It might be a new experience for Wall Street but a periodic cull of the “oldies” has always happened to more senior workers.
Take a look around your office and count the over fifties. In the UK, in more manual sectors, or jobs, you’ll still find them gainfully employed, but in white-collar and professional jobs they are likely to be few and far between. Of course, this isn’t necessarily so in some industries and countries, particularly where union power is very strong; the US airline industry being an interesting example: the average age of its flight crews must be amongst the oldest in the world.
It seems that this familiar corporate tradition, of culling the “oldies”, has now caught up with Wall Street; until recently it seems it has been so flush with cash that it didn’t need to worry so much about such mundane management disciplines. Morgan Stanley has now joined Citigroup, and UBS AG, in announcing significant downsizing which will hit its more senior, and best paid, staff. Goldman Sacs had a go at this last year, as well as encouraging its older partners to leave. JP Morgan Chase is also building a younger leadership team at the expense of the “oldies”. Morgan Stanley is leaving its financial advisors alone though as it attempts to realign itself behind its wealth management business.
Whopping great financial returns will not be as easy to come by in the future so it looks like these rather rarefied financial institutions have been forced to adopt commonplace practices from other business sectors. Keeping the pyramid as pointy as you can, at least in salary terms, if not in reporting lines, has always been a good idea. Many younger and less well paid people can do the jobs of the oldies just as well. The motivations of these two employee groups are often hugely divergent; the youngsters want the oldies’ jobs and the oldies just want to survive as long as they can. This is the cause of much internal politics that diverts attention from the annoying distraction of running the business.
Goldman Sachs is also deploying a tactic favoured by Microsoft, of culling 5% of its worst performing employees each year, to keep the employee “gene pool “fresh and staff on their toes. Performance management is of course fairly routine in big firms these days and for all of us it is sometimes just too easy to put up with lower levels of performance than you want; people can be a bit of a pain to manage after all.
So, is all this good news for shareholders and the economy overall? On the face of it you would think it would help make them stronger businesses wouldn’t you? But, of course, it also reflects a very different economic climate, that is likely to be here for some time to come, and that is much less like good news. I’d like to think that all this augers well for the end of financial extravagance, as bubbles of one sort or another pop and transfer wealth from one group of folk to another, luckier, or better informed, one, but I’m not too sure.
I’d put money on this good work being undone in a decade or so when the financial nonsense that we’ve all been though recently is forgotten and the youngsters now taking over the reins of these great financial institutions start to behave just like the outgoing oldies have done. As they age they too will want to hang on in there for as long as they can too. Until then, long live the pointy pyramid!
If you like this why not try one of my books, by clicking on the icons below: