The Millennial Conundrum: Who Wants To Work For Big Business Anymore?
Staff turnover is a problem for almost every company—finding and retaining talent is a headache that never ends, whether you’re a large corporation or a small-scale startup. Of late, however, it seems you can’t turn a corner without meeting a banker who’s paid their dues at a multinational conglomerate, and is taking that training and their savings to head for greener pastures—a startup.
It used to take a real leap of faith to embrace the risk associated with startup life, but the stigma surrounding that jump has long abated. Google “leaving corporate job for startup” and you’ll find article upon article detailing considerations aplenty. But with entrepreneurial culture flourishing, the term “startup” doesn’t have to mean three romantics in a basement working for peanuts and a dream—it can also mean fancy co-working spaces, plenty of venture-capital cash to burn and a team of pedigreed strategic advisors providing much-needed endorsement and connections.
If you put it that way, why would anyone want to stay at a big corporation, dealing with the inflexibility, bureaucracy and ladder-climbing needed to make it to the top?
Loretta Chan, a partner with Wellesley, a top-ranked executive-search firm that works primarily in the finance space, says this is an issue that's plaguing banks nowadays. “There’s definitely a trend towards people leaving the banking industry to go join startups. Because of this, the pool of talent has shrunk—and with that, it’s become harder to bring in strong talent,” she says.
You’d imagine that Bulge Bracket banks—the big guys— would be concerned. But in many cases, it’s to the contrary, particularly when it comes to well-compensated managers at a senior level. “Banks are facing cost restraints due to global issues, and the best way for them to do that is to ‘juniorise’. There’s a feel that specific roles outside of very senior management can be filled with junior staff instead, particularly when it comes to execution.
"Compensation has moved in a downward trend over the last five years. So senior staff are going somewhere they can have higher returns—both intellectually and financially"
“A lot of times banks are allowing people at a senior level to leave. Senior management is leaving because there are intriguing opportunities out there and they see that the banking industry is on a downwards trend and they are no longer making the seven- or eight-digit salaries that they used to, because compensation has moved in a downward trend over the last five years. So they are going somewhere they can have higher returns—both intellectually and financially.
“People are raising their hands to take redundancy packages and join startup businesses, and banks are supportive of that, because these people make too much money, or they are in roles that are management and not billers, so they’re no longer needed. Or their roles can be replaced by two juniors instead.”
That means, in turn, that there is increased pressure to retain talent with less experience. “At the more junior level, banks are wondering how to retain staff,” she says. “A lot of people are coming in as analysts post university, the banks are training them up, and after two years they leave the industry—and that’s a waste of their two years of resources.”
One mechanism is a deferral of bonus payouts. “At a senior level, we’ve seen firms defer 50 to 80 percent of bonuses over three to five years, whereas a junior might only have 30 percent deferred. I can’t say if that is a strategy to retain staff, but 10 years ago, maybe only 10 percent of a bonus would be deferred, 20 percent, tops,” Chan says.
“What’s also interesting is if you look at compensation trends over the last few years, senior staff have been taking a larger hit, because the banks have to keep paying juniors to retain them. Looking at bonus numbers for this year that have just been released, at one bank seniors are down 10 to 15 percent in total compensation, but juniors are up five to 10 percent. Mind you, this isn’t all junior staff—these are the ones that they want to keep. They’re paying them well, and they’re taking from the pool once used to pay senior staff.”
Are more proactive measures needed? “Perhaps, but this ‘startup trend’, it’s been going on for a few years already, at least, and what we’re now seeing is that some of these startups have failed, so we’re now seeing a return of some of these candidates.”
"If you've been in banking for a very short time and you left, then you don't have that skill set to come back"
Their desirability depends on their seniority when leaving, as well as what type of business they left to join—but the issue is so commonplace now that there really is no mark of dishonour attached to these prodigal sons and daughters. “At the end of the day, it depends on their calibre, and in what manner they left the business, and why. Some are leaving to join startups that are irrelevant, say, a pet-technology initiative. And others are joining startups that deal in cryptocurrency, for example, which is still related, and the return for these people might be easier.
“But there’s not a stigma, definitely. There’s no ‘We’re not welcoming you to come back.’ But it’s case by case, and it comes down to how fine your tool set is. If you’ve been in banking for a very short time and you left, then you don’t have that skill set to come back. But if you’re well-trained, you can still leverage off that—though there’s definitely a difference between seniors who are just managers and seniors who are revenue drivers.”