How to Become a Managing Director at Wall Street Banks Like Goldman Sachs – Business Insider
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„Rainmakers.“ „Masters of the Universe.“ There are plenty of terms to describe Wall Street power brokers — but none of them matters quite so much right now as the simple phrase „managing director.“
All across Wall Street, high-level bank executives are meeting to deliberate over which rising stars should be promoted to MD, a job title that’s coveted because it tends to sit just one to two levels below the C-suite. The closely watched promotion process generally kicks off in November with Goldman Sachs, followed by Citigroup and Jefferies in December and Bank of America and Morgan Stanley in January.
Insider spoke to experts about the process and their expectations for this year’s class. They said to anticipate a more diverse cohort of managing directors this year as well as younger MDs. The latter prediction came from a headhunter who cited investment banking’s widespread labor shortage, saying it could result in expanded opportunities for young rising stars to climb the corporate ladder faster.
„Tech-enabled fields or areas that are rife in poaching, like healthcare, could lend themselves to fast-tracking,“ said Natalie Machicao, a principal in the investment-banking search practice at Sheffield Haworth, a global management consulting firm. She added that she’s noticed more banks recruiting from rivals and promoting those new hires to managing director upon arrival, even if they were not an MD at their prior bank.
Whatever the composition of Wall Street’s incoming round of managing directors, the announcements will be widely watched as harbingers of the industry’s next generation of leaders. Jeanne Branthover, a managing partner and global leading of financial services at search firm DHR International, likened the distinction to „being part of a club.“
„Are you being told and shown that you have potential to be a partner?“ she said. „Well, if you don’t get MD, where are you going?“
Generally, people in any business line at Wall Street firms are eligible to be named an MD, whether they work in investment banking, sales and trading, asset management, operations, IT, or otherwise.
But there are only so many MD roles to go around. As a result, candidates in line for these big jobs — namely, vice presidents, directors, and executive directors, depending on the firm — are feeling the heat as they wait to learn the news.
At most banks, managing director is the top job below C-suite. But at Goldman, it’s one level below partner. Goldman does things differently in another regard as well: While most firms announce new classes of managing directors on an annual basis, Goldman does it every other year on an alternating basis with its partner promotions — a process put in place in 2013 under ex-CEO Lloyd Blankfein.
In 2019, the last year Goldman announced its most recent MD cohort, it elevated 465 people to the job. Its 2020 partner class, by contrast, saw just 60 new names, underscoring the exclusivity of the partnership.
At all firms, the review process for MD is demanding, but at Goldman it even comes with a special name: „cross-ruffing,“ a nod to a term from the card game bridge. The cross-ruffing process involves soliciting feedback about candidates from a range of managers throughout the firm over a period of months to determine if they are worthy of being promoted.
Branthover of DHR International told Insider that the unofficial jockeying to become an MD begins the moment you start working at the bank, even at the most junior level. Aspiring MDs „will know and should know that the minute they get into this kind of firm, their networking with the right people should begin,“ Branthover said.
A crucial step in the years-long journey comes when candidates earn an endorsement from a well-connected senior manager, added Machicao of Sheffield Haworth.
„Sponsorship from a senior banker is a very large part of the process,“ Machicao said. „It’s very atypical for someone to nominate themselves.“
The factors that banks consider for operational or back-office promotions differ significantly from those that apply to conventional dealmakers.
„Factors that the banks look for are more around tenure or leadership of human capital,“ Machicao said of back-office promotions. „Have you demonstrated success on certain projects? Have you improved efficiency in your division?“
Machicao said a scorecard can also come into play for candidates who don’t have a robust track record of generating revenues. The scorecard can help evaluate what deals bankers have brought in, or accomplishments that staffers in other business lines could tout to justify being promoted to MD.
For front-office bankers, though, considering how much revenue they’ve produced is king. That single factor amounts to about two thirds of the MD promotion process, according to Alan Johnson, managing director of Johnson Associates, a compensation consultancy for the financial-services industry . The other third comes down to softer considerations, like whether a banker is considered a good boss, Johnson explained.
„You could be a sweetheart of a guy, but if you can’t generate business or generate profits of some sort, you probably aren’t going to be a managing director,“ he said. „If you’re spectacular on the business side historically, that’ll make up for almost everything.“
Last year, Wall Street vowed to promote diversity, equity, and inclusion in the wake of the death of George Floyd. Nevertheless, action at the highest levels of the corporate hierarchy has lagged public statements.
Research published by the Financial Times in March found that Black professionals held fewer than 3% of senior-level roles in financial services, based on employment data that the FT evaluated from 2007 to 2018.
Goldman Sachs said in its 2020 sustainability report that, out of its 1,548 executives or senior manages based in the US, just 66 identified as Hispanic or Latinx, and 49 were Black. That’s compared to 1,181 who identified as white.
Nevertheless, Branthover is confident that this year’s class will place a greater emphasis on promoting diverse leadership.
„To me, there is no question that they will make sure that, whoever the group of people that they are promoting, there is a strong showing of diversity,“ she said. But, she added: „You have to be worthy. You don’t just get it because you are diverse.“
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