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Apr 09

Millennial Employees Confound Big Banks – WSJ

Entry-level bankers from Goldman Sachs Group Inc. gathered in a lower Manhattan hotel ballroom last April to listen to the firm’s top executives try to fire them up about their budding careers. David Solomon, co-head of the firm’s investment bank, took on the touchy subject of young employees leaving for private-equity jobs.

“At this time next year, there’s a lot of you in this room who won’t be working at the firm,” he said. “That’s a fact, candidly, we would like to change.”

Mr. Solomon grew animated as he advised the aspiring financiers that leaving Goldman was unwise, according to people who attended. They should think more about their long-term career trajectories, he said, and they would be more marketable after four or five years.

Some in the audience found his tone off-putting. It felt as though they were being lectured, even scolded, several of them said in interviews, rather than getting reasons to stay at the firm.

For decades, success on Wall Street followed a simple formula: Grind out years of marathon workweeks and menial tasks in exchange for a shot at helming deals and amassing millions. The industry’s biggest firms now acknowledge the math doesn’t work for many of their youngest bankers.

Six months after Mr. Solomon’s speech, Goldman announced changes designed to provide junior bankers with faster advancement and more stimulating work. “We’re well aware that our junior bankers have many options, so we’re doing everything we can to retain our best talent,” says Mr. Solomon.

Since then, J.P. Morgan Chase & Co., Citigroup Inc. and others have revamped their rules and added sweeteners for young employees, tweaking the delayed-gratification model to better suit the expectations of the millennial generation.

ENLARGE

Bank managers are trying to persuade younger employees to stick around and rise through the ranks, as generations of bankers did before them, instead of bolting to Silicon Valley or smaller investment firms.

According to a LinkedIn Corp. analysis conducted for The Wall Street Journal, analysts and associates who left their positions at a dozen investment banks in 2015 stayed an average of 17 months, compared with a 26-month average for those departing the same positions a decade earlier. Back in 1995, the average tenure was 30 months.

The entry-level exodus has spurred Wall Street into an uncharacteristic bout of soul searching, as leaders conclude that the industry must alter its long-held traditions and rethink its approach to management.

“We’re focused on trying to understand what’s important to the folks we hire right out of school,” says John Waldron, co-head of the investment banking division at Goldman Sachs.

The relative satisfaction of junior bankers matters because Wall Street firms are slashing thousands of more-senior jobs in a push to cut costs. The drive has picked up in the past year as low interest rates and difficult trading conditions weigh on the industry.

Goldman Sachs said in a February presentation it has reduced compensation expenses by $270 million since 2012, in part by eliminating higher-paid positions and bolstering the ranks with younger, more inexpensive employees. The firm said it reduced the number of partners and managing directors by 2% between 2012 and 2015, while increasing the number of analysts, associates and vice presidents by 17% over the same period.

Culture issue

In interviews, more than 40 current and former junior-level bankers at major firms—called analysts and associates—described a tension between banking’s hierarchical institutional culture and their desire to take on more substantial work sooner.

When Steve Wu began his two-year stint as an analyst at investment bank Moelis & Co. in July 2013, long hours were a given, but so were fast-paced deals, good money and prestige. The recent graduate of the University of California, Los Angeles, told his girlfriend he wouldn’t have time for a relationship.

What Mr. Wu says he didn’t expect was the drudgery—the amount of trivial work that got passed on to entry-level bankers. One night, he says, after he had worked until 1 a.m. preparing a 60-page client book, his managing director told him to replace all the logos in the presentation because they appeared “fuzzy.”

In June 2014, after 11 months on the job and just weeks shy of receiving a five-figure bonus, he left Moelis for a mobile-gaming startup and what he saw as the chance to be more than a cog in the machine. “Every day I can see the direct result of my action,” he says of his new job.

A spokeswoman for Moelis said more than two-thirds of the firm’s bankers are under 35, and that the firm is committed to the development of its bankers early in their careers. She declined to comment on individual employees.

Goldman Sachs, whose headquarters is in lower Manhattan, announced changes designed to provide junior bankers with faster advancement and more stimulating work.ENLARGE
Goldman Sachs, whose headquarters is in lower Manhattan, announced changes designed to provide junior bankers with faster advancement and more stimulating work. PHOTO: RON ANTONELLI/BLOOMBERG NEWS

At J.P. Morgan, associate Lee Tsai says he grew disenchanted about one year into the job. Objectives in his semiannual reviews, he says, were easy to meet and after requesting new responsibilities, months passed and nothing changed. “Same spreadsheets, same pricing models, same slides,” he says.

At the same time, he was giving talks to recruits, he says, repeating buzzwords he heard when he was a student. Big deals, client exposure, professional mobility—“feeding them,” he now says.

Mr. Tsai soon stopped attending recruiting events. He passed on mentoring new hires. “I couldn’t keep telling them about how great it was,” he says. He left the bank in August and is now learning to code.

J.P. Morgan, which declined to comment on Mr. Tsai, made several changes this year to the way it handles young bankers. One initiative, dubbed “Pencils Down,” urges the firm’s 2,000 global investment bankers to take weekends off, so long as they aren’t working on a live deal. It also expanded an accelerated promotions track that shortens the path from analyst to managing director by as many as four years for star performers.

The changes are “enhancements,” says Carlos Hernandez, J.P. Morgan’s head of global banking, “and realistic to what this generation wants.”

Anne Hubert, a senior vice president at Scratch, a consulting unit of Viacom Inc. that performs research on millennials, says she advised a major investment bank about young workers. Senior bankers, she says, hated the fact that young people constantly wore headphones, preventing them from hearing instructions shouted across the trading floor. “Those damn earbuds,” she recalls them grumbling.

Ms. Hubert says she encouraged them to view it as an opportunity to connect with the new generation and “tune in” to what they want. “What’s going on behind those earbuds?” she recalls asking them. “Are they listening to music or podcasts? What are they thinking about?”

At Goldman Sachs, “Managing Millennials” has been one of the most popular training sessions for years.

Limiting hours

Beginning last year, the bank began limiting hours for its most junior staff, requiring summer interns to stay away from the office between midnight and 7 a.m. during the week. Chief Executive Lloyd Blankfein’s daughter, a senior at Harvard, interned with the bank last summer.

Goldman and other banks have retooled their analyst programs, including new measures to outsource grunt work and invest in timesaving technology.

Credit Suisse Group AG has begun putting early-career bankers in front of clients soon after hiring—something that might have taken years in another era on Wall Street.

The Swiss bank also appointed a program director to coach senior bankers on communicating with young staffers, providing tips such as “don’t lean on hierarchy,” saysAmy Hudson, chief operating officer of the firm’s investment bank and capital-markets division. The appointee, Nancy Nightingale, is a “total mom figure,” says one third-year analyst. She recently helped shepherd an effort to get bosses to send personal emails highlighting junior bankers’ individual achievements.

“The things that [young workers] want are frankly the things that all of us always wanted,” says Ms. Hudson. But today’s junior bankers, she says, are “more confident about expressing it in the workplace.”

That dynamic isn’t unique to finance. Only 28% of millennials feel their current employer is making full use of their skills, according to a survey by Deloitte & Touche LLP. On Wall Street, however, paying one’s dues has long been part of the culture.

Michelle Wu discovered that fact six months into her job as a credit analyst at Goldman Sachs when she sought a transfer to another group to learn new skills. Her team mentors turned her down, she says. “Their responses were, ‘Keep your head down’ and ‘Focus on your work,’ ” she recalls. Goldman declined to comment on specific employees.

In December 2014, after less than a year at Goldman, she accepted a job on Google’s small-business team and moved to California. Despite working more than 100 hours a week—about the same as her job at the bank—Ms. Wu says she feels more energized. When she told her boss about an opportunity to increase revenue, she says, he told her to “run with it.”

Wall Street’s postcrisis landscape has been reshaped by job cuts and reduced risk-taking, and pay packages don’t tip the scales like they used to.

At three elite business schools—Harvard University, Stanford University and University of Pennsylvania’s Wharton School—M.B.A. graduates who accepted jobs in investment banking or trading had a first-year base salary of $125,000, on average, similar to those who join technology companies, and less than the roughly $150,000 base at other Wall Street firms such as hedge funds and private-equity firms, according to the schools.

Surveys show that young people who came of age during the economic downturn are less trusting of the financial sector in general, and more eager to find jobs that they believe serve a social good. A 2014 Brookings Institution report concluded that millennials are likely to “find an outlet for their desire to change the world for the better somewhere other than on Wall Street.”

Some veteran executives say banks should do a better job of explaining how helping clients raise capital and manage their financial risks is good for society.

Citigroup announced in March a program to allow incoming analysts to spend a year at nonprofits before beginning their banking careers. Citigroup will pay them 60% of their starting salary during that time. Nine recruits already have signed on.

The bank also introduced a program for young bankers to travel to Kenya for a four-week microfinance project, mirroring an initiative launched by Moelis earlier in the year. Moelis employees who have been with the firm for at least five years are entitled to a four-week paid sabbatical program, a spokeswoman said.

Some young Wall Street bankers say initiatives to reduce long hours, however well-intentioned, are having unintended consequences. Analysts at Goldman Sachs, J.P. Morgan and other banks say mandatory days off have made it tough to spread out workloads, ramping up pressure when they are in the office. Analysts in a few Goldman groups say capping intern hours has undermined team dynamics and created tensions over division of work.

Some bankers are baffled by the attitude of their more junior colleagues. There is a pain point among midlevel bankers who “can sometimes get frustrated if the younger analyst isn’t as available as they want them to be,” says Mr. Waldron, Goldman’s investment banking co-head.

Nevertheless, he says, “just because other people worked 80 to 100 hours [each week] in their life history doesn’t mean these people should.”

Source: Millennial Employees Confound Big Banks – WSJ

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