Making Nice: Goldman Eases Working Conditions as Lower Compensation Reduces Wall Street Allure

It's not like anyone ever really felt sorry for young Goldman Sachs employees. They had made a deal with that particular devil: in return for ridiculously long hours and a large dollop of verbal abuse they were paid more in one year than many people see in a lifetime. It was voluntary; the pecuniary and reputational benefits were understood and if that's what you wanted - and they wanted you - it was a gilded means to a comfortable end.

But then the financial crisis raised some concerns. And responsible if somewhat envious people started demanding checks and balances and all manner of regulatory hoo-hah that, though they were loathe to admit it, took some of the froth off the incentive package. On top of that, all those greater fools who got burned in 2008 were just a little more hesitant to come back to the markets or for a second helping of that ol' Goldman magic. So, revenues and profits sagged, employment was right-sized and suddenly working 100 hours a week didnt seem like such a good deal, especially when hedge funds and private equity firms and the entire tech industry started looking just as lucrative - and a lot more fun.

Goldman, after maintaining for several years that everything was just totally super, even as it dealt with lawsuits, Congressional investigations and the probable election of a next New York Mayor who may win by the largest margin in history running as the anti-Mike Bloomberg, has suddenly discovered that this competition thing sounds really good in speeches but can be a tad inconvenient in reality. As a result, it is finding that in order to retain the creme de la creme of financial talent, it has to pay attention to how they feel and what they think and, gasp, what they want. All of which means that for the next year or so the institution will have to be a little more, well, human. But not to worry: everything on the Street is cyclical. This, too, shall pass. JL

Daniel Schafer reports in the Financial Times:

Goldman Sachs has eased the working conditions of its junior investment banking staff by discouraging them from working weekends, highlighting how investment banks are changing their culture to retain young workers.

The US investment bank said it was in the process of implementing recommendations made by a “junior banker task force” of global executives created earlier this year, which assessed young investment banking staff’s working conditions and career development.Its proposals include hiring more entry-level employees, called analysts; providing additional opportunities for these analysts to spend time with their managers and clients and encouraging more predictable out-of-office hours.

“The goal is for our analysts to want to be here for a career,” said David Solomon, Goldman Sachs’s co-head of investment banking. “We want them to be challenged, but also to operate at a pace where they’re going to stay here and learn important skills that are going to stick. This is a marathon, not a sprint.”

Banks have started to reassess working conditions as stricter regulatory rules and lower revenues in most business areas are curbing their ability to reward extremely long hours with large bonuses. In addition, there is an intensified competition for talent with hedge funds, private equity groups and technology companies.
Goldman said it would hire 332 analysts next year, 14 per cent more than in the year before.
The decision comes after the bank last year ended two-year contracts and bonuses for analysts at its investment banking operations.
The move to give these junior bankers full-time employment contracts from the start was designed as a way to prevent them from being poached by hedge funds and private equity groups.
But is was also meant to ease pressures on entrants to the programme, who have traditionally worked at Goldman for two years and then gone on to do MBAs before returning to the bank.
Investment banks are notorious for their highly competitive and tough working culture for junior staff, with frequent all-nighters and weekend work sometimes seen as a rite of passage ahead of a career in the highly paid investment banking sector.

But the system has come under scrutiny this summer when a London-based intern at Bank of America Merrill Lynch died from an epileptic fit. Unconfirmed reports said he worked until 6am for three consecutive nights just ahead of his death.

BofA subsequently created a senior working group to review the circumstances of the death of 21-year-old Moritz Erhardt and the working conditions for junior staff.

The tragedy has sparked a debate about the long hours for City interns and junior staff, with bankers saying that the pressure to work hard has become tougher in recent years after deep staff cuts.