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A thought experiment: you have a job that pays exorbitantly well, and you want to offer it to someone. It isn't particularly difficult, and any reasonably well

by tdees40 11y ago

A thought experiment: you have a job that pays exorbitantly well, and you want to offer it to someone. It isn't particularly difficult, and any reasonably well-informed, self-motivated college graduate can handle it. How do you hire for that job? The demand is likely insanely high. Spoiler alert: you create an insanely complicated funnel to weed through huge quantities of candidates. And if talent isn't the primary determiner of success (remember that the job isn't that hard), how do you distinguish people? Simple, you work them nearly to death and see who comes out alive. I'm not saying that is exactly the situation here, but I think as a mental model it's not that far off.

Chinjut 11y ago
If the demand is so high, why not simply lower the pay to winnow the candidate pool? Why bother with the insanely complicated funnel instead?
- tdees40 11y ago
  Because your pay is high too! If you can find people to work beneath you for cheaper, why can't they replace you for less money? Edit: also, they do that with intern/entry-level banking jobs. Internships pay well, but it's nothing like what higher-level bankers make. Same with entry-level analysts.
  - whatok 11y ago
    The senior bankers who actually bring in clients are worth their weight in gold. 0 chance anyone in a position like that is going to stick around to get underpaid while bringing in business.
- dasil003 11y ago
  Because it winnows the wrong ones. They want the extremely tenacious money-driven type, because those are the ones that will help them make billions once they work their way up—and gladly clap on the golden handcuffs as they do.
- ThrustVectoring 11y ago
  If you lower the pay, the "best" candidates get grabbed by competing firms. The funnel works because you're not just selecting a subset of people, but because you're selecting a particular group - specifically, those who are willing to give the firm a better share of the organizational rents.
- georgehotelling 11y ago
  Well it's already $0 in some situations, so... charging people to be interns? You just might have a future in finance.
  - Jdoemk2 11y ago
    GS interns get paid loads
  - dkuntz2 11y ago
    Not in finance they're not. Finance wants the best interns who can actually perform at least some work, and doesn't want to get busted for breaking employment law in regards to unpaid interns.
stephengillie 11y ago
Instead of having one job pay $200,000 per year (let's say total compensation is $350,000) and require 18-24 hours a day of work, you create 2 jobs that each pay $100,000 (total compensation $175,000 each) and only require 9-12 hours per shift. OR You could create 3 shifts at $66,667 (total compensation $117,000 each) and have true around-the-clock coverage!
- whatok 11y ago
  So people always bring up outsourcing part of the job to some developing country but that would run into the same problem as your third option. Having too many cooks in the kitchen will introduce a lot of operational error while having a few people who know everything about a project will run things smoother even if they are worked to the bone.
  - stephengillie 11y ago
    Outsourcing to some remote part of some other country, and outsourcing to some remote part of the country you live in, aren't much different. Many large companies are able to maintain a large number of server operators and perform essential functions without needing one person to do everything. With sufficient communication you can avoid the "too many cooks" problem. I've personally lead highly-communicating teams which avoid this problem. In short what you do is put one of the 3 in charge of different work as it comes up, load balance and collaborate. But maybe it's cheaper and easier to pay one person a huge amount of money, and beat them up, than to create a highly-communicating organization of people (including email, IM, ticket system, face-to-face time, regular meetings, bridge calls, etc). It certainly looks simpler.
    - whatok 11y ago
      Thank you, I'm well-aware that other large companies are able to do all these wonderful things but it really is a different beast. I think a huge part of it is that the tools do not lend to a very collaborative workflow. Excel and Powerpoint do not exactly have a robust version control system or any great way of leaving any useful comments so that alone makes things difficult. And honestly, it's probably around the same amount of money if not more expensive to keep a leaner crew but for the type and nature of the work, it's probably more efficient. And don't get me wrong, there is some outsourcing going on, just not on some "well if all they're doing is powerpoint and excel, why don't they outsource the whole thing" level.
qq66 11y ago
The funnel is not that complicated; it's set up to find the people who are willing to make any amount of personal sacrifice to make huge amounts of money. Those are the people they want to be future Managing Directors. Startups that have insane working hours are doing the same thing.

by tdees40 11y ago

Chinjut 11y ago

If the demand is so high, why not simply lower the pay to winnow the candidate pool? Why bother with the insanely complicated funnel instead?

tdees40 11y ago
Because your pay is high too! If you can find people to work beneath you for cheaper, why can't they replace you for less money? Edit: also, they do that with intern/entry-level banking jobs. Internships pay well, but it's nothing like what higher-level bankers make. Same with entry-level analysts.
- whatok 11y ago
  The senior bankers who actually bring in clients are worth their weight in gold. 0 chance anyone in a position like that is going to stick around to get underpaid while bringing in business.
dasil003 11y ago
Because it winnows the wrong ones. They want the extremely tenacious money-driven type, because those are the ones that will help them make billions once they work their way up—and gladly clap on the golden handcuffs as they do.
ThrustVectoring 11y ago
If you lower the pay, the "best" candidates get grabbed by competing firms. The funnel works because you're not just selecting a subset of people, but because you're selecting a particular group - specifically, those who are willing to give the firm a better share of the organizational rents.
georgehotelling 11y ago
Well it's already $0 in some situations, so... charging people to be interns? You just might have a future in finance.
- Jdoemk2 11y ago
  GS interns get paid loads
- dkuntz2 11y ago
  Not in finance they're not. Finance wants the best interns who can actually perform at least some work, and doesn't want to get busted for breaking employment law in regards to unpaid interns.

stephengillie 11y ago

Instead of having one job pay $200,000 per year (let's say total compensation is $350,000) and require 18-24 hours a day of work, you create 2 jobs that each pay $100,000 (total compensation $175,000 each) and only require 9-12 hours per shift. OR You could create 3 shifts at $66,667 (total compensation $117,000 each) and have true around-the-clock coverage!

whatok 11y ago
So people always bring up outsourcing part of the job to some developing country but that would run into the same problem as your third option. Having too many cooks in the kitchen will introduce a lot of operational error while having a few people who know everything about a project will run things smoother even if they are worked to the bone.
- stephengillie 11y ago
  Outsourcing to some remote part of some other country, and outsourcing to some remote part of the country you live in, aren't much different. Many large companies are able to maintain a large number of server operators and perform essential functions without needing one person to do everything. With sufficient communication you can avoid the "too many cooks" problem. I've personally lead highly-communicating teams which avoid this problem. In short what you do is put one of the 3 in charge of different work as it comes up, load balance and collaborate. But maybe it's cheaper and easier to pay one person a huge amount of money, and beat them up, than to create a highly-communicating organization of people (including email, IM, ticket system, face-to-face time, regular meetings, bridge calls, etc). It certainly looks simpler.
  - whatok 11y ago
    Thank you, I'm well-aware that other large companies are able to do all these wonderful things but it really is a different beast. I think a huge part of it is that the tools do not lend to a very collaborative workflow. Excel and Powerpoint do not exactly have a robust version control system or any great way of leaving any useful comments so that alone makes things difficult. And honestly, it's probably around the same amount of money if not more expensive to keep a leaner crew but for the type and nature of the work, it's probably more efficient. And don't get me wrong, there is some outsourcing going on, just not on some "well if all they're doing is powerpoint and excel, why don't they outsource the whole thing" level.

qq66 11y ago

The funnel is not that complicated; it's set up to find the people who are willing to make any amount of personal sacrifice to make huge amounts of money. Those are the people they want to be future Managing Directors. Startups that have insane working hours are doing the same thing.