While the cross-ruffing process sounds exhaustive, Cary Cooper, professor of organizational psychology at Lancaster University’s School of Management, thinks it has serious shortcomings.
“There’s no process, no criteria. Staff could wonder: ‘Why should I stay here when I don’t know if I’ll get the opportunity to become a partner?’” he said.
The easy solution would be to select those who generate the most revenue for the firm. This is what Smith suggested when he resigned from Goldman and penned an excoriating attack on the firm and its culture in the New York Times.
ALTRUISM OR MONEY?
“Today, if you make enough money for the firm [and are not currently an axe murderer] you will be promoted into a position of influence,” he wrote.
Sherwood disagrees. In his view the partnership is something far more altruistic: “It is often about doing something that is good for the whole firm, to make the firm better and subduing your individual motivation and aspirations for the good of the whole firm.”
Acting for the good of the partnership is a prerequisite once membership of the exclusive club has been attained. The average tenure of a partner is eight years.
As Cohan puts it: “It’s very good for the junior people.”
Viniar reckons that 20 percent leave every other year. However, it is not just a benevolent act to encourage younger bankers. It is also about the bonus pool that exists for the partners.
The prospectus accompanying the 1999 flotation described the process: “Upon selection to the partner compensation plan, participants will be allocated a percentage interest in a pool for annual bonus payments in addition to base salaries. The size of the pool will be established by the partner compensation plan committee annually, taking into account our results of operations and other measures of financial performance.”
In 2009, in the wake of the financial crisis, the 100 London-based partners decided they needed to demonstrate that they understood public anger with the banking sector — so they capped their pay and bonuses at ￡1 million (US$1.5 million) each. However, that was a one-off.
Sherwood says the partners’ bonuses are handed out after the wider bonus pool is agreed on and that the process of becoming a partner is a meritocracy.
“Some are great leaders, some drive the organization, others are just incredibly productive people or are building new businesses. Some are lateral hires. There is no particular person, there is no particular nationality, race, region or gender. It’s a collection of very motivated, very diverse people who come from all types of different backgrounds,” he said.
“If you talk to the candidates, it is a very aspirational process,” Sherwood said, acknowledging that it also means that some hoping to become partners will not make it.
Those aspiring partners who pick up their phones this week and do not hear Blankfein’s New York tones but, perhaps, the more familiar voice of their divisional boss on the end, will know their time has not come.
Some will walk, but others, as Sherwood puts it, “will go back to their desk and work hard” and try again in two years’ time.