Zoom Image

Goldman Sachs CEO David Solomon: Restructuring of the bank, job cuts


Working for the major US bank Goldman Sachs is highly lucrative, but there is also a rough wind. The hierarchies are clear, the pressure to perform is enormous. This management principle also includes a regular process, which is nobly called "strategic review". Translated, this review means that 1 to 5 percent of employees who are perceived as less productive compared to the others regularly have to leave the bank.

During the Corona pandemic, Goldman had temporarily suspended this "strategic review". However, according to information from the Financial Times, the U.S. bank is likely to begin sorting out the suspected underperformers and handing over terminations as early as next October. If this process were to be limited to 1 percent of employees this time, around 440 Goldman bankers would be affected. At 4-5 percent, it would be around 2000 employees.

The "up or out" principle is common in many large U.S. companies, not just banking. The FT writes that Goldman's top managers have already been tasked with drawing up lists of names of employees from whom the bank could part. How many of them actually receive a notice of termination also depends on how many voluntarily resign beforehand and leave of their own accord – i.e. before the dismissals take effect in the context of the "strategic review".

Job cuts and restructuring of the business model

Goldman Sachs already cut around 3200 jobs in January. Due to the economic slowdown, the bank is suffering from weak demand in its important investment banking business. In addition, Goldman CEO David Solomon is in the process of restructuring the bank: The excursion into the consumer lending business in the USA has been stopped, and the bank is now to concentrate more strongly on global wealth management, equity trading and its core competence of investment banking.

The restructuring is taking place at a difficult time: Goldman Sachs' profits have recently collapsed because write-downs in the real estate portfolio and in the consumer division are slowing down business.

But it's not just at the lower end that there is movement at Goldman. In recent months, numerous top bankers have left Goldman Sachs. These include, for example, former Chief Investment Officer (CIO) Julian Salisbury, top commodity analyst Jeff Currie and trading specialist Dina McCormick.

In the first half of the year, Goldman Sachs' profits slumped by 35 percent. This also has an impact on premiums for Goldman bankers, which are likely to be correspondingly more modest this year. In the banking industry, this is also a powerful tool for employee management.