Start-ups, Corporates & The Fierce Competition For Talent
Wall Street could consider itself lucky. Aside from the fact that many of the banks that are headquartered on, and nearby, the famous avenue are of ‘systematic importance’ (short-phrase for too-big-to-fail), they also appear to have a durability that extends beyond their sheer institutional size. Industries come and ago, and as they do so do investors and the fine crop of talent in the labour market that, just like investors, are keen to follow the money. Big tobacco, big energy, Fleet Street, and the civil service (in both the US & UK) have all had their heyday. But, none of them has had a longer or brighter time in the sun when it comes to attracting the most talented of graduates and labour market hopefuls than large financial services firms, consulting firms, and big law. In the past decade, they’ve been joined by big tech companies who now boast a fine roster of talent of their own. The battle for talent between industries, hitherto, has largely been muted. Big tech joined the elite but that hardly did anything to the ability of large banks and Private equity firms to offer fine wages and career-clout that would continue to attract applicants in their thousands. Furthermore, several people that work for big tech companies are not natural fits for banking and law. Their desire to push for, and subsequently achieve dog-friendly policies in the workplace would seemingly never run in the dog-eat-dog world of investment banking - Google and Amazon are among several companies to have embraced such a policy. However, the monopoly that the financial services industry, management consulting firms, big law, and big tech companies have on attracting talent could end. At the very least, it will be challenged.
Against the backdrop of 2 years of academic disruption created by the COVID-19 pandemic, it appears that several of those at the start of their careers are reconsidering their options against what was formerly a rite of passage upon graduating. Such a path typically consisted of a person graduating from university and then going on to work in one of the ‘blossoming 4’ industries - Law, finance, big tech, or consulting. No doubt, this is still common, and unless we witness an economic upend, it will likely remain the case. Indeed, McKinsey attracted 800,000 applicants for 8000 jobs as recently as 2018. But, what could have formerly been characterised as a monopoly of the share of talent now looks less true.
Cue start-ups. The desire to have more autonomy, control over time, and actively build, rather than preserve, appears to hold cultural power for younger labour market hopefuls and students - It’s arguably easy to see why. Reports of 100 hour plus work weeks at some investment banks were well publicised over the course of the pandemic. One leaked employee-respondent survey from Goldman Sachs contained the statement by an employee that working at the bank was ‘arguably worse than being in foster care’ and called the work conditions ‘inhumane’.
Start-ups, especially those that have been handsomely bankrolled by private equity firms (PE firms), who themselves, partially because of COVID-19, have amassed a record amount of ‘dry powder’ (industry-speak for money) over the past few years, serve to profit from scandals of workplace dissatisfaction in the hallways of the heavyweights. Being able to attract top talent is also made easier amid LinkedIn’s ‘Gen-Z moment’ (as its CEO proclaimed of the present) which means that new companies have a trusted avenue for finding and approaching young talent, as formerly wasn’t the case. And the popularity of entrepreneurialism more generally means that start-ups are well-positioned to poach, if not turn the heads of individuals away from the traditional route.
Companies that also look extremely well-positioned to take the fight to firms in the ‘blossoming 4’ industries are blockchain-technology start-ups. Amid the cultural zeitgeist of cryptocurrencies and NFTs, blockchain projects are getting their fair share of funding and could prove to be the catalysts in moving private equity dry powder away from the side-lines. Venture capital (VC) funding for blockchain start-ups surpassed $25billion last year, an all-time record and it’s only set to continue as the potential benefits of blockchain technology become more commonplace in the lives of individuals.
This, in turn, presents companies operating within the space with ample opportunity and recruiters are wasting no time lining them up with the brightest minds. Several blockchain-dedicated recruitment companies have sprung up in the past few years promising ambitious blockchain projects that they can do a good job of poaching talent away from colossal corporations, not least because of the astronomical funding that several blockchain projects are receiving at the moment. When I ask an employee of one such blockchain recruitment agency, CB Recruitment, of how firms in the blockchain industry plan to compete with corporates for talent, he notes how, ‘salaries in the real-world are negotiable, salaries in the blockchain space are always negotiable’.
This should increase the competition for talent, and with it, bump up starting salaries across the board - The law firm Gibson Dunn offers its newly qualified UK lawyers an annual base salary of just over £160,000. Intensified competition from new industries could send this further north. That is despite the fact that many start-ups, whilst not being able to compete with these sums of cash, can offer other bonuses, namely equity options, and blockchain projects typically offer token options to employees thereby attracting talent by speaking in the language of crypto.
For successful companies, a common mantra is that their greatest asset is their people. The increased competition for talent that is set to unfold will test some firms to the limits of how far they will go to ward off competition from within, and beyond their industries for brainpower and competitive advantage.