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While rapidly expanding its corporation, Goldman Sachs Group Inc. is reportedly preparing to lay off employees based on performance and activity.
The round of layoffs, which is expected to affect hundreds of employees, could happen before the end of September.
The investment bank and financial services company reported that it had 47,000 employees in its second quarter, which is up 15% from 41,000 employees the same time the previous year.
As a method of keeping its employees working hard, Goldman Sachs had a tradition of laying off its lowest performing employees near the year’s end, before bonus payouts.
The layoffs were halted by the coronavirus and its effects on the economy. However, as businesses emerge from the pandemic, the practice is being reintroduced and will leave hundreds of employees jobless.
This method was particularly favorable to cut down on salary-based expenses. It was utilized by other companies on Wall Street to maintain a culture of hard-working individuals that strive to beat the competition.
Another reason for the layoffs is a reported decline in revenue related to investment banking activities, such as mergers and acquisitions and initial public offers. This is due to the drastic hikes in interest rates and the underlying worries of an oncoming recession.
While pushing for an in-person return to work, Goldman Sachs CEO David Solomon has been finding ways to cut expenses. Some of his moves include cutting dinner stipends down from $30 to $25, terminating stipends for breakfast and lunch and ending offers of free daily car rides to and from the office for employees in April.
During its recent second quarter, Goldman Sachs reported earning under $3 billion, compared to earning $5.49 billion during the same quarter in 2021. This decrease in monetary earnings is yet another reason for these predicted layoffs returning.
Solomon attempted to mitigate risk for the bank by switching many operations from risky trading strategies and investment banking to consumer banking.
Additionally, Bloomberg reported that Goldman Sachs’ consumer unit Marcus is projected to lose $1.2 billion this year.
Despite the panic surrounding Goldman Sachs’ layoff operations, other big banks such as JPMorgan Chase & Co. and Bank of America Corp. said that they are satisfied with their current employee counts. Rather than laying off employees, banking corporations are adjusting for attrition, with some taking a more structured approach while others are making a volatile move.
“You need to be very careful when you have a bit of a downturn to start cutting bankers here and there because you will hurt the possibility of growth going forward,” JPMorgan Chief Operating Officer Daniel Pinto told Reuters.
Another change Goldman Sachs is taking to reduce costs include removing a free coffee station at its headquarters’ entrance. This amenity was put in place to keep employees working and bring motivation and serotonin to the workplace, but reaction to its removal may echo what is to come for those fearing their job security.
“There’s no question that economic conditions are tightening to try to control inflation,” David Solomon told analysts, as reported by The Wall Street Journal. “As economic conditions tighten, it will have a bigger impact on corporate confidence and also consumer activity in the economy.
I think it’s hard to gauge exactly how that will play out, and so I think it’s prudent for us to be cautious.”