Inside Goldman Sachs as it chooses a new round of partners
There's not long to go. In around eight weeks' time, Goldman Sachs will announce the latest names in its biannual promotions to the Goldman Sachs partnership pool. It's a select affair. In 2014, just 78 people were promoted: making partner at Goldman Sachs is about as hard as it gets.
The partnership selection process at Goldman is known as "cross-ruffing." It involves current Goldman partners nominating current Goldman Sachs managing directors for potential promotion. No one knows whether they've been nominated or not: the entire Goldman partner selection process is kept insulated within the partnership pool. The names and performance reviews of MDs who are considered worthy are passed up to senior partners who interview other partners who've worked with the nominees. A shortlist is created and sent to the partnership committee. The final list is voted upon by Goldman's management committee. The lucky few get a call from a Goldman dignitary (think Lloyd Blankfein or Gary Cohn or Michael Sherwood) in mid-November. The rest are left to wait and to wonder until the next partnership round in 2018.
'Losing your rabbi'
Unsurprisingly, given the complexity of the entire affair, insiders say Goldman has been busy choosing its new round of partners for some time. "It's already been going for about a year," says one. "People have been having conversations for about eight or nine months and it's crazily political - a lot of conversations behind closed doors. If you're in Asia or London you barely see the MDs who want to make partner between now and November - they spend all their time in New York trying to be visible."
As Goldman Sachs itself has admitted in the past, it has problems with its "pyramid": there are too many chiefs at the top and not enough Indians at the bottom. For this reason, partner years at the firm are inherently volatile; existing partners have to leave to make room for the partners being promoted. Accordingly, this year has seen a wholesale clear-out of partners from the fixed income sales division in particular, including - most recently Tom Cornacchia, global co-head of fixed income, commodities and currencies sales from Goldman in NYC. Today's exit of Richard Campbell Breedon, Goldman's UK head of investment banking, suggests the rout is spreading to IBD.
With current partners playing a crucial role in sponsoring future partners, the late and unexpected departure of individuals like Cornacchia and Campbell Breedon can be a disaster for their pals' promotion opportunities. "It's called 'losing your rabbi,'" says the Goldman insider. "You have this guy who's sponsoring you and has been around for a while and then suddenly he's out. It's like the mafia - he's been watching your back and now you have no one to protect you and put you forward."
Fixed income sales out, foundation and strats in?
Given the many partner departures from Goldman's fixed income sales business this year, the big question is whether the firm will use this year's partnership promotions to alter the strategic direction of the firm. Will new sales people be promoted to replace those who've left? Or will the firm take this opportunity to promote more data and technology-focused individuals working under Marty Chavez on the new generation of trading products?
If Goldman's last round of managing director promotions is anything to go by, it will favour the latter: an unusually high number of Goldman's 2015 MD promotions were from the so-called 'Federation' or support functions. If a similar pattern is repeated in the partnership promotions, names like Roger Bartlett, COO of Goldman's equities business, or Leo Labeis, global head of MiFID implementation and macro CVA and FX trading quants, might materialize.
Unlike MD promotions, however, insiders say partner promotions at Goldman are often closely linked to revenues. "It's an economic decision. You get a share of the partnership when they think you're in line to generate economic gains."
Goldman juniors don't care
While their seniors engage in political machinations behind locked doors, Goldman juniors say they're not very bothered about the partnership process.
"I don't care," said one. "Most of the analysts, associates and VPs I know, across divisions and geographies, do not intend to stick around to make partner.
"The glory days of investment banking are over," he adds. "Pretty much everyone wants to exit to the buy-side, startups or business school plus a cushy corporate job in business development. You're not going to make serious money in investment banking any more."