Recruitment Set Back To "Normal"
Do you think other banks will now follow through?
WSJ: Goldman, JPMorgan Hit Pause on Intern Recruiting ‘Madness’
Two Wall Street investment banks are easing up in the race to hire their most junior employees.Goldman Sachs Group Inc. GS 2.23% and JPMorgan Chase JPM 1.76% & Co. won't interview or extend summer internship offers to college sophomores this year and will go back to recruiting students in the fall of their junior year, executives said.
It is a nod to a softer Wall Street, eager to cast off its sweatbox image to compete with perk-happy Silicon Valley. It is also an acknowledgment that a push in recent years to move up application deadlines isn't bringing in the kinds of candidates banks need as they try to diversify their overwhelmingly white and male ranks.
"We were contributing to an environment that pressured students to choose rather than to explore," said Dane Holmes, Goldman's top human-resources executive. "I want people who want to be at Goldman Sachs, not people who felt they had to say yes to an offer."
David Solomon, Goldman's new chief executive, spent his college summers as a camp counselor and, in a recent fireside chat with Goldman's summer interns, said he "stumbled into" a career in finance. "The world was not as competitive then," he said.
For students, Wall Street internships are the on-ramp to a potentially lucrative career in finance. For banks, they are the wide end of a funnel that will produce future leaders.
Mod Note (Andy): See more discussion on WSO on this topic
It was getting out of hand
Wait, if you're a Sophomore isn't it already too late? Recruiting already opened up for 2020? This only seems like good news to Freshman, and younger (lol).
If you are a current sophomore you will be able to recruit almost immediately at EBs or under the traditional timeline at GS and JPM.
Moelis RBC Guggenheim are officially starting recruiting this week. So I don’t see the EBs following. My hunch is this is really all about diversity...
The EBs (and MS) are the ones who pushed it to the point where banks were giving offers 18+ months in advance for internships.
Just read the article. I think its so fucked now, that the EB's are probably going to stick with it...think about it. They already have the infra trained and ready to go for the accelerated timeline. When JPM started this 2 years ago, they made a huge mistake that in my eyes is not irreversible. Prove me wrong, but I went through the whole "recruiting for your 2019 internship before getting my 2018 internship" and it was hell and high water.
I doubt they will stick with it
Hopefully this becomes widespread.
I takes true leadership to change things. It's hard, and will be if the EBs maintain current recruiting schedules. However, what the industry has done by advancing the cycle is simply recruit less mature, less qualified candidates. Most of these students (virtually all of them who attend schools with 2 yr business programs like McIntire) haven't taken any finance classes and don't know anything about the industry other than high compensation.
Think about it like the NBA. It used to be rare if a player left college early. They were using the four yrs to grow (physically and mentally) and mature their game. Now it's rare for them to stay all 4 yrs...and quality of play (and the game) has changed drastically for the worse. The Steph Curry's are great but half these kids wouldn't have made the cut 20 yrs ago.
It will take time to see real change. Fortunately GS and JPM are leaders and many will hold out for that status on their resume. Other BBs will follow. Give it a few yrs.
Right - if only Lebron, KD, Anthony Davis, etc stayed all four years then they probably could have made the cut 20 years ago
This NBA analogy is terrible
I thought Steph stayed all 4 years?
Maybe he did, not sure. My point is there is a lot less actual talent (because of age, lack of maturity and development, etc) then there used to be. The bar has been lowered. Previously, it took a rock star to go from high school (Moses Malone) to the NBA. Now it's common place (certainly is to leave college after a yr or two) and it's not because they're that much better then their peers a generation ago, it's because the talent gap has been reduced. They're competing against other 20 yr old kids who haven't developed.
As someone who uses this site as an educational resource for finance and still has several years until any kind of recruitment begins, I seriously hope this can get changed. If the current trend continued I was starting to get worried that it might have become expected for someone that wants to break into finance to start networking during end of freshman year, and that is just absurd. When I get to college I don't want to have to commit to a certain recruitment path in my first year, that defeats a large part of the reason behind going in the first place.
Agreed. Hope the best for you, youngin. If I'm still chopping wood and laying pine when you get in the game, but willing to look at a different career (commodity trading), holler at me.
Pasting the article body from behind the paywall.
This is great news, and primarily for the two observations listed above. We've moved our timeline up, only to end up with a less diverse candidate base and more incidents of candidates reneging on their commitment once they really figure out what they want to do.
I have never been a fan of the timeline moving so far forward in both banking and private equity recruiting. It's a classic prisoner's dilemma: everyone will tell you they prefer a more mature and seasoned candidate, but everyone also recognizes that failing to participate in an ever-earlier process means you run the risk of a lower payoff (worse candidates left on the market).
I wrestle with the logical inconsistency of a personal libertarian streak and the idea that 'regulation' of some sort is beneficial.
I see it at the MBA level: schools bar employers from talking to students for a certain number of months into the school year to let them get acclimated before succumbing to the pressure of recruiting madness, and also mandates minimum periods for offer expiry. This works better for all parties: the students do better, the employers get happier and more motivated interns, and the school gets more satisfied customers on both sides of the equation.
HBS, for instance, doesn't permit direct contact with students until the third week of October (roughly 10 weeks after students arrive), offers cannot be extended before the middle of January, and no offer may expire before the middle of February.
Since there isn't any one body with the power to force different firms to adhere to any standard in the context of banking recruiting, I don't see how this gets resolved. Even if the bulge brackets return to a more sensible model, you'll still have early players jump the gun. It sounds like a handful of the boutiques have already said they have no plans to change.
If I were head of recruiting at a bank, my approach would be two-fold: to run a longer interview process, and to be flexible on class size.
By standardizing the interview process where everyone has a 'sell day' on-site (similar to the screening dinners private equity firms run prior to finalizing their interview list), two phone screens, and an in-person superday of four interviews, you'd eliminate a lot of the irregularity where some candidates are getting waved through after doing a whirlwind process of a phone screen and an invitation to a superday two days later (where their superday may be eight interviews relative to someone else the following week only having five).
You'd also be able to 'batch' your interviews regularly through the year, illustratively doing six of these batches over a 12-month period to allow the eager-beaver sophomores to show up early while the slower-baking juniors could show up later (e.g. March of junior year). You could also re-invite people who were on the cusp in a prior batch to participate again.
Secondly, if you felt there were strong people who showed up in a late batch, you could be less dogmatic about your intern class size and include them anyway, acknowledging that some people will self-select out during the internship, others will prove to be underperformers, and you won't be batting 1.000 in any event.
This is in contrast to a place like Goldman who finalizes its banking intern class of 100-whatever, maybe squeezes in three or five very late entrants over the four months between February when the old/traditional timeline ended and June when the internship starts (all of whom are either diversity hires or super-connected kids who had phone calls made on their behalf), and then focuses really hard on its conversion vs. yield metrics.
In short, my ideal would be to screen a lot of people early and often, then be okay with adjusting class size to add worthy late entrants.
This means I have to be okay forcing out early entrants who I gave seats to who may get outperformed by strong late entrants, but that scenario isn't too likely. Illustratively, if I want 50 returning analysts, I could do six interview batches over 12 months and aim for 12 offers at each, meaning I want ~70 people for the summer since history shows me the return offer rate is 70%.
However, if I end up giving 18 offers in the final three batches (because some strong candidates showed up late since they wanted to recruit for startups, consulting, or something else), I now have 90 for the summer. This will give me a lower conversion rate of 55% instead of 70%, but I am (a) okay with that because it makes my place a true meritocracy and (b) I could mitigate how harsh that figure may seem by increasing my returning analyst class size to 55 instead of 50.
It isn't perfect, but these are quick thoughts that I think would make it easier on both sides.
The moral of the story is that the early arms race that has evolved in the past few years is not healthy and I hope it gets worked out.
Those who are still in school know this, but this was honestly just a dumb move from GS and JPM. Just about every other BB and EB have already begun the process for 2020 (with a few minor exceptions that you could count on literally one hand), apps are open online now at RBC, Rothschild, CS, PWP, etc. No kid in their right mind is going to wait out for the slim chance of GS/JPM and forgo recruitment with every other bank....
This
Although this sounds like good news at first glance, has anyone considered that the banks may be doing this in anticipation of a recesssion? May not be so great of news for students
In this article, GS and JP don’t mention if they would bring in students with exploding offers from other banks to interview. Sure, they may not be actively recruiting students. However, if students come to them with exploding offers, I wonder if they would bring them in to interview. They said they wanted students who wanted to be at GS or JP. A student who comes to them with an offer already in hand fits this profile. Their strategy could be to have other banks do the vetting for them and they pick off the top kids then open applications up to fill remaining spots in the fall. I could be way off on this, but it’s just a thought.
Very good point, GS and JP know there’s solid candidates that will network and will want to go work there, but will still be recruiting with other shops because of timelines - that’ll help GS / JP interview candidates that are already vetted and genuinely interested in their firm. (Basically just reiterated your post) I’m sure they didn’t play their whole hand with the article.
As someone who went from analyst through to VP with a partnership offer at a boutique before I left to start my own operating company, the ridiculously early recruiting makes no sense to me.
Students mature at different rates. The early offers benefit target kids who have family connections in the industry so they understand it pre-college but will by no means yield the most talented candidates.
I was a farm kid who had no idea what banking was until I was a junior and had a cousin land in IB. He convinced me to transfer colleges to pursue it and then I got caught up in the tech crash with no offers. I moved to NYC and lived on his couch. I got a temp back office job that led to a trading seat and later lateraled to IB.
What I learned (granted in an effectively pre-internet environment) about finance in those 2 years after I transferred was immense. As a sophomore there was no way that I could have made it through an IB interview process, but I ended up being a pretty good banker.
Great move for GS and JPM. If I were a sophomore, what I would do is recruit for all the other sub-tier internships and try to land one, then take that offer and leverage it to try and get in GS/JPM. If you get it, renege on your other offer and if you don't then oh well. Once Moelis and the rest of the shitco's start losing their top recruits to GS/JPM they will adjust the timeline accordingly.
This is actually move. Ridiculous how early recruiting starts and before you even take a business class. There’s a reason why many of the analyst classes are not as strong
"Sub-tier internships"? Wow. The BBs aren't for everyone, you know... and EBs are hardly "sub-tier." BTW all the recruiters talk and if someone does reneg, the other banks do know about it. Just sayin' is all.
A lot has already been said, I tried to skim through it to not repeat comments...the single biggest point that I have heard from current analysts at my old EB is that there is a noticeable drop in the technical questions being asked (ridiculously easy questions, like what are 3 ways to value a company with no follow up) and that has led to some incredibly poor hires.
Definitely sad since if you can't wait until the candidates are ready/know they want to do IB you get (1) a frustrated employer, who now realizes half the kids don't even want to be there and (2) a student who isn't going to get a meaningful experience in the industry.
Absolutely hope that there is eventually just a push from the career centers of top schools to not allow any recruiting for Junior Year summer before students' junior year.......
What happens if you are a sophomore with an internship offer from GS/JPM for next summer then?
Honestly, good. I remember having my first IB superday with BAML, on May 16th of my sophomore year, the same day my first final started, followed by 3 more in less than 48 hours. I spent two whole day and nights in constant stages of aderrall, THC from my pen, and caffeine. M I S E R Y
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