Morning Coffee: Goldman Sachs' job cuts are occurring despite rising profits. Eager, self-publicizing banker loses promotion to quiet colleague
It's the fourth quarter, and this means the annual cull of underperformers at Goldman Sachs. The Wall Street Journal reported on Friday that Goldman is preparing to cut between 3% and 4% of its workforce, amounting to between 1,300 and 1,800 people. The cuts, which are known by the euphemism of "strategic resource assessment" (SRA), have already started. They will go on for a few months.
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It could be worse. In bad years, the SRA consumes 7% of Goldman's workforce, which would mean 3,171 people will be impacted. But, given that profits at Goldman Sachs rose 61% year-on-year in the six months to June, it's perhaps surprising that Goldman is cutting jobs at all.
Goldman is, however, known for its annual cull, which is part of its culture. Managers draw up lists of weak employees they'd like to dispense with; employees are encouraged to keep on their toes as a result. After the cull, Goldman has the option of hiring some new and better people from elsewhere.
The weak employees are identified through Goldman's appraisal process. This is hypothetically fair but has been the source of complaints in the past. In 2022, a court case said that the firm's historic forced ranking system (whereby employees were ranked for performance by quartile) systematically disadvantaged women, who scored highly for teamwork and citizenship but were punished for the more important "technical skills,” “client relationships,” and “execution skills.”
For the past two years, though, Goldman has operated a different kind of appraisal system in which employees are placed in only three categories - "exceeds expectations;" "fully meets expectations;" and "partially meets expectations." 25%, 65% and 10% of people are typically placed in each group. The rankings are accompanied by three "conversations" about performance during the year and a 360-degree appraisal.
The implication is that anyone let go in the coming weeks shouldn't be entirely surprised. Given that only 3-4% of people are being chopped and 10% are in the "partially meets expectations" group, some may even be happy that they've been handed a reprieve.
Separately, the exit of Nuno Matos, the CEO of wealth and personal banking at HSBC, looks like a cautionary tale of the shortcomings of conspicuous ambition.
56-year-old Matos wanted to be CEO of all of HSBC, says Bloomberg. He'd been angling for the job since 2021, when he moved his entire family to Hong Kong. He'd been posting regularly on LinkedIn about all the events he was attending, all the initiatives he was launching, all the HSBC offices he was visiting.
Unfortunately, though, HSCB didn't choose Matos to be its CEO but his archrival Georges Elhedery, who doesn't even have a LinkedIn account and who took a six-month sabbatical. The two men reportedly don't get on. Elhedery is collegial and collaborative; Matos is direct. With Elhedery in charge, Matos is now leaving HSBC. Fortunately, there are probably other banks that will be interested in his keen approach.
Meanwhile...
Denise Prudhomme, 60, was found dead in her cubicle at Wells Fargo Arizona on August 20th. She scanned in on August 16th. Several employees smelled a foul odour and thought it was faulty plumbing. (NBC)
ANZ is wondering whether to ban alcohol consumption after three traders were drunk in the office in recent months and asked to leave. Staff had returned from lunch “intoxicated”, having consumed wine, and cited “profanity” being used on the trading floor. (Financial Times)
Goldman Sachs has set aside an average of €306,527 per head to pay its EU staff in the first six months of 2024, up 25% on last year. (Financial News)
London private equity professionals are not happy with the UK government's consultation on its proposals for tax on carried interest, which took place in August when people were on holiday. They want investments, including with borrowed money, in funds to constitute "skin in the game" which will then be immune to the tax changes and categorised as a capital gain, not income. (FT)
Generation Z women are discovering the Australian mining industry, where you can earn £100k a few years out of university. “The money is bloody awesome.” (The Times)
A new group of people has emerged: Henrys: a fast-expanding group of young people who are High Earning, Not Rich Yet. They have money, but not wealth. Reddit has a forum devoted to them. (Reddit)
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