Goldman’s move to unlimited vacations is good for… Goldman

When Goldman Sachs – the investment bank known for its demanding culture – recently told its senior bankers they could take as long as they wanted, the change in policy immediately propelled it up the corporate ranks. most employee-friendly Americans.

Managers should “take the vacation they need so they can continue to work hard, to be competitive, to operate productively, but to take care of their families,” Goldman chief executive David M. Solomon told CNBC. .

But the bank’s move didn’t generate much excitement in a place where employees build their careers by being available to customers anytime, anywhere. Goldman, in particular, has long prided itself on this philosophy — so much so that its executives rarely use all of their vacation time and often forgo out-of-office messages. Some have even been known to take satellite phones on vacation.

“It sounds psychologically soothing, and it’s part of Goldman cultivating a softer, softer Goldman image,” Wells Fargo banking analyst Mike Mayo said. “The reality is that it won’t make any difference. It’s like telling a restaurateur that you can have unlimited vacations – will that change the way the restaurateur works? »

Some observers have been downright cynical about Goldman’s motives, calling the policy a cost-saving measure. In the past, if employees had a fixed number of vacation days that they did not use, the bank had to pay them for those unused days when they left. But unlimited vacation means the bank has nothing to pay them.

“It was all financially driven,” said Veehtahl Eilat-Raichel, chief executive and co-founder of Sorbet, a company that buys unused vacation days from employees of other companies and puts the cash value on cards. prepaid. Unlimited paid time off is ‘positioned as an incredible benefit for employees, when in fact it’s really bad for employees and incredible for employers,’ Ms Eilat-Raichel added. .

Goldman Sachs – which posted a record profit of $21.6 billion last year – said any cost savings were incidental.

“Our goal is to inspire our employees to take more time off, rest and recharge,” said Bentley de Beyer, the bank’s global head of human capital management. “We are proud to partner with many other companies to introduce a flexible policy that requires minimal time out of the office to continue building resilience and sustainable performance.”

Unused vacation days have long been a financial challenge for employers. When employees quit — especially senior executives, with high salaries and mountains of vacation days intact — the company often has to pay them for their unused vacation time. It has become an even greater financial pressure for companies in recent months, given the huge turnover in the labor market.

The average employee in the United States has about $3,000 in paid vacation at any one time, according to data from Sorbet. Employers across the country owe about $272 billion in unused vacation days, Sorbet found.

Although companies like Netflix and LinkedIn have long offered unlimited vacations to their employees, the option has become popular lately. In a booming job market, unlimited paid time off can serve as a recruiting tool and tell a potential recruit that the company values ​​employee well-being. But in practice, unlimited holidays are often more advantageous for the employer than for the employee, because they are generally accompanied by a policy of erasing unused days from their accounts.

Research has shown that employees with unlimited vacation time often take less time off because they don’t want to go overboard or be perceived as unmotivated. A 2017 study by human resources platform Namely found that workers with unlimited vacation days took two fewer vacation days per year on average than those with a fixed number of vacation days. And employers who tell workers to take as many days off as they want usually don’t have to pay them for vacation days they don’t use.

In other words, unlimited vacations can allow employers to position themselves as caring and caring, while reducing their own financial investment.

At Goldman, the new policy angered bankers in part because Mr. Solomon insisted on a return to the office.

Mr. Mayo, the banking analyst, said he was shocked at how many people were working in the office when he visited Goldman headquarters for his first in-person meeting during the pandemic. Mr Solomon regularly worked from the office and urged managers to show up in person – a tactic that has led to some senior bankers leaving the company.

Goldman chief executives and partners are typically given 20 or more vacation days, depending on their tenure, said a company representative who spoke on condition of anonymity to discuss personnel matters.

Under the new policy, more than 1,400 senior bankers will no longer have a cap on their leave, although all employees will have to take a minimum of 15 days a year from 2023, according to a memo seen by the New York. Times. . The 15-day stipulation is intended to provide some structure for junior employees, who will also get an additional two days off. To ensure the changes are adhered to, the company will keep tabs on vacation days taken and address the issue as necessary during performance discussions, the rep said.

Senior bankers who take less than 15 days will not be paid for the remainder, the person said. In 2017, Goldman had already scrapped a policy that allowed employees to bank unused vacation, but some longtime employees still have banked days from previous years.

“It’s a good thing – they trust their senior executives to do the right thing because they’ve earned their stripes, dedicated their time and been successful,” said Paul Sorbera, president of Alliance Consulting. , a Wall Street executive. research firm.

Still, there are risks. Employees who report to “old school” managers could jeopardize their careers if they take too much time off, Sorbera said. And in an industry where it’s common to work with parental leave and forgo vacation plans, change can be slow.

“You can’t just put in a new policy and the next day the managers come out and crack the same whip as before,” he said.

William R. Gruver, a former Goldman associate who spent two decades with the company, was skeptical of the indefinite vacation policy. “I don’t think they’ll really quit their jobs — they’ll work from the mountains or the beach,” said Mr. Gruver, who served as chief operating officer of Goldman’s equity division until 1992.

Mr Gruver compared his love of work to an addiction, but after contributing to the breakdown of the marriage and ill health he left aged 48 and went on to teach at Bucknell University. He now works in a think tank.

In recent years, Goldman has rolled out family leave benefits. He gave 10 days off for the Covid-19 disruptions, which around 4,000 employees used. In 2019, it extended parental leave to 20 weeks instead of 16 weeks.

Goldman’s vacation perks echo those offered by other financial firms, including BlackRock, a giant asset manager, and Bridgewater, the world’s largest hedge fund.

Long before Wall Street, the tech industry embraced flexible furloughs — and was aware of its potential downsides. In his 2020 book, “No Rules Rules,” Reed Hastings, co-CEO of Netflix, discussed the company’s unlimited time off policy, instituted in 2003, and noted that the perk worked best if leaders set an example by taking time off. .

But Robert Sweeney, a technical manager, said that when he worked at Netflix in 2011 and 2012, he was ashamed to ask his manager for time off. Mr. Sweeney recalled a time that year when he had worked 80 hours a week to introduce a new product. When he finished the project and asked for a vacation, he said, his supervisor chastised him for leaving as another important deadline loomed.

In 2012, when Mr Sweeney launched his own company, Facet, which does tech recruitment, he emulated Netflix’s unlimited paid vacation policy. But he found his employees were taking very few days off and many were feeling burnt out. Eight years later, Mr Sweeney changed Facet policy to offer a minimum of 25 days vacation a year, with managers having the discretion to grant more to top performers.

The experience made him wary of employers offering unlimited vacations. “They claim they’re in favor of employee health and furlough, but they don’t actually commit to anything about it,” Mr Sweeney said.

Kate Kelly contributed report.

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