Just saw this article on business insider regarding GS reportedly not having a 2 year analyst program - is this just because they want to promote internally to associate?
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How is this even supposed to work? Do you think other banks will follow suit?
Here is the WSJ article. Pretty wild.
http://online.wsj.com/article/SB100008723963904435249045776498305582565…
From the article:
I personally like the move, I'd like to see more emphasis on ingraining a firm's culture into analysts rather than using them up until they are braindead and tossing them aside.
Lol... there isn't going to be any change, they are still going to grind analysts into the dust. The only thing this does it make analysts think twice about whether or not they want to go to a bank with this structure and risk trying to recruit since when their cover is blown they are fired. And you think GS needs more emphasis on ingraining their culture? Lol... they have full fledged koolaid sessions...
They are ONLY doing this to keep themselves from losing talent. They don't care how hard they work analysts, they just want to make it harder for them to leave. I think this is a shitty thing.
Considering they fired analysts with buyside offers earlier this year, why is a change necessary/how does this make it harder for them to leave? It already sounds like GS is definitely a place where you have to keep any job search under wraps.
the wording on the bonuses means that analysts might get shifted to a year-end bonus like associates. Implies that maybe you have to leave your half year behind when you switch gigs ...
They already are on a different comp structure than the rest of the street.
Shitty news all around, it will be harder for targets to transition into PE and harder for non target undergrads to get into IB through an MBA. I hope other firms don't follow suit...
How will this affect the difficulty of people transitioning to PE?
Agreed. I don't think other banks will follow suit tho, with the exception of MS... looks like they are starting to slowly transition this way. It will create a stark difference for the ones that don't though. Will be interesting to see how this impacts recruiting.
Sounds like they're trying to run a business with recent college grads now instead of just a training program for their clients.
On the money.
Even under the current policy, job searches are fine during part of your second year as an analyst. Starting next year they won't be.
Also, no departure bonus = shitty pay for the last seven months of your second year. Unless you stay as an associate, or unless you quit at the end of the January (which a lot of analysts will probably do)
I am a VP at a bulge firm and I have to be honest, I must be a complete idiot, but I don't understand GS' rationale for this move. What is the benefit to GS? Are they suggesting all analysts will have long term opportunities? How does GS' bonus structure differ from other firms?
GS stubs their analysts, most other bulge's just pay trailing 12 month...
just leave after your second bonus with 18 months on the job... settled.
That's what people are going to try to do, but recruiting doesn't sink up with that timeline necessarily, and many PE firms want you to complete two years prior to joining.
I think you're right tho. People are going to leave earlier... this move is going to backfire.
You have to consider how hard this policy will make it for their analysts to recruit in general unless you are at the doctors office for 2-3hrs on end every week. Previously, with the program expected to end after 2 years people knew you would be recruiting your second year and GS allowed that as a 2nd year. Now with no end to the program, any hint that you are recruiting at all and they will let you go.
This hurts their analyts more than you think
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Following up on Lukster's point, I think that they are trying to stop analysts from checking-out once they know they have a PE job lined after the end of the program. At the end of the day most analysts won't stay on with the firm after their first 2 years anyways. This is a big win for Associates at GS.
or they could still interview and wait till the end of the 2 years and the HFs / PE firms will compensate them part of their anticipated bonus ...
possible, but i dont think theres much motivation for PE/HFs to do that. they may as well just shift their recruiting to Jan/Feb after calendar year bonuses come out.
Why should GS analysts expect PE firms and hedge funds to pay extra to compensate part of their missing IBD bonus when those firms can just hire the analysts from MS/JPM/BX/LAZ/EVR instead?
If I were running recruiting at a buyside shop in two years, I wouldn't pay extra out of sympathy for GS analysts when they knowingly chose to sign up for GS's new system.
Fair point. It depends on how attractive a candidate is i suppose. Also there's nothing stopping the GS analysts from quitting - they just don't get a bonus for the last 6 months.
My two cents is that for years the model has been to hire very bright people, work them very hard for a couple of years while feeding them the goldman kool-aid, and then hope they move on to buyside roles where they do business with the firm. I think that as many of the firms businesses have become less profitable (for many different reasons), the prospect of paying people for a couple of years in return for future business seems less appealing. So now it becomes more about hiring people that actually may work at the firm for their whole careers and discouraging people who want to participate in the old "training" model.
Bondarb - i'm not sure about the buyside angle, but i guess just from a bigger picture, GS can probably save some money by reducing attrition.
I suspect that unless other banks follow in GS footsteps, they might have to either not enforce this policy or live with losing candidates to the other banks - not a big deal as I think that there are far more candidates than open positions anyway.
Definitely an interesting development - I think generally the banks are adapting to a new reality in financial services - maybe for the next decade, or maybe until the next big thing (technology driven imo) juices the economy.
Question!
This benefits GS analysts who want to stay with the firm after the previous 2 year deal; who don't want to segue into the buy-side, correct?
I'm really curious to see what the fall out of this is. I think I get GS' motivation: a) to stop people from checking out and recruiting early, and b) to try and better retain banking talent.
For b), that's kind of a pipe dream. I'm sure it's got to be frustrating for the senior guys at GS -- going to become an associate in banking at GS used to be the prized job for a graduating corporate finance MBA. But the reality is that nowadays the vast majority of associates in banking are, with some exceptions, 2nd tier talent. Sorry to the associates on this board, but especially in top banking groups, the analysts are typically smarter with better financial analytical capabilities and more blue-chip backgrounds (I've seen associates at top groups with backgrounds like state school / big 4 auditor / state school MBA - not that people at state schools can't be as good or better than ivies, but reality is that's not a prestigious background, and prestige is a big deal to most white shoe bankers). There are a ton of associates in top banking groups who are beyond incompetent when it comes to any kind of real thought.
But as recently as 15 years ago, this wasn't the case (before PE / HF became the preferred career choices); so a lot of the really senior MDs in banking are from the old era when they were the real hitters and now they're left only able to draft from the bench, which is obviously not a great feeling. So the response? Try to coerce their top talent (analysts) into staying for the long haul. Unfortunately, coercion has never really worked as a great long-term retention tool, especially for kids with options. As long as banking is a worse job opportunity for talented young people, they're going to go elsewhere. And banking definitely is a worse opportunity - in addition to worse hours and lesser pay, there's much less respect and responsibility than on the buy side, not to mention that you can avoid working for the same dumb middle management in banking (associates / VPs) that you know you're smarter than. And don't forget the work -- in banking, the work is incredibly inane until you get to the VP level; on the buyside, it's typically interesting and engaging from day 1 (assuming you actually like corporate finance). There's a reason why out of my banking class of 100 only 1 decided to stay on as an associate promote 3 years later.
Now going back to recruiting; I'm definitely interested to see what happens. The way I see this playing out, there are basically two scenarios. In the first one, other banks follow wso/">suit, analysts decide to hold the line, PE firms relent, and GS gets what it wants and recruiting moves to the last 6 months. In the second one, the rest of the street keeps going, and GS analysts get disadvantaged. I wonder if that leads to worse recruitment for GS (you'd assume yes, but then again a lot of college kids are dumb and idealistic and think that being in banking for the long term could be a rewarding career); more likely, it just leads to increased early attrition after 1.5 yr bonuses kick in and a couple kids getting fired every year as warnings to the rest (which will make GS sound like a GREAT place to work).
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