Why Bankers Work [100] Hour Weeks

First of all, most investment bankers are no longer working 100 hour weeks - senior bankers likely have never worked these hours (though they may claim they have) and major efforts have occurred to reduce junior banker hours, though with mixed results. The logical question is why do junior bankers work long hours when investment banks could simply hire more employees or offshore their personnel?

While the reasons are many, the easiest way to understand the situation is to examine how revenue is earned and how employee incentives are structured. Unlike its sister professions law and consulting, which typically charge by the hour, M&A advisory and capital markets work is primarily transaction work and therefore success fee based. Furthermore, while client relationships are built over years, the transactions themselves can be an intense period of a few months or even days. The combination of these factors result in investment banking teams that are leanly staffed and built to handle many projects at once.

Because senior bankers do not get paid until an M&A deal or securities offering closes, they are incentivized to work on many potential transactions at the same time to maximize the chance of receiving success-based fees. Therefore, they spread their human resources across many deals and attempt to keep their overall headcount to a minimum to reduce overhead cost. This contrasts significantly with a law firm where each lawyer is billing a client on an hourly rate so the partners are incentivized to hire most associates to bill more hours. Given banking deals last for a shorter amount of time (except the not so infrequent slow burn M&A transaction), a smaller team is easier to get up to speed on a deal, engages with clients in a high touch manner, is more likely to keep information confidential and is more manageable for senior bankers to oversee. One open question remains - how will artificial intelligence (that can work 168 hour weeks!) affect the demand for hard working, analytical and ambitious junior bankers?