Is Goldman Sachs guilty of hiring and firing without a proper plan?
Next week we will know everything. On Tuesday, ex-Goldman CFO and current co-COO Harvey Schwartz is due to make a presentation about the future strategy of Goldman Sachs at the Barclays Global Financial Services Conference. In it, Schwartz will hopefully outline precisely what Goldman plans to do to avoid a repeat of its recent poor quarters.
We already have some intimations of Goldman's intentions. It wants to strengthen flow credit trading as a counterweight to its traditional strength in derivatives. It wants to work more with corporate clients who trade even when volatility is low, instead of hedge funds who wait on the sidelines until volatility spikes. It wants its senior relationship bankers who are already in with corporates to sell its trading capabilities on the side. And, it wants to hire in "half a dozen senior bankers" in the next six months and "invest more in Asia" where, as the FT recently pointed out, Goldman's investment banking business is weak and getting weaker.
This is all well and good and Goldman will hopefully be lauded for its purposefulness when Schwartz is done. Except that recent history suggests that the firm isn't as definite about its future plans as it seems, or at least that it hasn't been: Goldman's layoffs in the past year have been in direct contradiction to its purported new intentions.
In September 2016, for example, there were reports that Goldman was planning to dump nearly 30% of its Asian investment bankers in response to a "slowdown in activity in the region" - precisely the sorts of people it now seems to be prioritizing. There were subsequent suggestions that the Asian cuts hadn't been as deep as expected, but many of Goldman's Asian bankers left anyway last year, with Chinese banks in particular keen to hire its senior staff. Similarly, Goldman was reported by Bloomberg to have let go of "dozens of managing directors, executive directors and vice presidents across the mergers and debt and equity capital markets teams” in June 2016. Again, these are the sorts of people it now seems to be hiring with some urgency before the end of the year.
Goldman wouldn't be the first bank to hire and fire along with changing market winds, but it's the kind of thing "the firm" is supposed to be above. Goldman's unofficial motto has traditionally been that it's "long term greedy." In fact, it's starting to look at myopic and panicked as any other bank which keeps under-performing and is under pressure to improve.
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