Along with lower bonuses and fewer jobs, another unappealing new reality is dawning on the financial services industry: fewer promotions.
The Wall Street Journal says Goldman will only promote 70 of its managing directors (MDs) to partner this year. In 2010 it promoted 110. In 2008 it promoted 94. This will be the smallest partner class for years, say insiders. Tomorrow, the select 70 will receive a brief telephone call informing them of their success – or not
What applies to partners is equally likely to apply to MDs, who are also promoted in the next few weeks. Last year, Goldman promoted 261 people to MD, the smallest number since 2008. This year, the situation is likely to be equally tight – if not tighter.
“Some senior Goldman executive directors (EDs) who have made money in a difficult market are worrying that they’re not going to get promoted,” says a headhunter who’s been speaking to concerned Goldmanites. “People have become used to gaining promotion when they’ve performed, but this is going to be a very brutal promotion round.”
The brutality may not be restricted to Goldman. Most banks are overweight at the senior ranks says another headhunter: “A lot of banks are feeling the pressure to reduce the number of MDs,” he says. “It’s going to be hard for them to promote many people.”
So, what do you do when you don’t get the call?
Don’t trust what your bosses tell you
If you don’t get promoted, you may feel irked. Your boss may try and placate you. Specifically, you may be led to believe by your boss that you’ll be promoted next year. Take this with a ladle of salt.
The archetypal eternal-Goldman-VP/ED is, clearly, Greg Smith, who spent 12 years at Goldman Sachs and seemingly got stuck at the ED level. Smith says he’d been promised a promotion to MD within two years by numerous Goldman partners. On the other hand, Goldman says Smith was consistently in the lowest performing cohort of the bank and that it had seriously thought of getting rid of him. Actions speak louder than words.
Don’t assume that you can leave your job and walk into a promotion elsewhere
It used to be normal that if you didn’t get promoted at a top tier firm like Goldman or Morgan Stanley, you’d simply hike to a different shop which would gladly hire you and promote you to MD in the process, says Eli Lederman, a former MD at Morgan Stanley.
Not any more.
Several different headhunters tell us that the days of moving for a promotion are past. “HR have intervened – the new rule is that there are no promotions upon hiring for anyone,” says one.
“Most of the big firms won’t hire VPs into MD roles any more,” confirms Zaheer Ebrahim at search firm Kennedy Group. “A lot of houses were hiring and promoting and they ended up with too many young MDs who weren’t really head of desk material. At most places it’s now company policy that you can’t move into a bigger title – although you can still go for a bigger platform.”
Don’t do anything rash
So what you didn’t get promoted? Most people don’t. There are 18,000 VPs at Goldman Sach, a few thousand MDs and around 450 partners. If you don’t get promoted, you’ll be in the majority.
“There are plenty of people at Goldman who have been VPs forever,” says former Goldman Sachs trader Anton Kreil. Ebrahim confirms that people at Goldman tend to hang around with quiet resignation when they’re not promoted. “Only around 10% of the people who don’t make partner or MD will try to move jobs,” he predicts. “The rest may be unhappy, but there are a lot of unhappy people around at the moment and very few firms in hiring mode.”
Don’t assume you’re unwanted
Just because you didn’t get promoted and your boss is whispering barefaced sweet nothings about your promotion potential next time around, doesn’t mean you categorically won’t be wanted elsewhere. The world is full of ex-Goldman VPs and MDs who quit for rival firms or different business areas entirely.
One headhunter says Goldman bankers are still very sought after: “There are always roles for them at other banks. As an organisation, Goldman is very well respected.”
The employability of ex-Goldman bankers appears to be born out by staff moves in the past few weeks: despite the lateness of the year, 11 ex-Goldman bankers have moved to new FSA-registered roles since September according to the FSA register; only 2 ex-UBS bankers have found new roles in the same period.
Focus on the advantages of hierarchical inferiority
At this point in time, there can be significant advantages to being lower down the hierarchy. Firstly, your salary will be smaller, which may help immunize you against redundancy. Secondly, if you’re a partner at somewhere like Goldman Sachs, your life will be subsumed by the firm and the compensatory factors will be fewer than they used to be. “Today, the gap between the pay of a managing director and partner is probably 10 times smaller than it used to be,” one former Goldman partner told Financial News.
Thirdly, Anton Kreil points out that the more junior you are, the more of your bonus you’ll typically receive in the form of cash. “The only difference between VP and ED at Goldman Sachs – apart from the fact that you’re one step closer to MD – is that you’ll get a larger portion of your pay in stock. I never wanted to get promoted for that reason,” he says.