In a country or a company, a vice-president is a top job, the title-holder is most likely No. 2 after the big boss, and the only one with that grand designation. In a bank, a VP can be...well, one of 12,000! Greg Smith, a Goldman Sachs VP, briefly became world famous in March 2012 when he quit the giant investment bank via a scathing oped piece on his employer in The New York Times.But more revealingly, Lloyd Blankfein, Goldman's boss, had reportedly said he didn't understand the fuss since Smith was just one of 12,000 VPs in the bank. US media then estimated that an astounding 40% of Goldman staff were VPs. And, get this, Goldman was also estimated to have 2,400 managing directors!
For the non-banking corporate world, a managing director is of course often the big boss or the second-biggest boss — a company has just one MD. Goldman's fancy designation party is pretty much the norm across investment banking and banking everywhere, including in India — banks are chockfull of vice-presidents, directors and managing directors. So, when you meet a bank VP, or even a bank MD, don't get impressed, be curious. Why are there so many of them?
Just look at the data. Vito India Advisers, an executive search firm, estimates that of the 2,210 people employed in MNC commercial banking in India, 365 are VPs, 325 are directors and 65 are MDs. So, over 25% of the total staff have business cards with fancy designations.In I-banking in India (domestic and MNC), there are 49 VPs, 31 directors and 32 MDs out of an executive headcount of 782. Here's the definitive proof of grand title inflation in banks worldwide: Jerome Tillier, a consultant with financial services company GXS and a sharp blogger, ran a test. He keyed in 'bank vice-president' in LinkedIn's search box, and got 449,898 hits! That's bigger than the population of Malta, as Tiller explained.
So, what gives? Why are there more bank VPs globally than the population of a small country?
"Designations like MD, VP are not jobs, but grades that reflect seniority," says K Sudarshan, managing partner, Asia, EMA Partners International, a global executive search firm. But that doesn't quite explain the seemingly madcap HR policy of banks. Sudarshan has more. "VPs are just fancy titles on visiting cards for market-facing executives... VPs are ubiquitous and the title does not mean anything and has nothing to do with the job one is doing...even the person managing in-house tech support can be called MD, technology."
So, why do banks do it? ET spoke to dozens of bank executives and headhunters and the following four reasons seem to explain best why almost everyone's a VP at a bank.
So, why do banks do it? ET spoke to dozens of bank executives and headhunters and the following four reasons seem to explain best why almost everyone's a VP at a bank.
Most executives and headhunters who spoke to ET for this report did so on the condition they not be identified.First, Indian and India-based banks are simply copying a longstanding practice of American banks, especially I-banks. When finance was liberalised, American banks brought with them American banking HR norms and peer pressure meant Indian private banks and I-banks had to follow suit.
The fancy designation party in Indian private sector banking really caught on from 2000 onwards, and banks got around company law stipulations on designations such as MD by anointing one or two people as big bosses and the rest as functional heads. Many took local legal opinion before creating the fancy designation-heavy hierarchy.
So, Standard Chartered Bank in India, with around 100 executives in its I-banking division, has 10 MDs, 30 directors and 22 associate directors. HDFC Bank has five country heads — in one country, India. Even a new investment bank like Avendus has 21 VPs. Or consider Kotak Mahindra's I-bank, Kotak Mahindra Capital Company.
It employs 50 executives — around 20% are associates to assistant VPs, 25% are VPs and the rest are directors and MDs. One out of every 10 executives in Deutsche Bank is an MD. Private equity? Teams are far smaller here. And PE hotshots say dynamics are different.
"We are like high-end consultants," a veteran PE executive said, adding, "we don't need an army...we need talented heavyweights who can get direct access to CEOs or promoters and start a business conversation..." But to outsiders, it looks like this: Blackstone has 3 senior MDs, and Chrys Capital, 4 MDs and 2 VPs in a 12-member investing team. Warburg Pincus' 17-strong team has 4 MDs. And Carlyle India has 3 MDs. Examples abound, and it's clear within the fancy designation party in banking, I-banks are even more liberal than their commercial bank cousins. The second reason, given most often by banks themselves, is that throwing around titles like VPs or directors or MDs is an employee retention tool in a highly competitive skilled labour market with a shallow talent pool.
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