Many MDs/Directors but little staff
I was just curious if anyone had any insight or read into when you see a bank (typically middle market/boutique) in which the higher ups vastly out number staff (analyst, associates and vps),
I was just curious what implication this had on how I should view a particular firm, other than the staff they do have are probably busting their asses. I suppose two things pop into my head:
a.) no barriers to moving up
b.) very high turnover.
Tia
In my office the ratio of senior bankers (MD, Director) to junior bankers (Analyst, Associate, VP) is close to 1:1, so I wouldn't say senior bankers "vastly outnumber" junior bankers, but it is certainly a lean team.
I would say the implication is three-pronged:
1) You get great exposure if you are good - MDs will pick their favorite vp/associate & analyst combinations and approach them directly to work on projects. At nearly every level this is a great thing because you build a solid rapport with an MD and get to own major pieces of the deal process. The flip side to this is that if you are not good or have a bad reputation then you don't get tapped for work, you only work on the bottom feeder deals, or you don't get to work on the interesting pieces of what you're staffed on.
2) There is high turnover - Analysts and Associates get burned out pretty quickly. Every analyst and associate works every day in my office (>=100 hours per week every week) and it is tough to keep going at times. There has never been a A->A promotion in my office because analysts want to get out as soon as possible. Associates come in from B-School bright eyed and bushy tailed but quickly burn out and jump ship after two years. Only 1 or 2 Associates have stuck around to get promoted to VP. No one gets fired, people just burn out and leave - fortunately placement is great due to point #1.
3) If you want to get promoted, you can easily - The senior team would LOVE to promote an analyst to associate, but no one wants to stick around. If you say you're interested in moving up you will be pampered and groomed to do so, but just be prepared for 4 more years of what you have been doing. Associates who decide they want to stick around and who do good work will absolutely be promoted, but it is a grind to get there.
For reference: I am at an elite boutique.
Every day, week in , week out? Surely you jest. Not sure how that's sustainable even over a short course of 2 years.
You'd be amazed. I've been in jobs like that and the result is a ridiculously high turnover rate....and this was in a military job where people technically can't leave. A lot of people would re-enlist just to get reassigned to another location, several officers got so burned out they gave up on the career, and a few guys had full on mental breakdowns and were forced out.
Granted it's not like that 24/7, but the odd day that you do get off will be spent sleeping our just lying in bed depressed because you've got no energy left.
Hence
sent you a pm
I don't understand - if the senior team really would LOVE to promote an analyst to associate, surely they recognize that the problem is burnout, and therefore would hire more analysts?
Good insight, plus it is a way to get as much work as possible from the junior staff, esp. when the pipeline is volatile.
I believe this is how they set-up their business model, the ones that can take the pain reach a good level/package after a while. along the way you constantly get squeezed by multiple MDs/Directors.
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Good insight by all and everything said is pretty intuitive to what I would of expected.
I would think that having that many upper level folks would be pretty expensive as well, along with some of the directors having to get their hands dirty and doing some of the grunt work.
Any other insight is appreciated.
I worked for an IB firm that had >3 to 1 ratio of MDs/directors to junior bankers and very small deal teams (2-4). I also have several friends who have worked at similar shops. I would characterize these firms as strong MM firms. Based on my experience, a severely top-heavy structure can develop if:
1) The industries served are very narrow. My old firm focused almost exclusively on an unusual/niche industry (not consumer, industrials, healthcare, etc.) and getting analysts up to speed was a difficult/lengthy process. The MDs and Directors were willing to roll up their sleeves to train and pay well knowing that they can't be onboarding several new analysts every year like some generalist firms. This leads to one or two analysts getting a lot of deal experience and sticking around rather than the constant churn at some firms.
2) The division of labor is not as defined by title. Due to the aforementioned reasons, several of the analysts/associates were promoted internally to director/MD and were very comfortable doing both business development and deal execution. Because of this, there was less of a need for an army of analysts/associates to work the models, etc.
3) The MDs and Directors are "good guys" and only want to bring on new talent when they feel really good about the pipeline and their ability to generate enough deal flow to pay everyone well. After surviving 08/09, many MM bankers have been hesitant to add fixed costs (junior bankers) that they cannot support for at least 2-3 years. Based on my experience, some MM/boutique senior bankers are very mindful of not following the binge hire/slash ranks cycle characteristic of their larger competitors. They tend to hire less often and want to keep people around for a long time. While this can be a positive for new analysts (not losing sleep about staying employed or getting a good bonus), it can also lead the same senior bankers to fret over promoting analysts to associate/VP level due to the higher "fixed" cost. They will almost never show someone the door unless performance is really poor, but they might push for more variable comp (bonus) at promotion day instead of meaningfully increasing base pay.
4) There is a lot of dead weight at the top. I had one friend get an offer for an unpaid internship at an "IB firm". This firm had 30+ senior bankers but almost no analysts/associates. My friend was told he would be paid a generous bonus if he brought in a deal. At firms like this, many senior bankers are just analysts/associates that weren't employable elsewhere and just stuck around. If a firm can't afford to pay a salary and expects newly minted analysts and interns to be the primary source of new deals, beware.
TL;DR - it's all about deal flow. Working for a firm with a top-heavy structure can be very rewarding if deal flow is strong. P/E recruiting was pretty easy because I gained more deal experience than many of my counterparts at other firms and was more involved in all aspects of the deal process because our organization was very flat. I have friends who are stuck at other top-heavy firms that don't have great deal flow and it only causes high turnover, low comp and general dissatisfaction.
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