back to office

There is keen debate about whether an in-person culture or hybrid working will prove the best foundation for winning in investment banking. 

Few would have predicted in March 2020, when workers abandoned their offices en masse, that almost a year and a half later most of them would still be working from their spare rooms, studies and kitchen tables.

But for many in the world of investment banking, the great home-working experiment could soon come to an end. The chief executives of several leading investment banks have made forthright statements indicating they would like staff back in the office as soon as possible. For instance, speaking at a conference in February this year, Goldman Sachs’s David Solomon referred to pandemic-induced home-working as an “aberration that we’re going to correct as quickly as possible”. While a large proportion the company’s US staff returned to the office in mid-June, plans for London-based staff to also return to the office were later put on hold.

Speaking at a conference in June, Morgan Stanley’s chief executive, James Gorman, remarked: “If you can go into a restaurant in New York City, you can come into the office,” indicating that he expected staff to be regularly working in the office again by September.

You’re going to need space to work in small, medium and large groups

Rob Dicks, Accenture

Others have struck a softer tone. In April, HSBC’s chief executive, Noel Quinn, wrote on the social networking site LinkedIn: “We estimate that most of our roles could be done in a hybrid way — and that includes myself and the executive team.”

In July, Citi’s chief executive, Jane Fraser, remarked in comments at a press conference that “the future of work at Citi will see nearly all of us back in the office, but … for the majority of our people, we’re expecting to have a hybrid model”. Société Générale is also embracing the hybrid model, with its head of HR, Caroline Guillaumin, commenting that for France-based staff, who will be able to work from home two or three days per week, “teleworking will be widespread and become the norm”.

No clear roadmap

One thing is apparent: while all banks followed broadly the same roadmap of sending almost all staff home in March 2020, coming out of the other side is radically different, with many different approaches being taken.

For both office-first advocates and hybrid-working champions it is possible to make a compelling case for why their approach is best for business. The key question in the coming months and years will be whether both camps are correct.

Office-based working is argued by many to be better for collaboration, culture and apprenticeship, with in-person interactions making for richer communication, facilitating better idea sharing, and having everyone in the same place creating the possibility of more spontaneous communication — the so-called ‘water-cooler’ moments. There are also concerns that over time, remote working may erode a sense of community and loyalty. For staff in the early stages of their careers, it can also be much harder to learn the ropes virtually. 

rob.dicks

Rob Dicks, Accenture

However, proponents of hybrid working argue that this system offers the best of both worlds — the benefits of time in the office combined with the greater flexibility that many employees value. Accenture research of more than 9000 workers in 11 countries in March 2021 found that 83% identified hybrid working (defined here as working from home 25–75% of the time) as the optimum working model. In light of the fact that investment banks have operated remotely while managing record volumes of activity in many areas, it is now much more difficult to argue that home working is less productive.

Those with caring responsibilities, often women, may particularly value the additional flexibility offered by hybrid working. A separate March 2021 Accenture survey of 500 women working in financial services found that 46% wanted to work in the office one to three days per week, and a further 25% wanted to work fully remotely.

Banks are also aware they face stiff competition for talent, particularly with the technology sector when it comes to staff with digital and IT skills. There is a feeling among some banks that creating a flexible working culture — something often offered by technology firms — will be increasingly important to attracting and retaining the best talent. Ms Fraser, for instance, indicated that she believes a hybrid model will give Citi a competitive advantage in this area.

For Rob Dicks, head of Accenture’s North America capital markets talent and organisation group, the banks that are choosing a more office-focused approach are explicitly, and knowingly, going down a route where “in-person culture trumps employee preference for hybrid working”. “We have some banks that have been very forthright about the need for an in-person culture,” he says. “Their belief is that [culture] drives higher value and they are willing to make the trade-off that some current and potential employees may opt out of working there in exchange for creating it.”

Hybrid complexities

However, for the banks that are choosing to pursue hybrid working, this will come with its own set of challenges, such as the practicalities of making sure that all employees get fair air time in meetings and with management. When it comes to promotions and assessing performance, it is vital that contributions of staff working remotely are not lost and they are not at a disadvantage compared to staff more frequently in the office. Although for large international organisations these are not entirely new challenges, they are likely to become more acute.

Bhushan Sethi, a principal and joint global leader in PwC’s people and organisation practice, says: “Hybrid is going to be really difficult for organisations. Not only will they need technology that makes it seamless, but also the right culture that ensures everyone is included when working on deals or collaborative projects, when deciding on career progression and who gets prime client opportunities.” He adds: “Leaders will have to design and govern to make sure there is equity. It’s not an impossible task, but it is much more complex.”

Upgraded office environment

Whether banks are opting for hybrid or a more concerted back-to-the-office push, investment will be needed to make the office a place where staff want to spend time, both in terms of Covid-19 safety measures, and it being a comfortable and productive space. With working from home being the status quo for almost a year and a half, the office now has to prove its worth.

The creation of versatile workspaces that will enable collaborative working is at the top of the list. Mr Dicks says: “You’re going to need space to work in small, medium and large groups, which has really strong connectivity for people who aren’t in the office. And there is going to need to be a significant amount of space for one-on-one video conference interactions, because we’ve all grown accustomed to having those without excessive background noise.”

As Mr Sethi describes, these upgraded office environments will have to cater to different needs for different groups, throughout the week. “You’ll need collaborative spaces, perhaps for a group working on a complex regulatory issue or a technology team doing some agile project work, with each only needing the space for a couple of days at a time. But it can’t all be collaboration and social space — you’ll still need to have the secure trading floor, spaces to engage with clients, and there will still need to be spaces for focused, head-down work. It can’t be one-size-fits-all.”

Less space needed

It may also be possible to make savings by reducing the office footprint, if on any given day fewer staff will be working there, even for firms that attach high importance to the office environment.

JPMorgan’s chief executive, Jamie Dimon, made his dissatisfaction with remote working clear in May, when he remarked during a Wall Street Journal conference: “It doesn’t work for those who want to hustle, it doesn’t work in terms of spontaneous idea generation.” In the US, its staff have been encouraged to work in the office regularly since early July. However, even with some perceived downsides of remote working, in his April 2021 annual shareholder letter he wrote that as a result of how “remote work will change how we manage our real estate ... for every 100 employees, we may need seats for only 60 on average”.

HSBC has also indicated that it will be reducing its global office footprint by 20% by the end of this year and 40% over the next few years.

Darin Buelow, global location strategy leader at Deloitte, says: “I believe there are two kinds of big office users out there right now: those who have realised they’re likely going to have more seats than they need and are doing something about it, and those who haven’t.” He believes the streamlining of workspaces will continue naturally in the coming years as leases expire and companies can assess what their true post-pandemic workplace needs are going to be. For many, it is still far too early to tell.

Vaccine hurdles

Another big hurdle for firms is ensuring staff feel safe in the office — nobody wants to be the epicentre of a large outbreak. Concerns around this are particularly acute at a time when the Delta variant of the virus has been driving up case numbers in many countries.

In the US, banks including Goldman Sachs and JPMorgan have surveyed staff on their vaccine status, stating that responses are mandatory. Morgan Stanley has also implemented a policy of only allowing fully vaccinated staff to work in its large offices in New York City and nearby Westchester. A person familiar with the situation explained that the policy has been brought in to enable more normal working conditions to be safely resumed within those buildings.

It can’t all be collaboration and social space — you’ll still need to have the secure trading floor

Bhushan Sethi, PwC

In Europe, while some banks have surveyed staff on their vaccine status, banks do not appear to have mandated responses. One individual at a large European bank said that while individuals’ vaccine status is not being considered, they are monitoring government demographic data about vaccine take-up in the general population, and referencing that against the profile of their staff to take a general view on likely vaccination levels.

Back on the road

The office itself is also only one part of the equation. Before the pandemic, many bankers spent a large part of their schedule travelling to meet clients and attend other events. Although some business travel has recommenced, much activity remains virtual.

“Everyone is still trying to weigh what is most efficient, but also what is most impactful,” says Douglas Adams, global co-head of equity capital Markets at Citi. “On the one side, you can have a meeting with somebody in California, followed by a meeting in Boston, followed by New York, all in one day, where you couldn’t do that historically. So, there’s clearly efficiency, but the real question is [whether] the impact is the same, or at least close enough?

bhushan_sethi_071415 (2)

Bhushan Sethi, PwC

“It becomes a particular question when establishing new relationships with clients. Is it impactful for us to do it virtually, versus being in person? Our firm and others are increasingly travelling to see clients, and I think that’s in part driven by the ability to be more impactful in person. But when it comes to more ‘maintenance meetings’, it feels like these will be [done virtually], certainly in the near term.”

In this new world, the right balance is still to be established when it comes to what is essential travel or not. Tom Ragland, chief executive of the Harrison-Rush Group, a recruitment agency for senior financial services professionals, notes that he has heard that business travel is starting to return, but that many bankers are unhappy about it, as they no longer believe it to be a good used of their time in many cases. “I expect there will be some pushback on that,” Mr Ragland remarks.

Andreas Bernstorff, head of equity capital Markets, EMEA, at BNP Paribas, believes that when it comes to things like roadshows for initial public offerings (IPOs), virtual will remain the norm. “The conclusion I draw at this point is that it’s never going back to the way it was before,” he says. “I think the genie is quite difficult to put back in the bottle, because there are some quite distinct benefits of being able to do things virtually.”

In addition to the increased efficiency of such arrangements, he highlights that “we have found it is possible to engage many more investors in a virtual process than only going down the physical meetings route”.

“Around IPOs in particular, a key advantage with a virtual process is that you are in the market for a shorter length of time,” he adds.

Keeping a competitive edge

One employee at a European bank said that travel remained a grey area, as there was no official policy, but they were keeping a keen eye on what their competitors were doing.

This is a concern that Mr Bernstorff echoes: “The interesting question is, does there become some kind of competitive advantage for an issuer to say, ‘I’m going to see the 20 or so most important potential investors’? We could see some reversion to that type of behaviour if people feel it will give them an edge.”

Ultimately, when it comes to travel or working in the office, whatever banks have communicated to their staff, arrangements are unlikely to stick unless they prove conducive to winning new business and keeping existing clients happy. “When you’re in the client relationship business, what’s going to drive your ability to make deals, build relationships, sustain relationships, is paramount,” observes Mr Sethi. “If banks find they lose business because other banks are more proactively calling on people and building relationships in person, that will clearly be a trigger point for a change in approach.”

It seems likely that arrangements trialled in the coming months will prove a point of departure, rather than the final set-up, as banks continue to grapple with many conflicting demands. The question of what the post-pandemic workplace will look like for banks is still far from answered.

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