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Overview
In a system with no gatekeepers and misaligned rule makers, it's no surprise that the world of finance recruiting pushes the boundaries of what candidates are able to deal with. All the top investment banks, private equity firms and hedge funds are guilty of one of the most miserable recruiting tactics: the exploding offer.
Yes, recruiting for ultra-competitive finance jobs is indeed as bad as it sounds. It combines the general awfulness of recruiting with the intensity and general ruthlessness of finance.
It’s also super competitive.
Goldman Sachs has reported a 3% hire rate for its internship program and Morgan Stanley has reported a 2% rate. It’s tough enough getting a single offer.
If you're looking for help landing one of these top offers, you should check out our Finance and Valuation Starter Kit.
Getting an Exploding Offer
Imagine the following common scenario. You spend your undergraduate years diligently grinding, working hard and building an amazing resume. By virtue of hard work, you go from a complete novice freshman to becoming an executive on your student investment club.
When you graduate, your hard work pays off and you go to a great investment bank. You know your next goal: breaking into the buy-side. It won't be easy, but working hard has always worked out for you so far.
When you end up going through the buy-side recruiting process, you know you at least have the minimum qualifications to go for a top mega fund. You know you'll have the chance to enter one of the most lucrative careers in finance.
But then you get thrown a curve ball when you meet with an up-and-coming middle market firm on the first day of recruiting.
They give you an offer and tell you: if you decide to leave this room, your offer explodes.
You think to yourself, it’s a great firm… but is it really what you want? You know how tough recruiting is and you know that many candidates don’t get any offers, so how could you potentially squander one now?
The Exploding Offer: Receiving a job offer that expires before you have a chance to meet with any other firms
Top Factors to Consider for an Exploding Offer
Getting an exploding offer is a weird double-edged sword. It’s an incredibly stressful position, but it’s also a very fortunate one to be in. But you of course owe it to yourself to make sure you’re making an educated decision to the best of your ability.
The first time I got an exploding offer I was 20 years old, and it was an offer to move across the continent. I hope that you can learn from some of the information I’ve picked up over the years.
Here are the top 4 things to consider when you’re debating on taking an exploding offer:
What stage is the recruiting process currently in?
Timing is perhaps the most important strategic factor here. The private equity recruiting cycle is extremely chaotic and rushed. If you get an offer before the process or on the first day of the process, you should feel really good about your candidacy. That means there are still comparable job offers to go around.
This is also where intel really helps. To the extent possible, you should tap your network to see how many people the firm is trying to hire, how many comparable firms still have spots, and if the firm is in any rush to hire.
If this is an off-cycle recruiting process, you may be more compelled to take the offer. You should always try to keep tabs on how many other firms might be recruiting.
How do you compare with the remaining candidates?
You have to be very honest with yourself here. Try to assess your candidacy objectively and think to yourself how many other similarly qualified candidates there are left in the market.
Think about objective metrics like the quality of your bank, school, and resume and think if you can afford to take the risk on future opportunities coming up.
This can also be an extremely helpful thing to keep in mind if you’re in the final rounds of a process and there are only a few candidates left. If you know the final candidates are likely to take other offers, then you might have more negotiation in pushing back an exploding deadline.
Before recruiting, you should try to make a mental list of firms you would be comfortable working for.
When you’re in the midst of recruiting, you’re going to be under insane mental pressure to do what other people want. If you get an offer, all the firm’s troops are going to start e-mailing you with “Congratulations!” and “I’m here to talk if you have any questions before you accept!”
Even the most virtuous keener can have a tough time rebuffing so much praise. The antidote is to try to assess all the firms ahead of time with a set of objective criteria. You should have a high level idea of the specific firms you'd be willing to accept before the process starts. Your opinion will likely change as you go through interviews, but doing data-driven research beforehand can be a very helpful anchor when making decisions.
How comfortable are you reneging on an offer?
This is perhaps the controversial stance I’ve switched on the most going from a student to professional. As a student, recruiting gossip is rampant and if you renege, you’ll likely be socially punished for it by your peers. You’ll have burned a bridge with an important employer and that offer might not be re-extended to a peer of yours.
But as a professional… I started to realize just how ruthless finance recruiting is. It puts an unfair expectation on candidates and I’m much more understanding of reneging. I’ve seen many people do it and honestly, there isn’t that much the firm can do. You’ll definitely get blacklisted from that firm and maybe that headhunter, but if you’re reneging for a superior offer, it doesn’t really matter.
So generally, if you’re in school: bad idea. Alumni only a few years out are too tight-knit that it’ll come back to bite you. In the real world: there’s too much attrition and work to deal with anyways, so no one can punish you.
Why do firms give exploding offers?
I think there are a few very intuitive reasons why firms are so willing to give exploding offers:
There is no tangible punishment or downside for them.
Look, if they give you an exploding offer, what can you do? I mean, if you accepted the offer, and they then decided to take away your offer, what could you even do then? Write an angry message on Glassdoor? Sulk about it to your significant other? They honestly don’t care. They aren’t in the business of caring and chances are the exact same recruiting tactics were pulled on them.
There are no centralized gatekeepers in recruiting.
Some top schools have career teams that will try to defend its students, but in general, firms can do whatever they want. All of their incentives are to get the highest-quality candidates. They play to those incentives and nothing else. There are no formalized rules in the system.
You generally have no leverage over them.
You’ll develop more leverage as your career goes on and you open more doors, but generally, you have very little leverage at the start of your career. Especially if it’s an off-cycle process or if there are only a few other comparable firms still recruiting, they can pull all the tactics they want.
Add to the fact that many competitive finance offers tend to expire within 24 hours or a few weeks. So even if you got another offer at some point, it might not actually be a tangible thing to use as leverage.
You’ll learn over time that recruiting is extremely personal and only you have to live with the choice. You can ask for advice from others, but they won’t ever care as much as you do.
Do your diligence, reflect honestly on these factors, and ultimately be confident in the decision you have to make.