Just be thankful banks don’t fire people like this – eFinancialCareers

Just be thankful banks don’t fire people like this – eFinancialCareers

If there’s one thing that sums up the tough and uncaring image of investment banks, it’s the proverbial cardboard box and ten minutes to clear a desk when you’re fired.  Yes, there are good compliance reasons for this practice and yes there is only limited scope to do anything differently, but at a human level it’s not a nice way to be treated (notably Deutsche didn’t do this and gave its employees a whole day to clear out and commiserate).  It is, however, what it is. Most importantly, it’s not weird, and when you look at the stories coming out of WeWork right now, it might seem that a bit of old-fashioned heartlesness is a good thing.

So, how weird is getting laid off at WeWork (‘We’)? The Wall Street Journal suggests things can be pretty odd there. For example, founder Adam Neumann reportedly decided to lighten the mood after a large round of layoffs (7% of the staff – proportionately, that’s about a third of the current Deutsche Bank redundancy program).  Neumann called all the staff together for a town hall meeting.  So far, so normal.  Neumann told them that the move was tough but necessary and the company would be stronger as a result.  Also familiar.  And then…he called in teams of employees carrying trays of free tequila and DMC from Run-DMC ran into the room and performed ‘It’s Tricky’ while employees were expected to dance around. Some were reportedly, ‘stunned and confused.’

This wasn’t all. On several occasions, Adam’s wife Rebekah (Chief Branding Officer, whose mission is to ‘infuse spirituality’ into her husband’s company) reportedly ordered employees to be fired because she ‘didn’t like their energy’ after a short conversation.  While some might say that this is slightly reminiscent of the Santander management board’s alleged objections to Andrea Orcel, at least Santander also had the issue of money to think about. 

There’s only one thing which WeWork did to its departing employees that bankers will recognise as familiar. That’s the imposition of an arbitrary rank-and-yank forced firing program to dig out underperformers.  Even then, the numbers are way too high to make sense.  Banks and consultancy firms are considered aggressive if they have a policy of getting rid of the bottom 5% every year. At WeWork, Neumann demanded 20% turnover after discerning that he’d hired an unacceptable number of ‘B players’.  Nowhere has that much dead wood, plus it’s pretty obvious that if you fire all the Bs, then everyone’s an A and there is no objective standard to decide who might be next to go.  It’s a policy that destroys teamwork and creates a sense of paranoia.

Mostly, WeWork’s approach to redundancies is a cautionary tale for all those young and idealistic graduates of elite universities who are apparently deciding to go into startups rather than to Wall Street.  Banks can be tough places, but they have org charts and management structures rather than single founders.  And the need to make money rather than lose it puts a limit on how far they can drift away from reality.  Get rid of those constraints and what you have is the pure corporate expression of one person’s ego.  And that makes for a very discomforting place in which to spend your working life.

Elsewhere, we suggested last week that smart analysts like Kinner Lakhani and Huw van Steenis had seen that the future of equity research was to get out and put your brain to work on corporate strategy instead.  Now it seems that the banks agree.  Simon Bound and Steve Strongin, the global heads of research at Morgan Stanley and Goldman Sachs respectively, are looking to improve their P&L by selling strategy advice from their teams directly to corporate clients.

Instinctively, it feels like a terrible idea; you might get companies which ran themselves to please the stock market, combined with analysts who made recommendations to please their consulting clients.  But it has actually worked in the past.  The Nomura Research Institute, spun out of the securities house of the same name, is the biggest Japanese management consultancy, while Wood Mackenzie, the energy specialists, were top rated stockbrokers in the 1970s and 80s.  Even the delicate compliance issues are not wholly unknown to, for example, the McKinsey Investment Office.  It might be the way of the future for top analysts to spend more time on the company and less on the quarterly earnings.

Meanwhile …

A survey of “finmeme influencers”, people who post very mildly humourous finance-related pictures on Instagram and Twitter.  If you like EBITDA jokes they’ve got those, and if you like fleece vest jokes they’ve got those too.  (Institutional Investor)

If you wondered how things like WeWork get that way, Sir Michael Moritz of Sequoia tells us that “Great entrepreneurs can usually tell a story well”.  (Slush)

Job cuts come to the discount brokerage industry (to be expected, as profitability is typically driven by float income on cash balances which is very low given where interest rates are).  Charles Schwab is laying off as many as 600 people, including its high-profile markets analyst Brad Sorensen. (Business Insider)

One of the toughest jobs in finance might take a bit longer to fill than expected, as there are proposals to delay appointing a successor to Mark Carney at the Bank of England (Financial News)

You wouldn’t necessarily expect hedge fund redemptions and roller coasters to appear in the same story, but the redevelopment of the Dreamland park outside Margate is in jeopardy after the announcement that Arrowgrass, which was partly funding it, is to close (Kent Online)

Clearing out in the notoriously competitive world of Australian equities, as several top players leave Citigroup (AFR)

And an unusual story – banks often threaten to sue each other over poaching of staff but it rarely comes to court, not least because everyone does it sometimes.  Credit Suisse, though, were angry enough over 70 private banking staff who went to UBS in 2015, and they have won a $9m judgement, which seems quite small at just over $125k per banker. (Bloomberg)

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