How does "up or out" actually work?

The "up or out" culture in investment banking is a real phenomenon, but it’s not as black-and-white as it might seem. Based on the most helpful WSO content, here’s how it typically works:

1. Promotion Timelines and Expectations:

   • Generally, there’s an expectation to move up every 3-4 years at each level (Associate → VP → Director → MD). If you’re not promoted within this timeframe, it’s often a signal that the firm doesn’t see you as a long-term fit for the next level.
   • This doesn’t mean you’re immediately fired, but it’s a strong hint to start looking for other opportunities.

2. What Happens If You Don’t Get Promoted?

   • VP Level: If you’re passed over for promotion to Director, it’s often a sign that the firm doesn’t see you as having the potential to bring in revenue or lead deals. While some VPs can stay on for a while, many eventually leave, either voluntarily or because they’re nudged out (e.g., through bad bonuses or lack of support).
   • Director Level: Directors who don’t make MD often face a similar fate. They’re expected to bring in significant revenue, and if they don’t, the bank may signal it’s time to move on.

3. Exit Options for Those Who Don’t Get Promoted:

   • Lateraling to Another Bank: It’s common for VPs or Directors to lateral to another bank, especially if they believe they can make MD elsewhere. However, this can be challenging if being passed over for promotion is seen as a red flag.
   • Corporate Roles: Many senior bankers who don’t make the next level transition to corporate roles, such as corporate development, strategy, or finance, often with clients they’ve worked with.
   • Boutiques or Smaller Firms: Some move to smaller banks or boutiques where the promotion structure might be less rigid.
   • Other Opportunities: For Directors and MDs, options like CFO roles at smaller companies or industry-focused investment firms are also common.

4. Survivorship Bias:

   • The idea that “all you have to do is stay and you’ll get promoted” is indeed a result of survivorship bias. Many people leave voluntarily due to burnout, lifestyle considerations, or better opportunities. Others are subtly or explicitly pushed out if they’re not seen as promotable.

5. Firing vs. Voluntary Exits:

   • While outright firings are rare, the bank often makes it clear when someone’s time is up. This can come in the form of poor bonuses, lack of deal flow, or reduced responsibilities, prompting the individual to leave on their own.

In short, the "up or out" culture is real, but it’s not always an immediate firing. It’s more about whether the firm sees you as a long-term fit for the next level, and if not, they’ll often encourage you to explore other opportunities.

Sources: Questions about VP/D/MD levels at investment banks, https://www.wallstreetoasis.com/forum/investment-banking/what-percentage-of-investment-bankers-at-bb-banks-pursuing-a-career-in-ib?customgpt=1, Exit as a VP because lost interest, Anyone else fed up with the banking/finance industy?, Turning down HBS/GSB/Wharton for the Promote-Through