U.S. investment bank Goldman Sachs Group Inc is adopting a performance review system that will grade up to 10% of its 39,000 employees as under-performers this year, according to an internal memo sent on Monday, potentially leading to more job cuts in 2021 than the bank has made in recent years.
Goldman Sachs’ new head of human resources, Bentley de Beyer, who joined the bank in January, is revamping its opaque performance review process to make it more transparent and determine what proportion of staff is put in each grouping, said bank spokeswoman Leslie Shribman.
The bank’s main goal is to let staff know where they stand as roughly 90% of the bank’s workforce works from home due to COVID-19 restrictions, said Shribman, who verified the contents of the memo.
Goldman Sachs’ review changes are another sign that COVID-19 working restrictions are prompting some large corporations to overhaul their human resources policies.
“The dynamics of today’s challenges underscore the need for more transparency in feedback and even stronger communication between our people and their managers,” Goldman Sachs Chief Executive David Solomon wrote in the memo to all staff.
Under the new system, 25% of staff will be graded “exceeds expectations,” 65% will get “fully meets expectations,” and 10% will be marked as “partially meets expectations” in their annual reviews in December.
Employees will also have more frequent formal performance check-ins with their managers – at least three times a year starting in 2021, according to the memo. Previously, they met to discuss performance only a couple of times annually.
The Wall Street bank has not disclosed the percentage of employees in each performance group previously and Shribman declined to say how the new percentages compare with the prior system.
Goldman Sachs is notorious for its tough annual review, which typically paves the way for a cull of roughly 5% of staff, often for missing performance targets. The bank has said the cuts allow it to hire a steady stream of new, diverse talent, which has become a priority over the past year.
It has not made major job cuts this year, and its headcount as of June 30 was actually up 10% from the year-ago period.
Shribman declined to say whether the changes would result in increased 2021 job cuts and said performance grades are just one factor in those considerations.
Despite a tough economic environment caused by pandemic shutdowns, Goldman Sachs reported a 41% jump in quarterly revenue earlier this month on strong trading and investment banking income.
Goldman Sachs’ annual cull has long set it apart from Wall Street rivals, which tend to make mass layoffs periodically.
Morgan Stanley, for example, terminated 1,500 of its roughly 60,0000 staff last December. Its largest prior cut was 1,200 staff in 2015.
Morgan Stanley CEO James Gorman, like leaders at several U.S. and European banks, has vowed no terminations in 2020 as the U.S. economy struggles with mass unemployment.