Summer Internship Recruiting: Down, But Not Out
So, do summer interns still get recruited even in the midst of a financial crisis? Are internship programs being eliminated altogether? Which offices are actually hiring interns? Is anyone safe?
I’ve been getting a lot of these questions lately as we move into summer recruiting.
The short answer: most of your fears are overblown, though they are not without merit.
Why? Well, I hate to sound like a consultant but all comes down to a cost-benefit analysis.
Why Full-Time Recruiting Was/Is Down
This one should be obvious to anyone who has been recruiting over the past year (and just about everyone else). Things are bad, M&A activity is way down, banks have been failing left and right and many firms – especially bulge brackets – see no need to bring on lots of additional new hires.
Hiring someone full-time is a big risk for most banks because there’s no telling what will happen to the economy in the span of a year.
Just look at 2006 full-time hiring, which saw a record number of new bankers – and then a record number of layoffs 1-2 years later as the credit crunch struck.
Or consider 2002 full-time hiring, when banks hired barely anyone and then scrambled around desperately (and provided huge incentives) in 2003 to find people as deal activity rebounded.
Banks are extremely poor at hedging risk and rarely take the logical approach of hiring a moderate number of people – they tend to use an all-or-nothing strategy instead, which means full-time hiring is even more risky than it should be.
Comparative Costs and Risks of Full-Time vs. Summer Hires
Summer interns incur far less risk than full-timers: there’s no long-term commitment and each intern gets paid a lot less.
At worst, a bank might “waste” 2-3 months of salary on a summer intern. There’s no bonus, no need to send them to expensive training, and no commitment to anything.
Sure, bonuses may not be what they used to be, but even in a recession they’ll still comprise a good chunk of each junior banker’s base salary.
And don’t underestimate the cost of training: not only in New York (or London for anyone at Barclay’s) over the summer, but also during the first few months when everyone new is ramping up and doesn’t know much yet.
Having a pool of summer interns also gives the bank more options – if they do need more full-timers than anticipated, they could always go back to their summer pool and see who’s still looking for work (of course, this is something HR departments overlook and waste a ton of time/money as a result).
Benefits of Summer Interns
Beyond the lower risk and expenses, summer interns come with many benefits.
In a high-end services industry like banking, having full-time people complete the random tasks that need to get done each week is expensive – from “managing prospects” (updating spreadsheets of who the banker has been talking to lately) to creating profiles of companies to looking up basic information, getting food, coffee and dry cleaning… and the list goes on.
With interns bankers get significant leverage – it’s like they’ve instantly gained an army of assistants.
Interns also keep full-time bankers happy (ok, relatively happy – this is finance, after all) because they provide all this work relief.
Down… But Not Out
As a result, banks almost always do some summer intern recruiting each year, no matter how bad the economy is. Yes, it was down last year – and it will be down this year as well.
But I doubt that it will be eliminated altogether (as full-time hiring was at many places this fall).
Oh Yeah, That Election
You’ll notice this was a “2008 US election commentary”-free article.
However, I’ve been getting questions on what the results of the US election mean for the financial services industry in the coming years – while I normally stay away from politics, I might just look into my crystal ball next week. Hopefully this won’t cause half of you to desert the site.
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