Published on April 12, 2016 by Ankit Soni
A job as an analyst/associate with an investment bank (IB) was considered a stepping stone to a successful career with large pay checks and, above all, respect and admiration from friends and family.
However, things have been changing rapidly and headlines in the recent years in some of the leading financial dailies is a testament to this change.
In previous decades, an IB’s resourcing model was fairly straight forward. Typically, a bank would use the allure of a prestigious and lucrative career to make bulk hires from top graduate and business schools. The bank would then invest time and resources to train these new joinees, putting them through a rigorous work schedule, with the hope that some will stay on and grow to take on more responsibility and senior positions within the firm. Occasionally, in a downturn, banks would go on a cost-cutting drive with mass layoffs, but this was never really a concern as the firms always had access to the next breed of graduates and MBAs who were equally enthusiastic to join.
The loss of institutional knowledge and inefficiencies caused due to this high churn was considered acceptable and very much a part of doing business.
Human capital is core to any IB and the current approach is unlikely to take them to the next level, especially in this new era characterized by intense competition for talent from technology firms and startups. These days, graduates and junior bankers have a large number of career options to choose from. Not only are they equally remunerative, but also offer higher job satisfaction and sustainable work-life balance, which is increasingly becoming an important deciding factor. The short-term outlook of the banks, with frequent hiring and firing en-masse, does not help their cause either.
With growing cost pressures and limited appeal, banks will increasingly have to do more with less. IBs will have to think long term and make efforts to:
Investment Banks will have to think long term and make efforts to:
Build leaner teams that are capable of delivering higher output with a lower cost base; this would help them weather increasingly shorter market cycles with limited ramp-up and downsizing while accruing additional savings on secondary costs (HR, Admin, etc.) associated with these activities
Adopt a more focused and selective hiring strategy by looking for fewer but promising candidates, who banks believe can be groomed to grow and drive the business in the future
Design and implement effective employee retention strategies for junior bankers
Inculcate a sustainable work-life balance and promote better job satisfaction through early responsibility and involvement in higher value-add tasks, complemented with adequate compensation
Working with smaller but more committed teams would require IBs to adapt their operating model. While some of the banks are better prepared to meet these challenges, many would need to reassess their current efforts and make a fresh impetus with respect to:
Standardization: Standardizing, streamlining and documentation of various tasks being undertaken across the firm’s offices can help the banks realize significant time savings and efficiency gains. Furthermore, maintaining well-documented and accessible archives for work performed in the past also helps mitigate the potential risks of loss of institutional knowledge and process breakdown that typically occurs with the departure of a large number of people in a given team.
Centralization: Using centralized support teams to complement front-end bankers across various offices is another strategy that could yield rich dividends for the banks. Centralization helps the firm avoid potential duplication and cross-utilize intelligence and analysis more effectively. Utilizing these central teams for standard and time intensive tasks also helps the bank involve their employees in higher value-add activities, resulting in job satisfaction and better retention rates.
Automation: Automating repetitive and basic tasks is the third way in which banks have begun exploring ways to reduce costs and gain efficiencies. While still in early stages, many firms have embarked on a detailed review of their IBD operations, either independently or with third-party service providers with a view to automate tasks, wherever possible.
Leveraging the benefits of these initiatives could help the banks move towards a leaner operating model. Complementing this with a focus on retaining and grooming selective high performers through better job satisfaction, work-life balance and fast-track career growth could help them achieve higher returns and sustainable growth in the long term.
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About the Author
Ankit Soni has been with Acuity Knowledge Partners’ Investment Banking (IB) vertical for over three years. He is responsible for engagement management and business development activities for investment banking clients and has been involved in transitioning and building up IB teams for clients based in the US and Europe.
Previously, Ankit was based in London, where we worked with CDC as a part of their Asia Funds team. Prior to that, he worked in Nomura’s investment banking division. He has completed his MSc in Management from Imperial College Business School, London, and his Bachelor in Mechanical Engineering from Manipal Institute of Technology, India.
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