A few days ago The New York Times ran a story about how partners at Goldman Sachs “are made, and unmade,” with a fair amount of hyperbole about how the “secretive process” results in a small number of people being “chosen to receive this golden ticket, bestowing rich pay packages” and many other benefits including, in Goldman’s new downtown New York headquarters building, which has a very large floorplate and therefore relatively few windowed offices, a–you guessed it–windowed office.
Other characterizations of making partner at Goldman are effulgent: “Being partner at Goldman is the pinnacle of Wall Street; if you make it, you are considered set for life,” according to Michael Driscoll, a senior managing director at Bear Stearns.
As you may have surmised from the headline, the story the Times wants to tell is the dark secret of how Goldman “de-partners” people, as a matter of routine during its bi-annual partner promotion process. If you can get past a certain breathlessness of description, here’s the inside scoop:
The process of vetting new candidates for partner and deciding which existing partners must go began in earnest in recent weeks, according to people with knowledge of the process, which takes place every two years. […]
Candidates are judged on many qualities, primarily their financial contribution to the firm. But lawyers and risk managers — who are not big revenue producers — can also make it to the inner circle. […]
Goldman typically removes 30 or so partners every two years, said those people who described the process. The number is expected to be significantly higher this year because fewer senior executives have left the firm as a sluggish economy and uncertain markets limit their opportunities elsewhere. […]
Those whom Goldman does not want to keep are likely to be quietly told in the coming weeks. Each situation is handled differently, the people with knowledge of the process say. Some partners are given time to find other jobs outside the firm. Others are told they will not be made partner and are asked to consider what they want to do next within the company.
So far, so unsurprising.
But buried in the article are two wonderful facts we might do well to reflect upon:
- Goldman has about 375 partners, and 35,000 employees. For those who don’t care to do the math at home, this is essentially a ratio of one partner to 100 employees. The typical AmLaw firm has a ratio of about three lawyers to two staff, and now (lower than it used to be) a ratio of one partner to about two and a half associates. Put this together and you might have an AmLaw firm ratio of one partner to eight “everyone else.”
In other words, Goldman is twelve times more highly leveraged than we are.
You could also take this moment to reflect on our industry’s leverage vs. that of healthcare. About half the people working in “legal services” in the US are lawyers. About 2% of the people working in healthcare are doctors.
Who, then, is “right?”
Thought #1.
Next:
- “The average tenure of a partner is about eight years, in part because of natural attrition and retirements. Goldman insiders also note they have what they call an “up-and-out” culture, leading to the active management of the pool.”
Eight years? I did the same double-take.
Now, your instinct, as was mine, might be to question the story; after all, the “explanation” offered by the Times is not exactly a model of clarity: “attrition” plus “retirements” plus “active management”? These add up to something about nine yards short of a first down in explanatory clarity.
But let’s assume, arguendo, the figure is right.
What’s going on here?
My theory is that partnership at Goldman is a very hard job. It’s taxing. Demanding. Exhausting. Draining. Maybe the half-life of a person in that job is eight years.
Might we learn something from this?
I don’t think anyone would doubt the demands of partnership at an AmLaw firm (any law firm) are an order of magnitude tougher than they were a decade ago. Is it realistic to expect people to perform at the level required these days, for 30 years?
Immediate caveat: I happen to be lucky enough to love what I do, to the point where I can’t imagine ever stopping. And I know scores and scores of AmLaw partners who feel the same way about what they do. To those fortunate enough to walk in these shoes, work is not “demanding” or “draining,” but fulfilling and exhilarating. Still in all, I’m not sure we’re in the majority.
So thought #2: What if average partnership tenure at AmLaw firms were closer to eight years than to 30? Would that be a kinder world or a crueler world? A more productive or a more vicious world? A world more humane to our brethren and offering higher quality to our clients, or a world full of short-term perspectives and firm “leaders” operating with one eye on the exit door?
I wonder what Goldman would say.
But then, of course, having “Partner, Goldman Sachs” at the top of your resume is not the worst opening gambit for someone on the job market.
