With Marty Chavez as CFO, Goldman staff need to be very afraid
So, Marty Chavez is to be Goldman's new CFO. Not immediately, but soon: Goldman says he'll continue in his current role as CIO and head of the combined technology and strats unit until April 2017. This gives a lot of people at Goldman Sachs more than enough time to find a new job.
Chavez' elevation to the CFO position should be enough to strike fear into the hearts of the 26,000 people at Goldman Sachs who don't work in technology or quant roles. Chavez is a fearsome proponent of automation and 'efficiencies,' and with Chavez as CFO those two things are likely to be chased harder than ever.
Earlier this year, the New York Times reported that Chavez had ruffled feathers at Goldman by telling staff they needed to upgrade their skills if all they were doing is pushing buttons. The same might well apply to anyone at Goldman who's doing no more than using the firm's quantitative tools to relay trading ideas to clients. As CIO Chavez pioneered Marquee, a system which serves up Goldman's previously highly guarded SecDB risk system to clients so that they can access it directly. Some Goldman insiders are said to believe that Marquee is simply an excuse to do away with the relationship professionals who currently mediate between SecDB and clients. With Chavez holding the purse strings, this concern looks real.
Goldman doesn't need to cut costs as much as some other banks, but it could still do with trimming some fat. Costs ate up nearly 70% of revenues in the first nine months of 2016, compared to 56% at Citi's institutional clients unit. During the bank's third quarter conference call, Harvey Schwartz said Goldman cut $700m from costs in the first half of the year, but that it remains committed to improved "operating efficiency."
Goldman has already relocated jobs to 'low cost centres and now needs to pursue what McKinsey refers to as “in-footprint” cost-reductions that make existing businesses more efficient. With Chavez as CFO, this can only mean one thing: automation. A lot of Goldman staff are about to meet their nemesis.
Meanwhile, there's the question of who takes control of the 9,000 people working in Goldman's technology and strats group - 26% of the firm's total employees - when Chavez leaves.
Goldman usually facilitates its succession planning by having multiple co-heads of divisions. However, Chavez has been the sole occupier of the CIO position since he replaced veteran Goldman CIO Steve Scopelite in September 2016. Equally, the tier below Chavez only has one head after a co-head disappeared: Don Duet and Paul Walker were co-heads of global technology at the firm, but Walker retired in February 2016.
This raises the question of who will replace Duet if Duet replaces Chavez come April. And if not Duet, then whom? Insiders suggest the likes of Elisha Weisel, the son of deceased nobel laureate Eli Weisel. Weisel junior is currently a partner running risk for Goldman Sachs' securities division, but insiders say he's effectively head of Goldman's trading strats team. - The trading strats quantify risk, so indirectly report to him.
Chavez' imminent departure risks reawakening the rivalry between quants and technology staff at the firm. Before Chavez was promoted in 2013, Goldman's strats and technologists were part of different teams. However, Goldman's technologists made an error installing new trading software after failing to communicate with the strats, and when Chavez was promoted in 2013 he unified the two groups. Chavez came from a strats background, as did Paul Walker, and the perception was that the strats had gained the upper hand.
The choice of Chavez' replacement will be about more than just competence though. Chavez has also been a big 'culture carrier' at Goldman Sachs: he's gay, he's latino, he has Japanese arm tattoos, he has a full head of hair (unusual in the upper echelons of Goldman), he's overcome a drink problem and he has actually worked on Silicon Valley. Chavez brought diversity to Goldman's technology function. He also made it cool. That's a hard act to follow.