Why don't banks just hire more people?
This is a question I always ask myself. I worked at a (non finacial) firm before I went to University and when people had too much workload or did too much overhours the firm just started to hire new people...
Now I always hear people talking about working 100 hours a week - I mean those people have to be compensated for the workload, why just don´t hire more smart people with the benefit of having more motivated and "not near burn out"-staff?!
The supply for the BB is there, thousands of people are applying and beyong the target schools there are many smart people, so why don´t hire more people?
to provide a hyperbolic but relevant point, if I said you need to change a lightbulb and you could have as many people as you wanted to do it, how many people would you have do it? just bc you can throw 100 people at a task wouldn't make it go any faster. Doing even high level excel work and transferring that to a PPT presentation doesn't necessarily lend itself to a 1 person per slide type deal (keep in mind you're also paying them ~$80M plus bonus a year for no real extra utility).
I don't think your question is dumb or anything like that, but if you've ever been in an actual situation where too many people are jumping in and out of a deck, you'll understand why excess bodies don't translate to (and often can be a hindrance to) the timing of work output. There probably is an optimal number of people to staff on a deal but there are so many variables and intricacies that are job/deal specific, ill let a quant try and figure that out.
At business school our class was divided into study groups of 5 - 6 people each who would work on group projects together. I lost count of the number of times it was completely suboptimal to have more than 2 - 3 people work on a project at the same time. After a certain point the extra capacity just became a deadweight.
I have some pretty solid first hand experience from my early college days being the deadweight group project member, or as I liked to refer to myself at the time: "presentation specialist."
Tl;dr - unpredictable work demands and division of labor failures.
When you are on a project there needs to be a high level of responsibility that each member on the team has...if the client asks "why is the XX growth rate this % in the DCF" you can't respond "oh let me confirm with the 10 analysts that worked on this project I'll get back to you on that". I think sometimes an extra analyst or two would help a lot to alleviate the burned out analysts that are getting crushed, but you also cannot hire so many people that the quality of the analyst experience (# of deals) is diluted to where they can't be considered A to A material (Analyst to Associate direct promotion).
A final point - a lot of groups absolutely destroy top bucket analysts and therefore hours for some middle bucket and all the bottom bucket analysts are really not that horrible since they get less staffings. No perfect answer, but hope this helps!
I think the dilution of experience is a big point here, especially at the analyst level. At my EB, one of the reason we attract top candidates is because we can provide them a clear path to having a lot of top notch deal (e.g. M&A) experience and strong exits. If we expand the pool too much the deal experience we provide will go down and there will be more analysts recruiting for a finite/largely unchanging number of good PE opportunities.
At the BBs the teams are a lot less lean and I constantly see lateral candidates who have been in groups for 2-3 years yet have very little M&A experience (which is what most PE firms want and what most EBs need). Having extra staffing also creates a bit of a morale hazard since it is easier for seniors to create unnecessary/low-value add work since the resources are technically there (and hence hours remain unchanged)