DealMakers - Q2 2020
Working from home, a new normal for investment banks?
by Gideon van der Schyff
With the COVID-19 pandemic resulting in lockdowns across the world, including lockdowns in the financial hubs such as London, New York and Johannesburg, working from home (WFH) has become essential to keep investment banks operational. More than three months into the South African lockdown, we, as investment bankers, have come to realise that it is indeed possible to WFH. Sure, Zoom calls and the like get interrupted by screaming kids and the neighbours’ barking dogs, but the work is still being done and the industry is still moving forward, but is WFH sustainable?
Gideon van der Schyff
Technology platforms such as Zoom, Microsoft Teams and Google Meets, accompanied by a stable internet connection, enable investment bankers to effortlessly carry on with their day-to-day business. Time no longer lost in traffic, airports and planes has meant more time online in front of our screens, and further efficiencies are inadvertently created by shorter lunch breaks and less time spent around the “water cooler”. Where an investor roadshow would traditionally have been scheduled to take place over a week, or two, more investors can now be reached in a much shorter timeframe. Decision makers can attend more meetings, and instead of jumping on a plane for one meeting, time can be spent more productively. But WFH has its drawbacks. One such drawback is the unavailability of a dedicated, fully equipped home office. With the couch or dinner table converting into your makeshift office, it is easy to find yourself not switching off and not “going home”. Instead you keep your laptop open, keep responding to emails and keep taking Microsoft Teams calls from colleagues and clients. Research has shown that maintaining a work/life balance when working from home is extremely difficult, and it is fair to say, even more so in the investment banking industry.
Technology has enabled us, and COVID-19 has forced us, to work from home so, yes, investment bankers can work from home, but there are social dynamics, key to keeping the industry alive and thriving, that cannot be replaced by technology, and which might not be worth sacrificing, even for the increased efficiencies and opportunity to save costs. Although not exhaustive, here follow some examples:
first impressions through a face-to-face meeting;
building relationships with clients while together on the road or around the negotiation table;
learning the tricks of the trade from colleagues in an open office environment;
younger team members’ exposure and mentoring;
being around and learning from experienced dealmakers on a full time basis, and not just on scheduled calls;
late nights in the office as part of a team that must meet a deadline; and
impromptu “off the ball” team chats that lead to new ideas and new solutions.
These social dynamics are key to the investment banking industry and cannot simply be replaced by technology, partly because communication is harder and less effective without physical cues and eye contact. Social dynamics are at the heart of the investment banking industry, and it is what enables investment banks to foster client relationships, provide innovative solutions through a collaborative and cohesive team effort and to train future investment bankers to ensure continuity.
Many tech companies have publicly stated that they will not return to the office anytime soon, with some even considering never returning to the office. Reasons given include the increased efficiency of staff WFH, cost savings of not having an expensive lease, lower travel budgets and lower employee costs as employees can live and work in less expensive areas/cities, justifying lower salaries. With the astronomical rise in tech-related jobs (and the salaries and benefits that go with them), investment banks are now required to compete head-on with these tech companies for the top graduates. Several international banks have acknowledged that they are losing top talent to tech firms as graduates get offered flexible working hours, and the option to WFH, along with competitive salaries.
WFH will most likely never be a viable full time and exclusive option for investment banks because of the unique and socially dynamic nature of the business. Nevertheless, the potential exists for the industry to use and embrace technology to offer more flexible options in future, to help attract and retain top talent and to extract some of the efficiencies that the lockdown and WFH has presented.
Van der Schyff is a Corporate Financier at PSG Capital.