Last night, Goldman Sachs did a quietly amazing thing. The bank admitted, for the first time in decades, that it is freaked out about becoming uncool.
Now, that's not exactly what you read in the stories about the recommendations of Goldman's newly assembled Junior Banker Task Force, which includes a firm-wide initiative to make junior bankers take weekends off and provide them with more efficient tools during the week. But make no mistake: These changes spring from a deep insecurity within Goldman about its position in the labor market, and a brewing panic that the firm no longer occupies the pedestal among highly talented young people that it once did.
A bit of necessary background to this latest development is that, since the mid-eighties, when Wall Street banks began recruiting college seniors for two-year analyst gigs, Goldman has been the most desirable place for a certain kind of recruit — the Ivy League overachiever who wasn't necessarily a banking specialist, but was exceedingly smart in an all-purpose way and could easily be taught the specifics of high finance. For years, this was Goldman's target demographic: Harvard history majors, Princeton painters, and Yale archaeologists, all of whom could be swayed from their career paths by the offer of two years of high pay and prestige at Goldman. Goldman took special pride in its role as the bank where you didn't need to be a finance gunner to fit in. Lloyd Blankfein was a Harvard history major, and Hank Paulson studied English, after all.
Of course, once they arrived fresh-faced from their top-tier colleges, these recruits were put through the wringer — 100-hour workweeks, interrupted holidays, and extreme mental and physical duress are all common. And until the crash of 2008, these unpleasant work conditions were not only tolerated but venerated. Working hard was what made you a real banker; if we wanted to go home before midnight, the refrain went, we would have become consultants.
But after 2008, the calculus changed. Starting in about 2010, amid layoffs and turmoil in the financial sector, this breed of smart-but-confused Ivy League student began to pass over Wall Street. They went to Silicon Valley tech firms, to Teach for America, or to follow their truer passions. Why work 100 hours a week at a struggling and unpopular investment firm when you could go to Facebook, wear jeans to work, get home in time for dinner, and still make bank?
This shift has created a recruiting crisis at investment banks. Goldman isn't hurting for applicants — it had a 2 percent intern acceptance rate last year — but the Harvard history majors aren't showing up in huge flocks anymore, and the ones who are aren't staying long before decamping to private-equity firms or, in more cases, dropping out of the industry altogether. ("Wall Street Is Losing the Best and Brightest," read one Wall Street Journal op-ed by a fretting finance executive.) The industry-wide slowdown has led big banks to cast around for something — anything — that can help them keep their leg up.
Goldman's efforts have apparently culminated in the Junior Banker Task Force, whose goal is to make life at the firm a little more pleasant for 22-year-old Excel grunts in the firm's investment-banking division, and help with both recruitment and retention in the future. Part of the outcome of the task force will be an attempt to force more reasonable hours on analysts and get them to take weekends off, as well as hiring more analysts in order to spread the workload around. ("This is a marathon, not a sprint," Goldman investment-banking co-head David Solomon told Bloomberg.) I'm also told, by a person close to the situation, that Goldman's efforts to be kinder to junior analysts will include a new piece of software that forces managers to be clearer about their expectations for every pitch book and Excel model, which will minimize needless work.
Dealing with Wall Street's recruiting crisis is obviously a bigger matter than a software fix. (If you want about 300 more pages on the subject of young bankers, I hear a book is just around the corner!) But one issue is that the grueling working hours foisted on junior banking analysts are only partly management's fault. More of it is owing to the intense competitive streak that runs through the financial sector, and every analyst's desire not to be in the bottom bucket when bonus and promotion time comes around. As Bloomberg TV anchor Stephanie Ruhle noted this morning, in a banking climate where underwhelming performers are routinely laid off, do you really want to be the Goldman analyst who obeys orders to take weekends off?
I have high hopes that Goldman's new, slightly saner analyst regimen will trickle down to the rest of Wall Street. But although the new efforts might boost morale among twentysomethings who already work in investment banking, they won't necessarily help attract new classes of college students unless the changes are real and lasting, and unless they put Goldman and J.P. Morgan in the same league as Google and Facebook when it comes to giving perks and conferring status.
And even that might not work, given the lumps the financial sector has taken since the crash. As one former Goldman analyst who decamped to another industry after his time at the firm told me this morning, when I wrote him with news of the Junior Banker Task Force: "Too late."