Big banks like to stick together on major policy decisions. But as Wall Street grapples with heading back-to-work, a rare chasm is growing between the finance giants.
The implications of these choices, and the resulting stratification of policies will likely ripple through the world of finance and out to Main Street in the coming months.
Citigroup’s chief executive Jane Fraser announced in March 2021 that the majority of the company’s 210,000 employees will be allowed to go hybrid with three days in the office and two days at home each week. UBS made similar plans last month with the launch of their Virtual Worker Framework that will allow some US employees to work 100% remotely.
Goldman Sachs, Bank of America and Morgan Stanley are taking hardline approaches, requiring employees to come into the office five days a week.
This shift toward flexibility on Wall Street comes as the industry faces a new competitive recruiting landscape – Big Tech and cryptocurrency jobs offer recent graduates big salaries, big perks, and fewer hours in the office. Banks responded by dolling out higher base salaries and bonuses.
But money isn’t always enough. A January study by MIT’s Sloan Management Review found that flexibility on remote work arrangements was 150% more predictive of high employee retention rates than compensation levels.
Banks like Citi are responding by offering Zoom-free Fridays, Citi Reset Day, an annual firmwide holiday, and hybrid work for those who want it.
Tom Naratil, President of UBS Americas, said his program will “appeal to a more diverse pool of applicants and increase employee retention,” giving the bank a competitive advantage in an increasingly competitive landscape. “We recognize the world has changed and we continue to adapt so that we can deliver the best for our clients and our people,” he said.
Some banks don’t agree with that stance. They’re betting that hybrid work is a pandemic-era flash in the pan.
“Bringing our employees safely back to the office is core to our apprenticeship culture and client-centric business,” said Andrea Williams, Goldman Sachs global head of media relations. “What’s clear through the process is that we are better together than apart, especially as an employer of choice for those in the beginning stage of their career.”
About 75% of Goldman Sachs staff is a Millennial or Gen-Zer.
So far, Goldman’s bet is paying off. The bank’s summer internship program saw a record 236,000 applicants in 2022, a 17% increase from 2021 and 202,000 full-time first-year applicants, a 27% increase year-over-year.
Goldman was one of the only firms to hold an in-person program for summer interns in 2021 and will do the same this year.
Morgan Stanley CEO James Gorman said during a keynote speech at the Australian Financial Review Business Summit in Sydney last month that it’s unrealistic to expect to excel at a job without being physically present.
“A lot of us have gone into the mindset of ‘Jobland’,” Gorman said. “Well if you’re in ‘Careerland,’ you need to be around other people to learn from them a bit.”
We’re in the middle of a restarting phenomenon, said Steven Davis, a professor at the University of Chicago Booth School of Business. The nature of work will become stratified – companies will decide where they stand on hybrid work and workers will sort themselves based on their own preferences.
A lack of diversity
The problem is that older workers, women, and workers of color have expressed stronger preferences to work from home or in a hybrid setup. That means companies that require their employees to commute into the office full time may end up lacking diversity on their teams.
A recent Axios-Harris Poll survey found that 52% of women say they enjoy working remotely and would like to do so in the long term, compared with 41% of men. About 15% of women say working in person allows for more camaraderie among colleagues, compared with 25% of men, and 52% of Black workers and 50% of women say working from home is better than working in the office when it comes to advancing in their careers, compared with 42% of men.
A shortage of child care workers in the United States is also weighing on women who are unable to return find the affordable caretakers they need to enable them to return to the office, said Ileen DeVault, professor of labor history at the School of Industrial and Labor Relations at Cornell University,
“If you let everybody choose what they want to do, it looks like women and minority group members will spend less time on the worksite than men and white employees,” said Davis. “People seem to like the workplace less when they are in a distinct minority. And it’s not just about gender, race and ethnicity. It also shows up with respect to political persuasion, and religious beliefs.”
This could make the workplace “an even less minority-friendly place.” he said. “Individual worksites might become more homogeneous.”
Just 5% of Goldman Sachs managing director class are Black, and 30% of the class are women, CEO David Solomon reported in his 2021 annual report and shareholder letter. The class is the most diverse to date but “we still have much work to do to build and retain a pipeline of diverse leadership,” he said, noting that the company was hiring additional diversity recruiters and expanding sponsorship and development programs for diverse talent.
The bottom line
Wall Street has long been considered a pacesetter for US policy and corporate culture at large, and it appears that Washington is echoing the calls of David Solomon, James Gorman, and Bank of America CEO Brian Moynihan.
“Because of the progress we’ve made fighting Covid, Americans can not only get back to work, but they can go to the office and safely fill our great downtown cities again,” President Joe Biden announced in his State of the Union address.
But a growing number of Big Tech companies including Facebook, Twitter and Slack have already made remote work their permanent norm. Apple and Google are embracing hybrid models, for now. Management consulting company McKinsey has called this change a once in a generation reimagining of work, but warned that it would take years of experimentation to find the right calibration.
The proof, said Davis of the Booth school, is in the pudding (or in this case, the patents). The share of new patent applications that advance work from home technologies has been following an upward trajectory since the onset of the pandemic.
That improved technology will be a force in supporting “a new equilibrium where many organizations do have hybrid work as an important feature of their working arrangements,” he said.
Correction: An earlier version of this story incorrectly stated when Citi announced its hybrid plan. The announcement was made in March 2021.