Why do investment bankers need to work long hours?

Moderator Note (Andy): Inspired by DonVon's post earlier this week ("WSO has ruined my concept of regular hours!") I came across this q&a from Quora's finance section where a user asked "Why do investment bankers need to work long hours?"

OP's question continued:

What prevents banks from hiring, say 3 bankers instead of 2 and reducing the size of bonus? Can't some of the modeling work be outsourced?

This quality/in-depth answer by user Henry Wong received a lot of votes:

Most of the horror stories you hear are at the junior level (and I think you are indeed referring to the junior level), but I will try to address both senior and junior banking work hours.

Senior bankers work long hours, but generally not unreasonable.  They work hard because there is a lot of money at stake, which translates to a lot of responsibility.  Also note senior bankers are really 'salespeople' who frequently have to work around clients' need and schedule.  Many have intense and aggressive personalities.  However, work hours (60-80 hour/week) are not inconsistent with other top level *client oriented* corporate professionals / executives.

Junior bankers are a whole different story.  The 120+ hour/week, stranger-than-fiction, horror stories you hear are at the junior level.  Here are some thoughts on why adding headcounts don't  necessarily help:

• Work hours obey Parkinson's Law, where work expands so as to fill the time available for its completion.  80% of the work is done in 20% of the time, basically the conclusion and analysis.  Frequently, the conclusion is more or less drawn before the analysis.  Remember this is primarily a 'sales' job.  The remaining 80% time is spent 'perfecting' the pitch.  Junior bankers spend their time making docs/memos/presentations look *pretty*, adding inconsequential analysis, adding footnotes, looking for typos, etc.  The work is iterative and expands as to fill all the time until the day of the client meeting.  Increasing headcount does not solve Parkinson's Law.
• Work 'load' displays spiky characteristics.  You spend a lot of time waiting for feedback and turnaround.  There are a lot of bottlenecks in the banking process and junior bankers sit at the bottom/last part of the process, ie. junior bankers sit around waiting for a series of bottlenecks to unclog before they can do their thing.  The unclogging generally happens at the end of the day (I'll elaborate on my next point), so the junior banking work usually starts to happen end of the day.  Increasing headcount is not effective against 'waiting time'.  Put differently, you don't want to add headcount (a fixed cost) to solve a spiky work load (a high variable load).
• Bankers are poor managers and generally do not respect other people's time.  There is a 'hazing' culture, where senior bankers feel they've paid their dues and expect junior bankers to pay their dues too.  They generally work in silos and lack communication/collaboration between groups/departments, so there are many last minute change-of-minds and re-doing of work.  They tend to focus on what is immediate and urgent, not necessarily what is time consuming (less immediate) and important (less urgent).  The time consuming work gets pushed to the end of the day and shoved to the junior bankers after general work hours.  There is a culture where they expect junior bankers to turnaround work overnight.  In turn, when these junior bankers rise in rank, they reinforce this culture to the new generation of junior bankers.  Increasing headcount is not effective against a management and institutional cultural problem.
• To be clear, junior bankers are culprits as well.  There is a steep learning curve, mistakes are inevitably made (part of the learning process) and time wasted.  However, many join the banking industry with the knowledge and 'expectation' to be abused - so that's what they got.  They feel there is a need to show 'facetime'.  They feel they need to meet and beat expectations.  They allow themselves to be a 'reinforcer' of this culture.  Then again, they probably would not be hired without this mentality in the first place.  Increasing headcount, once again, does not help.  (see also: Henry Wong's answer to Harvard College: Why do Harvard undergraduates head to Wall Street?)

There have been some outsourcing happening as you pointed out, and yes, you can hire a few more bankers, but it does not solve the core problem.

User Marc Bodnick added in this response:

A few related thoughts:

• Bankers get paid huge fees for a short, intense project -- a merger, an acquisition, a financing, an IPO. Why do bankers get paid tens of millions of dollars for a few months work? Because the stakes are massive and good banking work can generate a ton of value.
• Splitting up the work among mid-level and junior bankers is inefficient in terms of lost learning and information -> It is much better for a small number of very talented people to know everything about the company(s) and the transaction. Two guys sitting in every meeting and reading every document learn way more than 5 guys splitting up all the meetings/documents.
• Assuming that the work gets done, it's much better to have a small number of great people working on your deal team, rather than lots of pretty good people. In other words, one A+ guy is better than three A- guys.
• Below the Managing Director level, the best people want as much of the load as possible. They want to maximize learning and experience, internal and external credit, client trust and relationship closeness, and compensation.

I suppose many of these points explain why small teams are often better in many industries, not just finance.

Thoughts monkeys?