I'm a management consultant in banking and financial services when I'm not being grumpy on Twitter, posting photos of the fine county of Cheshire on Facebook, or uploading exercise to Strava. My work brings me into frequent contact with Board members of a couple of the largest UK banks, including at the moment. And I think we might be seeing the stirrings of a revolution in how large, private sector organisations operate, directly as a result of CV19. I'll explain my reasoning, partly so I can look back in two years or whenever and either admit I got it hopelessly wrong, or be smug about my crystal ball...
So, coronavirus, CV19; when lockdown came the banks pretty much emptied all their head office-type buildings and functions. Employees were instantly told to work from home, and the vast, vast majority have not been back to their desks since. (Indeed, I've been told second-hand that when one of the banks that I don't work with asked if anybody wished to return to their desks at Canary Work when lockdown was eased slightly, not one of the 3,000 employees volunteered. And I know for certain that not even Board members have been into one bank's Gresham Street head office). Branch opening times have been reduced to four hours a day in many cases, and call centres have operated with skeleton staffing, again with many people being set up to work from home, where previously that simply wasn't an option for them.
In the first couple of weeks there were a few wobbles. Some people had to be given remote access to their organisation's systems, which isn't always straightforward given the security wrappers that are put round bank technologies these days. I know for certain that there was, and continues to be, major worries about the overall credit quality of the lending book, particularly for small and medium businesses. And the executives that run those businesses are particularly nervous, as they've been forced into providing Business Bounceback Loans, which although are government-backed, still fall under the auspices of the Financial Conduct Authority, who hold the senior managers of banks personally liable these days (through something called the Senior Managers Regime, introduced after 2008) for any wrongdoing - which includes lending to people or firms who are unlikely to be able to repay, which may well be the case for the Bounceback Loans. Plus, those same executives have been working even longer hours, and under even more pressure - probably unsustainably so - than BC (Before Covid).
Despite all the above, two major things have happened. First, despite the wobbles and the panics in the early days, the businesses have pretty much carried on functioning. Yes, there's been some criticism that some banks have been slow to pay out some loans, but by-and-large branches have still opened, internet banking has stayed available, phones have still been answered, and cashpoints have been full of notes. The banks have also had to absorb massively increased levels of phone traffic too, and individuals and small businesses have understandably flooded them with requests for payment holidays or other advice. Some days have been five, six times busier than the equivalent day last year, at a time when, as I've said, much activity has been transferred to 23 year olds working from their one-bed flats. It's been a truly remarkable achievement, and one that will get little attention or acclaim.
But for me, as a consultant, that's not the most significant or most interesting of the two big things that have happened. That is the fact that huge swathes of those people in the head office-type jobs have not been very busy, and that their lack of activity hasn't inhibited the running of the firm. This has been a hobby horse of mine for a while now - the fact that once an organisation reaches a certain size - I would estimate in the 5,000-10,000 employee range in the private sector - significant numbers of "non-jobs" are created. It's hard to define exactly what a "non-job" is, other that one that creates no discernible value, defined in terms of either generating revenue, managing or saving cost, or keeping the organisation safe from a legal or regulatory point of view. But after a while you tend to be able to spot a non-job holder quite easily.
These non-jobs have been created for a variety of reasons over the years. The three most popular in banking have been a) the 'spans of control' approach, which has set ratios for the number of people each manager has to have as direct reports, leading to jobs being created just to meet the ratio and thereby help secure their grade; b) a huge over-reaction to the events of 2008 leading to very fat 'Risk' departments (where few people actually understand genuine risk, but they sure have a fine list of forms that need to be filled in before anything can actually be done; and c) the fact that the organisations have been so big that the people at the top simply have no conception what thousands of their employees actually do, day in, day out. (I proved this to my satisfaction four years ago when I spent a month physically drawing out every department in every division of a large clearing back on twenty square metres of the CEO's dining room wall, and adding selected metrics for each one [number of people, average salary etc]. "The Wall", as it became known, stayed there for several months, during which time every executive and some non-exec directors visited it, and to a person expressed that it gave them insight into the company they'd just never previously had. Other than for their part of the business, they simply didn't know who did what, where, and what it cost beyond a headline figure).
Anyway, CV19 is beginning to shine a light on these non-jobs. They've been under-employed: the committees they support with their myriad Powerpoints haven't met as decisions have been escalated up the organisation much more quickly; the meetings that fill their diaries haven't been needed as a result - and the world hasn't stopped turning, something the people at the top have noticed.
Now, it would be perfectly reasonable to posit that it's only in the long term that the effects of the lack of activity of middle managers are likely to be felt. You could argue quite plausibly that the BC networks of information gathering and transmission that feed critical and strategic decisions are supporting what's going on now, and as they wither so the quality of future management decisions will deteriorate. I don't buy that - information is frequently sifted, refined and presented in such do-my-career-no-damage ways as to become practically meaningless. And if it's not diluted like that, it's bound up in 84 page presentations that simultaneously serve to both justify the existence of the author, and scramble the mind of the recipient, likely a senior decision taker.
I don't think I'm describing anything that the execs haven't known for themselves in their hearts. But these people have been their insurance policy, their don't-go-to-jail card, and I suspect that they'd probably prefer to keep them in place if they could. But after CV19 the world is going to be a very different place, one where they will be under immense pressure to cut costs, and the traditional approach of everyone finding 10% just isn't going to be enough. They're going to have to be radical, and they now know the uncomfortable truth that they employ lots of people that they don't really need.
So my prediction is that we're going to see huge swathes of redundancies in banking, but not from the sources of headcount reductions over the last decade like branches and call centres, but from the functions that have been growth areas in recent times - risk, chief operating office, transformation and related functions. (We'll also see branches stay at their current levels of service, and call centre numbers shrunk further, as everything goes online, but that's for another day).
And why would banking be any different from other industries dominated by large firms? It may have a greater risk management component than elsewhere, but my strong suspicion is that many sizeable operations will have been shocked at just how few people it takes to keep the show on the road. Not everyone with a non-job will be fired; I'm sure some will be transferred to more productive roles, but plenty will be shown the door. So while journalists and business writers are speculating on the long term possibilities of working from the home, the impact that will have on organisational culture, and the usage and rental yields of commercial property and so on, I sense that the real story might be an entirely different one - the fact that the virus has illustrated very starkly that there's a vast number of people being employed on very comfortable salaries (I'm talking in the £40k - £80k range, and more in London), who just don't need to be. Stand by for lots of middle class unemployment.
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