The Wall Street hiring spree of 2021 is now firmly in the rearview mirror.
Gone are the days of $100,000 entry salaries for newly graduated junior bankers, as the country’s largest banks begin to consider the return of unforgiving hiring and retention practices.
After hiring thousands of new staff in 2021 and leading the way on the Street in employee bonuses, Goldman Sachs is hinting that it is debating the return of much stricter policies for whom the top brass considers to be underperforming.
Goldman executives are warning that the bank is likely to cut back on hiring, and potentially even bring back its dreaded performance review process, as the bank evaluates how best to reduce expenses.
“Given the challenging operating environment, we are closely re-examining all of our forward spending and investment plans to ensure the best use of our resources,” Goldman chief financial officer Denis Coleman said Monday during the bank’s quarterly call with investors discussing second quarter results.
Specifically, Coleman said that Goldman is planning on reducing the “velocity” of its hiring process and to “reduce certain professional fees going forward.”
Cutting the bottom five percent
Earlier on Monday, Goldman CEO David Solomon told CNBC that the bank is “always looking to add to talent to the firm,” but added that “at the same point, we’re going to manage the growth of that going forward a little bit more cautiously given the macro environment.”
The hinted-at return of the bank’s brutal end-of-year performance review also suggests that job cuts for Goldman employees could be in the cards this year.
Coleman said that Goldman will likely be reinstating annual year-end performance reviews by the end of 2022, a process he said the bank had “suspended during the period of the pandemic for the most part.”
Before the pandemic, Goldman was notorious for its annual routine of cutting the bottom five percent of its staff, or sometimes more, using its performance review metrics to weed out underperforming employees.
The return of the performance review is the latest sign that Wall Street banks are starting to turn their backs on the strong hiring and expansive retention policies offered during the pandemic, and return to the more cutthroat and uncompromising methods the industry has long been well-known for amid a broader market decline and unconvincing quarterly results.
In its Q2 earnings report, Goldman disclosed strong earnings in wealth management and global markets, but “significantly lower” revenues for the asset management and investment arms of the bank.
Investment banking revenue is down 41% from last year, while asset management fell by 79%. Other banks that reported their earnings last week, including JPMorgan Chase and Morgan Stanley, posted similar declines in investment banking revenues last quarter.
Goldman is not the only Wall Street titan to signal that changes to hiring and retention are forthcoming.
Last week BlackRock, the multinational investment firm managed by Larry Fink, told employees that it would begin reducing hiring for some roles.
