On the face of it, remote working has worked pretty well so far. Technology has made it possible for traders to handle record volumes and generate unprecedented profits from makeshift offices at home. Productive client meetings can be held on Zoom, and dealmaking has continued to happen across capital markets and more recently in M&A. The pandemic seems to have taught businesses that not everybody needs to be in the workplace at all times.
But office life turned on its head still threatens to complicate business. Goldman Sachs Group Inc.’s David Solomon recently encouraged traders to return to their headquarters, citing the damage to company culture that would occur if things didn’t get back to normal soon. UBS Group AG’s chief executive officer, Sergio Ermotti, was even more explicit: “It’s especially difficult for banks to create and sustain cohesiveness and a culture when employees stay at home. A normal level of people working from home should be about 20% to 30%.”
Most banks would be lucky to see 20% of staff at their desks right now. In London, firms are now trying to find ways of getting more people back to the office, after Boris Johnson’s government backtracked on its own guidance this week and advised people to work from home. Amid a surge in infections, the world’s biggest financial services center may be facing another six months of restrictions.
There are reasons to be skeptical about banking executives’ motivations for wanting people in HQ. They prefer doing business in city-center landmarks that house thousands of employees. They’re also financially at risk: Some of their largest exposures are to commercial real estate.
Still, the banking titans have a point. Across their businesses, from mergers to wealth management, they’re having a hard time luring new clients over Zoom. More important still, being away from the office is bound to have an impact on how employees behave. The informal norms modeled by managers and reinforced through social interactions are what shape a culture, not the rules and regulations written in company handbooks.
A negative reaction from a superior or a manager paying special attention to you sends an important message that’s simply harder to receive when you’re not in close proximity. And no number of video calls can replace what young employees learn from colleagues simply by observing how they behave.
This is also the time of year when thousands of graduates — banks’ biggest source of annual employee intake — join Wall Street. The late-night get-togethers, the team training sessions and the endless hours preparing pitch books are what equips new recruits to understand how their organizations work. BlackRock Inc. CEO Larry Fink recently said he’s particularly concerned about the 400 new young hires who joined in July and have never been to the office.
It’s not just those fresh out of college who will struggle either. Even a senior banker starting anew will find it much harder to understand how the company functions when joining from home. Annual staff turnover and the already challenging task of bringing new hires up to speed will soon get worse. Mentoring will need to become a key performance target for managers.
And if Jamie Dimon of JPMorgan Chase & Co. is worried about the “alienation” employees feel while working from home, some of his competitors should be even more so. Daniel Beunza, author of “Taking the Floor,” a book on morals and management on the trading floor, says that during the pandemic he has seen an even greater erosion of corporate identity among employees of lower-tier banks.
“The informal oversight, the informal cultural practices you put in place are built on preexisting relationships,” Megan Butler, director of supervision at Britain’s Financial Conduct Authority warned this week. “The longer working from home goes on, the more they are at risk of breaking down.”
Even though this year saw some record-setting trading profits, it will be difficult for banks to reward employees with juicy bonuses. Regulators have urged restraint in compensation, and ballooning provisions for bad loans are eroding banks’ profits. With the carrot shriveled, keeping workforces aligned to a corporate ethos of good conduct will be much harder.
Culture, as Henry Ford described it, means doing the right thing when no one is watching. Working from home is a headache banks could do without.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.
Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.
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