What is worrying Goldman Sachs? Who is it hiring and how do you get in? Helpfully, Goldman Sachs has just released its 2016 annual report which contains some of this information. This is what you need to know.
Goldman Sachs is under pressure to cut fees. A new band of competitors are subjecting its business to “intense price competition” and could result in “pricing pressure” in its investment banking and client execution businesses, it said. Even with the recent elevation of automation-enthusiast Marty Chavez from CIO to CFO, Goldman is competing with a new tech-savvy competitors out to eat its lunch.
“For example, the increasing volume of trades executed electronically, through the internet and through alternative trading systems, has increased the pressure on trading commissions, in that commissions for electronic trading are generally lower than for non-electronic trading,” it says.
Goldman expects this to continue as “competitors seek to gain market share by further reducing prices”.
OK, maybe that’s an exaggeration – especially considering the big cuts last year - but Goldman insists that the majority of MDs have been with it since they graduated from university. 60% of partners and managing directors joined as analysts or on its associate programme, and the median tenure is 15 years.
Goldman mentioned this last month, but last year it received 130,000 applications for its intern and graduate programme and hired 4% of them (up from 3% last year). This is an 11% uptick in applications on 2015. 5,000 people were hired into its programmes and 37% of them studied STEM subjects, which is reflective of its focus on recruiting quant and technology talent. It now has 9,000 people working in technology.
Goldman Sachs started using HireVue, a machine learning driven online interview firm, to vet potential graduate and intern hires during the first round. It involves five questions, for which you’re given 30 seconds to prepare and three minutes to answer. The upside is that Goldman has cast the net wider – it’s now recruiting from 900, rather than 800, colleges for its 2017 internships. This isn’t always going down well – current Goldman employees have complained that it’s diluted the gene pool at the bank.
Not for everyone, obviously. But Goldman has been focusing its recruitment efforts in Salt Lake City as part of its move to curtail costs. Over the past five years, it’s increased headcount there by 80%.
Maybe the Salt Lake City build-out has mitigated the cuts in Goldman’s New York office, but of the 2,400 staff who left last year, most were outside the U.S.
Goldman had 18,100 people in the Americas in 2016 and 16,300 elsewhere. U.S. headcount fell by 900 people, or 5% in 2016. Headcount elsewhere in the world was down 8%.
Hedge funds and active managers could bounce back this year, believes Goldman, and this will help its sales and trading teams “To the extent decreasing market correlations translate into a better backdrop for generating outsized performance, that should also support increasing levels of client activity.”
Last year, Goldman scrapped a nine-point scale that it uses to assess its employees, identify stars and weed out under-performers. Instead, it will allow managers to ask for feedback from colleagues – who can also offer this without solicitation. Goldman’s dreaded 360-degree review process – which involves senior staff from all parts of the organisation chipping in – remains. It’s “integral to our team approach”, says Goldman.
Predictably, Goldman says that it’s facing competition hiring and keeping hold of employees that “address the demands of new regulatory requirements”. This is particularly the case in “emerging and growth markets” where more established local players can be more appealing options.
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