24th June 2024

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Business Industry and Financial

Top investment banks battle over hybrid working demands: ‘People are just choosing to resign’

When Citigroup asked employees to return to the office at least three days a week in March 2021, it was the first major bank to set out its stall on hybrid working.

The measure, announced by chief executive Jane Fraser as part of a series of initiatives a year into the pandemic that included ‘Zoom-free Fridays’, has stuck at the Wall Street bank even as its rivals have taken a tougher line.

“We’ve seen a lot of good people leave this industry because they were unable to balance the demands of office-based work with some of their personal commitments,” James Bardrick, UK chief executive at Citigroup told Financial News.

“Hybrid working helps with this and we hear a lot of potential recruits ask about this flexibility,” he added. “Our approach is flexible relative to many of our US peers, and this can be a differentiating factor when we look to hire.”

Three years on from the onset of the Covid-19 pandemic and banks remain divided on the future of work. Citi’s three-day-a-week policy contrasts with most of its major Wall Street peers, which have beaten the drum of in-office collaboration since lockdown restrictions were lifted.

‘It feels like micromanaging’

JPMorgan’s demand for managing directors to come into the office five days a week from April called time on its hybrid policy for senior staff and set the tone for those further down the career ladder.

“People aren’t exactly jumping up and down at the policy,” said one senior dealmaker at the bank. “It feels like micromanaging — senior bankers who have been around for a long time, working on holidays and weekends, are now being told how often to come in. Most bankers had an informal arrangement of four days a week anyway and that worked well.”

Gripes about JPMorgan’s new policy were relatively widespread on its internal message board, Reuters reported, with some staff describing it as “tone deaf”.

But the Wall Street giant is far from alone in unwinding its working-from-home arrangements. Goldman Sachs and Bank of America have long required five-day-a-week office attendance, while fund manager BlackRock ordered its 20,000-strong workforce back four days a week in May, saying it was “evolving” a lighter policy in place since November 2021, FN revealed.

“The best experience for our people is to be in the building working with colleagues in teams, and this means being in the office,” said Anthony Gutman, co-head of investment banking for Europe, the Middle East and Africa at Goldman Sachs. “The best way to learn, to grow and service your clients is to be physically here.”

A crackdown from banks

Many employees have simply been ignoring mandates to return to the office, according to analysis released in November from the not-for-profit group Women in Banking and Finance (WIBF) and the London School of Economics, which was supported by financial institutions.

But banks are cracking down. JPMorgan’s memo warned of “corrective action” for employees who do not follow the policy, with bank insiders saying that extreme cases could lead to dismissal, but is more likely to comprise some stern words from managers. BNY Mellon also said staff could face “corrective action” for not adhering to a three-day-a-week policy unveiled in April.

JPMorgan declined to comment.

“When we wrote the report in November, employees were simply ignoring banks’ mandates to be in the office in a tight labour market where they had the upper hand,” said Grace Lordan, founding director of the Inclusion Initiative at the LSE, who wrote the research.

“This has now swung back in favour of employers, which are upping their office return mandates even in the face of staff resistance,” she added.

Many financial services professionals now face a stark choice of abiding by banks’ in-office demands, or looking for a new job.

Jamie Dimon, JPMorgan’s chief executive who has long espoused the importance of working together in the office, told journalists during its first quarter results that employees can choose, but face consequences.

“We completely understand that some people don’t want to do it — they can not do it elsewhere,” he said.

Adrian Crawford, a partner in the employment practice who works with financial services firms at lawyers Kingsley Napley, said that staff pushing for more time working from home face few choices.

“The one claim employees can bring against employers is a breach of contract, but most contracts were designed before Covid and expect duties to be performed in the office except in special situations,” he said. “Instead, people are just choosing to resign.”

Ivor Adair, a partner in the employment practice at lawyers Fox & Partners, said that staff should check for any changes to their contracts during the pandemic.

“How the issue is handled if a conflict arises may also be relevant if trust and confidence is to be retained and constructive unfair dismissal claims avoided,” he said.

European banks remain flexible

While US banks have taken a hard line on office work, European lenders have stayed more flexible. Deutsche Bank’s dealmakers remain on a three-days-a-week requirement in the office, as do those at HSBC, while Barclays told bankers to be in four days from September. BNP Paribas asked staff to come in 2.5 days a week, but requested more time in the office for front-line staff earlier this year, FN reported.

At independent investment bank Lazard, dealmakers are required to spend more than 50% of their time either in the office or with clients, but this varies by location.

Deutsche is cutting its office space by 40% as a result of its hybrid working strategy, executives said at its annual meeting in May. Goldman Sachs, meanwhile, only moved into its new UK headquarters in Plumtree Court in October 2019.

Citi is also in the midst of a multi-million pound redesign of its 42-storey Canary Wharf UK headquarters that will include a winter garden, more open-plan spaces and areas for “well-being”.

But employees have been slow to return. Over the past year, there has been just a 10% increase in occupier requirements within the City of London, according to real estate adviser, CBRE.

However, Simon Brown, head of UK office research at CBRE, said that it has been “relatively common” for firms looking for new office space to increase the size of their requirements as staff attendance has picked up.

“The number of occupiers shrinking is significantly outweighed by the number of occupiers growing,” he said.

Philip Pearce, chairman of Savills’ central London agency team, added that of the banks currently looking for new office space, 23% were looking to “reduce their footprint”. Banks account for 15% of office space in the city with around 1.6m square feet, behind only law firms, which occupy 1.9m square feet.

“With more banks announcing return to work mandates, we anticipate that these trends will continue to entrench in the coming months as they increase their requirements for offices,” he said.

Bardrick said that the bank believes “having most of us together in the office most of the time is right — for culture, creativity, engagement, performance and our apprenticeship model”.

“But we also don’t want rigid face time in the office for its own sake,” he added. “So up to two days at home works for many of our employees and offers them work-life flexibility while also maintaining our policy of being together most of the time. The two are consistent with each other.”

Meanwhile, Goldman’s Gutman said that its requirement to work in the office “should not be misconstrued as inflexibility”.

“People need to have the ability to handle other priorities in their lives without feeling they are underperforming in their day job,” he said. “We believe that’s what people want, it’s not a face-time mentality or clocking in or out at a particular time, but we’ve shown more discretion around building flexibility into the way they work. That is more effective for our people and our clients than saying something like ‘you can work from home on a Monday’.”

Banks’ tougher stance on remote working comes as the World Health Organization declared the end to Covid-19 as a global health emergency on 5 May.

Firms have moved from offering incentives like free pizza, food trucks and social drinks to spelling out exactly what is required from employees and the consequences of refusing to comply with policies.

An ‘aberration’

JPMorgan and Goldman Sachs have largely toed a consistent line on hybrid working, which has come from the top. Goldman CEO David Solomon’s comments that working from home was an “aberration that we’re going to correct as quickly as possible” came less than a year into the pandemic, while JPMorgan boss Jamie Dimon has repeatedly said that it “doesn’t work” and reduces employee productivity.

Meanwhile, Barclays, HSBC and Deutsche Bank executives have long flagged hybrid working as an opportunity to reduce real estate costs.

“It wasn’t a knee-jerk reaction, it was an informed strategy to include flexibility in the way we work,” said Citi’s Bardrick. “This is it for the foreseeable future. We’ve maintained our position since we launched it globally in 2022 and are sticking with it.”

The LSE’s research suggests that there’s no drop in productivity from the increase in remote working among financial sector employees, and Lordan said that banks are making decisions based on “CEO preference”.

“Both men and women in banking want more flexibility on how they work, and there’s also a disconnect between senior and junior employees, with the younger generation really valuing more autonomy,” she said.

“Ultimately, overly-strict mandates on office work may backfire — both on banks’ ability to retain talent and diversity, with talented individuals simply choosing to work for organisations that offer more flexibility,” Lordan added.

To contact the author of this story with feedback or news, email Paul Clarke