Utilising workplace in financial services The automobile had existed for 74 years before Swede Nils Bohlin invented the seatbelt. In 1959 the Volvo employee patented his invention and flew to America to start selling it.
At a time when pilots were willing to put just about anything on to stay safe, but drivers baulked at the slightest discomfort, Volvo began marketing the seatbelt. It was a time of profound change in the automotive industry. Most car manufacturers, claiming cost considerations, were opposed to including seatbelts and safety innovations in their designs. Henry Ford II professed the industry would shut own completely if it had to make safety-related ‘unreasonable, arbitrary and technically unfeasible’ product changes. The US Government saw relying on self-regulation was futile and got squarely involved. Congress passed a law requiring that all cars comply with certain standards of safety and by 1968 seatbelts were a mandatory installation.
What followed the top-down change was a global industry shift: manufacturers began touting their safety features as a competitive advantage. Despite the push back and prevailing incorrect cost- benefit understanding, the shift happened quickly. Suddenly the marketing conversation wasn’t about having the fastest car but the safest car. Fifty years later and safety is still one of the biggest selling points in the automotive industry. What was initially viewed as a ridiculous, compliance tick-box became a significant market differentiator and, of course, a life-saver. As of 2009 over one million lives have been saved by the seatbelt.
The financial services (FS) sector is having its own ‘seat-belt’ moment, catalysed by the 2008 financial crash. Increased top-down regulation has forced the industry to evolve and think creatively about recruitment and future-proofing. The result is a FS sector with more modern values such as innovation, ethics and digital transformation. Areas that once might have seemed arbitrary are now essential.
One might have thought that these changes would be reflected in where people work. New spaces enabling a new approach. Yet we see a mixed bag. Leesman data shows that just over 1 in 2 employees in the sector are proud of their workplaces. Compared to the highest-performing workplaces measured, the Leesman+ group, at 81.2% agreement on Pride, that is shockingly low. Conversely, Productivity and Collaboration agreement sit 1% higher than the average workplace. So what is going on? There are a few contextual trends and data points which paint the picture more clearly: talent, digital change and customer centricity.
Talent troubles It is known that tech firms are plundering university departments of robotics and machine learning graduates, and other sectors are struggling to keep up. Speaking to a top US bank revealed the intensity in Manhattan: “Competitors are a few blocks away, so it is about staying relevant, but our workplaces are not that different. To the younger generations, learning and proximity to superiors is vital, rather than novelty aesthetics.” While one bank may be worried about their US neighbours, Morgan Stanley highlights the international competition in countries such as India, where the organisation’s campus is situated a stone’s throw from two US merchant banking
competitors. “It is very easy for the workforce to walk across the street and get another job,” a spokesperson says. “So we want to set ourselves apart. We want to have an edge in the war for talent.”
“It is very easy for the workforce to walk across the street and get another job, so we want to set ourselves apart. We want to have an edge in the war for talent.”
They’re not wrong; Leesman data dispels the millennials myth at its core. Across the database, the youngest employees report the highest Leesman Lmi scores. Complexity drives the correlation with the need for a variety of workspaces; with those successfully adopting Activity-based Working as those with the highest complexity scores. On average, those surveyed under 25 select 8.9 activities to be important to them (out of 21 possible), compared to 11.1 among those aged 45 – 54. So, it is somewhat unsurprising that they are satisfied.
Then there are the sub-sectors whose challenge is beyond talent retention and is on attraction. Federal Credit Unions, though a smaller group at just over 6,000 in the US, serving 45% of the economically active US population, struggle to compete for dynamic younger talent within the sector itself. For such legacy institutions, the need for digital transformation and customer centricity hinge even more on a relevant workforce. And the workplace is a significant business lever to improve talent attraction as competition stiffens.
Denis McGowan, Global Head of Real Estate at Standard Chartered Bank, explains the picture is more nuanced in attracting the best young talent: “The Bank’s competitors are now the non-banks, including payments companies and ecommerce. Starchy old banks are no longer the place to be. Due to many reasons, the employment contract, tech solutions, the ability to bring own devices to work are all pieces that make it an attractive place… workplace is a strategic advantage in the war for talent.” Certainly, the traditional hiring process for banks, mopping up MBA students, is going through a shake-up, including moving internal talent, behavioural profiling, increasing contractors and leveraging social media.
The tech sector has famously weaponized real estate in the war for talent, even though the jury is still out on the operational effectiveness of prioritising beer pumps and beanbags. Apple’s new headquarters are an example of how much value the sector places on workplace design: the building, shaped like an iPod dial, is larger than the Pentagon and cost around $5bn. Google’s new Zurich Sihlpost building on the doorstep of the traditional financial hub sends another clear message.
Stephen Elias, Head of Workplace Delivery at Citizen Bank, reiterates this as a future trend: “We are fiercely competing with other banks for talent in highly specialised roles. Space is not the only consideration for job seekers, but it is important.” Interestingly, he picks up on the Pride discrepancy shown in the Leesman data as something to leverage. “The litmus test I reference is would you take your family to see where you work. Chances are if you don’t like where you work, you won’t take them to see it.” Who doesn’t want to show their family around an Apple-esque office? Increasingly, bankers and traders are going to demand state-of-the-art offices to facilitate their work, if their current companies aren’t offering it they will go somewhere that does.
Linked closely to the talent challenge is digital disruption which is forcing the sector to change. FS organisations need to move from the old siloed approach, where separate teams manage their distinct tasks and deliver within their defined timeframe, to a new dynamic approach.
It’s time for the sector to hire, train and enable employees to utilise digital, use connectivity and navigate disintermediation and new data sources. McGowan stresses the need for workspace professionals to beresponding to this: “Tech is an iterative process. And space is becoming an iterative process. We need to be providing a myriad of spaces. And that means what we offer today is not what we offer tomorrow.”
Indeed, our research shows that Creative Thinking sits as the 9th most important activity within FS, yet only 52% are satisfied that it is being catered for. Interestingly, this is higher in importance than both the broader benchmark and the Leesman+ high performers. Knowledge sharing is fundamental to coping with change. McGowan believes there is something to be learned from how shared spaces generate communities. “The common thing in those new environments is the ‘community of interest’. Banks struggle – we provide space for ourselves but not a community for like-minded people.”
It might explain why agreement with ‘a sense of community’ has a 13% discrepancy between the FS sector and the Leesman+ high-performance group. Standard Chartered are acting on this, McGowan expands, “as the sector’s business model is moving to open source knowledge, faster and quicker…the role of workplace is to enable pace. Our new office space in Singapore has sprint and scrum spaces for tech development. It’s an enabler to get that idea out the door quicker and be more tailored to the customer. It’s a collaborative environment delivered at pace.”
“Knowledge sharing is fundamental to coping with change.”
According to McKinsey, legacy financial institutions will see profits decline 20%–60% by 2025 if they fail to evolve digitally. There is real pressure on developing an agile operating business model. Our top 10 US bank spoke of ‘waiting until we are in a different expense environment’ to invest too heavily in experience. Other sectors, understood to be more cash-rich or better capitalised, including technology, were seen not to face such pressure. So, for the financial sector it seems vital to allocate investment and resource in a very targeted way, rather than taking a broad-brush approach. Given the sector’s overall productivity hovers around 1% from the average workplace, but the internal and external mobility of the employees are between 9 – 10% less transient than the average workplace, it suggests there is an opportunity for marginal gains, accommodating agility as job roles change.
Elias believes the financial crash abetted the trend, “My sense is that many financial companies learned to do more with less which likely impacted workplace density in the end. The financial crisis led to steep job losses but eventually it meant banks had to ramp up their risk, compliance, analytics functions to meet the regulatory demands. One pertinent consequence of this is a ‘space lag’ – scaling down permanent staff and resourcing up on contractors based on projects and revenue. With the typical lease being ten years, but headcount changing dramatically within a 2 – 5-year period, property experts are left battling low utilisation rates, high occupancy cost and then a lack of space periodically. This cadence is unlikely to change with the increasing pace of the gig-economy, so real estate teams must adjust.
Despite the wider industry sentiments for a more agile environment, or as McGowen describes it, “an environment that responds to the task in hand at that point in time”, large banks are fighting fires from numerous angles. An explosion in the number of new entrants in the financial sector, each typically offering an innovative solution to a particular area of inefficiency marks a change from the banks of the 1990s that wanted to provide a full service rather than a niche one. Our research consistently points to work activity complexity providing the strongest marker of an employee’s workplace infrastructure needs. The more complex their activity profile, the wider the range of spaces required. This leads to a great variance in workplace experience as the Lmi for those with a highly complex activity profile ranges from as low as Lmi 56.2, for the least employees, to Lmi 73.4 for the most mobile. Which means there is a significant amount up for grabs.
“We are fiercely competing with other banks for talent in highly specialized roles.”
Our top 10 US bank interviewee spoke of the difficulty in measuring the efficacy of an agile workplace: “Financial pressure is the push factor and then effectiveness is the pull factor. The trouble with it is that it is the former that is easily measured. Inputs can be measured. Twenty-seven different lines of business that do different things in a different way.” Elias elaborated that banking “is a heavily regulated industry…that will limit our ability to get more progressive in some functional areas due to segregation needs and information sensitivity.” These obstacles need to be navigated and McGowen sees the urgency “getting innovative products out of the door quicker is enabled by an agile workplace.” It seems that is the point; accommodating this level of complexity and variance in task on a bespoke and scalable level will help the sector produce customer-centric outputs.
With the talent profile changing, the sector sitting firmly on average, and digital change putting pressure on the need to adapt, it will be interesting to see which workplaces excel in the future. With only 12% of the Leesman+ high-performance group comprised of FS firms, currently there is much room for improvement. What does remain clear is that there is a lot at stake. As McGowen highlights “environments need to respond to the task in hand at that point in time.” Former Volvo CEO Håkan Samuelsson proclaimed: “Our vision is that by 2020 no one should be killed or seriously injured in a new Volvo car.” The paradigm shift to safety has happened for the automotive sector, and they are capitalising on it. It is time for FS to pick up pace and respond to their own shift.