Goldman Sachs Braces for Annual Cull, Affecting 3% to 5% of Staff

Goldman Sachs is preparing to cut 3% to 5% of its staff as part of its annual performance review process, according to a source familiar with the matter. The move, which typically results in between 1% and 5% of company-wide employees losing their jobs, is expected to affect around 1,300 to 1,800 employees, or 3% to 4% of its workforce of approximately 45,300 people as of late 2023.

The so-called "strategic resource allocation" was historically an annual exercise at goldman sachs, but the bank paused it during the pandemic until last year, when job losses were also at the lower end of the historical range. Managers across the bank have drawn up lists of employees who could be dismissed, with final numbers still being decided and potentially affected by any employees who quit before the lay-offs are communicated to staff, which would result in fewer jobs being cut.

Goldman Sachs declined to comment on the matter. The bank has eliminated thousands of jobs this year, including roughly 3,200 positions, or 6.5% of its workforce, in January as part of an effort to reduce costs following a dramatic slowdown in investment banking activity and losses at its consumer banking business. A number of senior executives have also quit the bank, and pay at the bank was sharply lower for 2022, contributing to a decline in morale.

The proposed staff reduction is part of the bank's annual "strategic resource assessment" process, which typically leads to the dismissal of around 1% to 5% of its employees. In 2024, the affected percentage of the company is set to be higher, with between 1,300 and 1,800 employees potentially losing their jobs. This staff reduction is expected to have several impacts on the bank's strategic goals:

1. Cost reduction: The primary goal of the annual cull is to reduce costs by removing underperforming employees. By dismissing a significant number of staff, Goldman Sachs aims to lower its expenses and improve its financial outlook. In 2023, the bank is targeting a number at the lower end of the 1% to 5% range, which could result in substantial cost savings.
2. Talent acquisition: The staff reduction also creates opportunities for the bank to acquire new talent. By letting go of underperforming employees, Goldman Sachs makes room for the hiring of more skilled and productive workers. This can help the bank improve its overall performance and better position itself in the market.
3. Market positioning: The annual cull is also a way for Goldman Sachs to signal to the market that it is committed to maintaining high standards and a strong performance culture. By removing underperforming employees, the bank demonstrates its dedication to excellence and sends a message to clients, competitors, and potential recruits that it is serious about its reputation and success.

The potential implications of these cuts on employee morale, retention, and overall productivity within the organization can be analyzed as follows:

1. Employee Morale: The cuts could negatively impact employee morale, as seen in the case of Goldman Sachs in 2022. The combination of dismissals and modest bonuses led to a decline in morale (Financial Times, 2023). The layoffs could create an atmosphere of uncertainty and fear among employees, potentially leading to decreased job satisfaction and engagement. A decline in morale can negatively impact productivity and overall job performance (Gallup, 2024).
2. Employee Retention: The cuts could lead to increased voluntary turnover, as employees may seek better job opportunities elsewhere. In the case of Goldman Sachs, a number of senior executives have quit the bank following the layoffs and a decline in pay (Financial Times, 2023). High-performing employees may be more likely to leave, as they have more options in the job market, which could lead to a brain drain within the organization. The loss of key talent could negatively impact the organization's ability to retain institutional knowledge and maintain productivity.
3. Overall Productivity: The cuts could lead to a decrease in overall productivity, as the remaining employees may have to take on additional responsibilities and workloads. The loss of key talent and expertise could also negatively impact productivity, as the remaining employees may not have the same level of skills or experience. However, the cuts could also lead to an increase in productivity if the remaining employees are more motivated and engaged, and if the organization is able to identify and retain its top performers. The cuts could also lead to a more efficient and streamlined organization, as the bank aims to keep costs down and make room for new talent (Reuters, 2023).

In conclusion, the proposed staff reduction at Goldman Sachs is expected to have a positive impact on the bank's strategic goals by reducing costs, creating opportunities for talent acquisition, and reinforcing the bank's commitment to high performance and market positioning. However, the cuts could also negatively impact employee morale, retention, and productivity within the organization. It is important for the organization to communicate the reasons behind the cuts and to provide support and resources to help employees navigate the changes. Additionally, the organization should focus on retaining and engaging its top performers to mitigate the potential negative impacts of the cuts.