Goldman Hiring Practices Signal Change for Industry

As reported on, Goldman Sachs is dramatically overhauling the way it hires new recruits, often fresh from top U.S. universities and colleges. In the past, at many of the top investment banks, recruits were offered a two year contract, and when that contract was up, the young staffers were generally expected to head to another firm, or back to school. Few opportunities existed to move up in the investment bank compared to the number of analysts working on these short term contracts.

New Policy Reflected Changed Culture?

Goldman indicated that the firm is simply responding to changes in the world around it. Many business schools now require significantly more experience than two years for graduate programs, limiting access for Goldman analysts. The firm likely wants to have its brand prominently represented by strong analysts in business schools across the U.S. and Europe, and therefore, potentially longer terms prior to the MBA could be advantageous.

In addition, Goldman found that top hedge funds and private equity firms were poaching top candidates before their two year term was up. The analysts on term contracts viewed their position with Goldman as a limited term, and weren’t hesitant to jump ship when permanent opportunities arose. The company believes that a more permanent arrangement will be beneficial in retaining star talent.

While these are certainly positive changes, it’s unlikely that there will be a major shift in firm culture towards the workload put upon young analysts. Long hours, grueling assignments and sometimes menial tasks will continue to be a feature of the job as juniors learn to cut their teeth on the street.

Savings Limited for the Firm

The firm does not expect to save significant money by making the switch from contract workers to full time employees. Terminations come with additional costs in terms of severance pay and while the firm expects to end the practice of a two year completion bonus, there would still be monetary incentives for high performers.

The Downside for Analysts

Unfortunately this is not all good news for analysts at Goldman Sachs. In the past, it was possible for average analysts to skate through to the end of their two year term with a fixed date set for their termination. Under the new arrangement, no such date exists, and therefore, analysts could be terminated long before the two years is up.

Additionally, analysts will be facing greater competition to stay on with the firm, with more analysts believing they have a shot at a truly permanent role. While this competition may allow Goldman to select better candidates for promotion, it will be more difficult to advance in the ranks as a junior member of the team.

What this Means for Job Seekers

As a leading investment bank, Goldman Sachs’ policies and practices are often echoed throughout Wall Street. Accordingly, the two year stint as an analyst may be on its way to becoming a relic of the past, much to the relief of many students looking to enter the field.

While moving into an employee arrangement may be an improvement over contract work, those looking to move into the investment banking field should not be fooled by this development. The hours will remain long, the work hard, and the reward, well to some, will be worth it. The initial analyst positions will always be a proving ground for young talent, a stage to showcase their skill and dedication to the firm. The form of legal employment arrangement won’t change that century old practice on the street!

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