Why are investment bankers quitting in droves?
The life of an individual who works on Wall Street is almost legendary at this point. Thousands of college students around the country dream of high salaries at the cost of long hours, weeks, months, and years stuck in the bullpit or the cubicle. And it turns out, the legends exist for a reason. A study of Goldman-Sachs analysts [1] provided some insight into the truth behind the legend:
105 — Average hours in the week before the survey
98 — Average hours per week over 2 prior months
5 — Average hours of sleep per night
3 AM — Average time analysts got to bed
This phenomenon isn’t new. For many years, investment banking has been a status symbol type job chased by the best and brightest from the financial sector. Hobbies and sleep were sacrificed on the altar of Wall Street with the promise of wealth and prestige. Ok, so maybe that is a bit of a dramatization of the situation, but the point remains. Many were willing to take on the brutal work schedule of investment banking for the compensation they received.
Over the last 2 years the pandemic and remote work have transformed many industries and induced what economists are calling “the Great Resignation” with resignation rates reaching all-time highs and nearly 4 million Americans quitting their jobs each month in 2021. [1] On top of the resignations, remote work has transformed the way many employees interact with their role specifically, and their company culture as a whole.
The investment banking industry certainly felt the effects of these changes to the workplace. Top banks, even at their major franchise locations, are struggling to hold on to their talent, and find themselves losing out overall as they attempt to recruit, hire and train to match departures.[3] How did we get here? Well let’s look at what has happened over the last two years.
Working from home
An industry that was already highly demanding of its entry level analysts and associates became even more strenuous during the shift to working from home. [1] Though there was less in person face-time, hours actually became worse as Zoom availability jumped up close to 24/7.
Some other factors exacerbated the issue:
- More pitches: with remote pitching taking over, entry level employees had a higher volume of presentation decks and meeting materials to prepare
- Online coordination: changes to presentations that would have taken 15 minutes to make in person may be significantly slowed by online communication
- Uptick in SPAC deals: special purpose acquisition companies have become a preferred way to go public, and the work required is extensive and extremely monotonous.
Quality of life
While it may not seem that investment banking had much room for quality of life to decline, there have been significant changes. While junior employees still have high entry salaries ($85,000 starting), the same high pressure menial labor, and the promise of earning future riches as they developed in their careers. But once they started working from home, several dynamics changed. First and foremost employees experienced a significant decrease in the variety of their workplace. Instead of moving between conference rooms, cubicles and other office environments, they are often confined to small apartments or even one desk for long hours on end. On top of this change, many companies offered their employees perks such as free meals and gyms that they can utilize during their extensive hours. Many companies cut the free meal benefit for tax purposes, much to the chagrin of their workers. The sum of these changes took a toll on employees’ mental and physical health:
Cultural woes
As more and more workers resigned across the industry, banks began to try to get competitive, offering substantial financial bonuses as well as other miscellaneous perks like Peloton bikes. They could afford it as well, as 2021 was their most profitable year ever built on the backs of their remote workers[4]. Despite bonuses, the sense of optimism one might expect on the back of a record year is missing. High salaries and ever increasing bonuses just aren’t cutting it. One internal PowerPoint that was leaked throughout the industry compared the workload and demands to abuse endured in foster care. [5] The pandemic, and its impact on people, escalated the burnout that was already common within the industry, and few people seem willing to tolerate it. While banks continue to throw money at their people in an effort to retain them, research is showing that compensation just doesn’t satisfy talent’s needs like it used to. MIT research indicated that a negative perception of the culture of an organization is more than 10 times more predictive of attrition rates than compensation dissatisfaction. As quitting rates stay higher than ever, how can banks begin to stem the tide?
Adapt
If current events are any indicator, most major banks still have a lot to learn. In March of 2022, Goldman Sachs reopened their Wall Street office, mandating the return to office of 10,000 employees [6]. However, only about 50% obeyed, in a significant act of defiance. In fact, an increasing number of employees across the U.S. list flexible work options as a must for their jobs moving forward: 36% said they would leave a job that isn’t willing to offer flexible work [7]
Investment banking has a throwing money at their people in an effort to keep fueling what is essentially a burnout culture. We discussed a similar cultural mindset within the software development industry and it led to toxic workplace behavior, lawsuits, and significant financial repercussions. While bonuses are large, they do little to address the other dimensions of a healthy culture like personal fulfillment or perceptions of equity. In fact, they historically undermine these dimensions: Wall Street bonus payouts are often more political than they are merit based. [8]
Competing for talent in today’s marketplace requires more than meeting the physical needs of your employees with a salary and benefits. More and more workers are realizing their need for a culture that keeps them physically and mentally safe, allows them to build meaningful connections, gives them purpose and meaningful work, provides opportunities to grow and learn, and makes them feel valued.
Every business wants to win the war for talent and create a company full of driven and engaged employees. In investment banking, it’s likely that the motivation is purely numbers: more profit, more productivity, less cost.
We would hope that in time, the primary motivator becomes their people. They want their employees to thrive and excel. Whatever the motivation, companies often struggle to identify concrete steps they can take to change their culture and drive engagement.
It starts by identifying the dimensions of your culture that may have issues, as well as those which are cultural strengths. We utilize our digital tool INSITE to quickly get data on your culture and visualize the areas to emphasize and the areas that need work. But even with the greatest data, it all comes down to taking action. Our culture experts will work with leadership to create an action plan that will help drive transformation that will both empower your people, and drive positive business outcomes.
If you would like to learn more about compensation dissatisfaction, talent retention, culture, or INSITE, we would love to learn more about you and your organization. Just head to www.ledgestone.com/contact to get in touch.
References:
[1]https://mergersandinquisitions.com/investment-banking-hours/
[2] https://www.cnbc.com/2021/06/09/4-million-people-quit-their-jobs-in-april-to-find-better-work.html
[3] https://www.efinancialcareers.co.uk/news/2021/11/great-resignation-banking-jobs
[5] https://www.nytimes.com/2022/02/04/nyregion/wall-street-toxic-work-place-culture.html
[6] https://fortune.com/2022/03/11/goldman-sachs-return-to-work-employees-david-solomon/
[7] https://www.flexjobs.com/blog/post/2018-annual-survey-finds-workers-more-productive-at-home/
