smith School of Business

My classmate Rocky Guo recently posted (and beat me to the punch – grrrr….) about a great career seminar held by Smith’s Office of Career Services earlier this Monday.  Prof. Jeff Kudisch, the recently selected Director of OCS, led the seminar.

Studies show that past behavior is the best indicator of future success so interviewers ask questions to elicit responses that indicate how we dealt with different challenges and scenarios in the past.

Prof. Kudisch emphasized that when being interviewed (and in general) we should communicate our actions and their results clearly (e.g. I took night classes in finance at my own expense and used my new skills to increase our project turnaround by 20% vs. I display initiative to move my team forward).

Please check out Rocky’s post to learn more about how to clearly communicate our behaviors to interviewers instead of leaving interviewers to infer them.

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Smith Undergrad Career Fair

October 7th, 2010 by under Articles for the Smith School, Career Search. No Comments.

Talking it Up. Source: Tony Richards, Smith Marketing Communications

Us MBAs aren’t the only Smith students looking for internships and jobs.  Check out this article I wrote about the undergrad career fair in September.

Smith students have high expectations to meet. “We’ve had so much success with Smith students,” Ali Downes, a Recruiting Manager from Enterprise Rent-A-Car, said effusively. “I’ve been recruiting at Smith for seven years and performance-wise, Smith students are among the best. They’re dressed professionally and their resumes are top notch. We’ve had Smith interns become full time employees.”

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Job/Internship Strategies for International Students: Breaking into The Hidden Job Market

October 3rd, 2010 by under Career Search. No Comments.

Earlier this week, Dan Beaudry, from TopMBA, a career site for MBA students, came to Smith to talk about Job Search strategies for international students who are discouraged by hiring policies that specify US citizens and authorized workers only.  His main points were to:

  • Focus on effectively communicating your value proposition
  • Go to employer presentations anyways even if their official policy is that they only hire citizens or pre-authorized workers (Beaudry says this is one of the biggest mistakes international students make)
  • Schedule informational interviews to gain access to the Hidden Job Market where key contacts can advocate for you

Although, necessary information for international students, Beaudry’s advice is applicable for all of us.

As if Competing for a Job Wasn’t Hard Enough Already

International students face a more difficult time than US citizens getting a summer internship or full time job because their employer must sponsor them for a work visa.

The cost to the employer (e.g. hiring a lawyer, filling out paper work, paying fees) may be ~$5,000 per hire.  Furthermore, employers may feel that there are already enough pre-authorized candidates to consider – throwing in more applicants increases total hiring costs.  Even if a firm agrees to sponsorship, an oversubscribed pool for H1-B visas introduces uncertainty as to whether the applicant will be randomly selected at all.  These initial considerations cause many employers to set an HR policy of only considering US citizens and those who already have work authorization.

Communicate Your Value Proposition

Yet, these policies are not necessarily set in stone.

If international students can successfully argue that they will bring a lot of value to the firm and that their skills will solve a problem the firm is having, then it is possible to overcome the breakeven point of the employer’s cost/benefit decision for hiring only pre-authorized workers.  This advice rings true for any applicant.

However, most recruiters do not have the authority to break policy.  The key is to find someone internally who will be an advocate for you.

Access the Hidden Job Market Beneath the Surface. Source: Royalty Free Photos

The Hidden Job Market: Beyond the Tip of the Iceberg

Beaudry explained that job postings represent only 20% of the entire job market.  Using the image of an iceberg, he pointed out how the 80% of job positions are hidden under the surface of the water.  In the Hidden Job Market, recruiting managers and current employees network with each other to provide referrals.

Firms prefer referrals because they reduce hiring costs (e.g. posting, recruiting, etc.), increase likelihood of job fit, and smoothen turnover.  A referred applicant is more of a known entity because they have already been vetted.  Furthermore, the person doing the referring has put their own reputation on the line.  Many large firms have Employee Referral Programs that reward employees for referring applicants that are successfully hired.

Beaudry said that the best way to break into the Hidden Job Market is to ask for informational interviews with people who hold positions about which you want to learn more.  An informational interview can be informal and provide a lower-pressure environment for emphasizing the skills, experience, and insights that candidates can bring to the firm.  The goal is to impress your contact with your knowledge, get the inside scoop on the firm, and get the her or him on your side.

If international students can gain access to a team manager, the hiring director, or someone else with influence, the student will have a better chance of landing a job.  These critical contacts have the positioning to say that an applicant and her/his skills are extremely valuable to the firm and its projects.  Lower level recruiters won’t have the authority to break policy, but if you can communicate how valuable you are, you might convince someone with more power to make an exception for you.

In particular:

  • Don’t mention the need for a work visa at the very beginning of a conversation.  Bring it up much later after you have articulated your value.
  • If the informational interviewer is encouraging, emphasize how much you would like to work for their firm or one like it and ask if they know of other opportunities at firms who do sponsor international students.
  • Make sure you select someone you are sincerely interested in for your informational interview

Some Personal Thoughts

Althought it seemed like encouraging advice, it is easier said than done and I wonder if it might put off some employers:

  • Could an informational interviewer feel like you are wasting her/his and your time when she/he finds out you need a visa?  How would you deal with that?
  • How do you tactfully follow up with that interviewer to encourage her/him to recommend you?
  • How do you tactfully communicate to lower-level recruiters to not entirely write off your application until they’ve had a chance to talk to your informational interviewer?
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