Wall Street CEOs Say Working From Home Isn’t Working – The Journal.

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Ryan Knutson: Despite almost all their employees working from home, Wall Street banks have been performing really well.

Commercial (multiple voices): The banks all are beating on the bottom line. Goldman is just a blowout. Jeez! They are number one in everything now with investment banking. They had a really amazing quarter. That does look like a blowout for shares of JP Morgan, widely regarded as best in breed jealousy.

David Benoit: Banks had a remarkable 2020, really.

Ryan Knutson: That’s our colleague David Benoit, who covers banking.

David Benoit: The stock market went crazy, which makes them a lot of money. Companies desperately needed cash, which meant they were selling bonds and stock. There was more cash flowing into the banks than ever, and we essentially saw record revenues.

Ryan Knutson: Now that vaccines are readily available, some bank CEOs are requiring workers to return to the office full time ASAP.

David Benoit: The Wall Street banks are demanding their people be back. Some of them are back in person already. Some of them are coming back in September, but it’s really kind of not the, « Sure, you can always be flexible and work from home. »

Ryan Knutson: While a lot of white collar industries are planning for a hybrid of home and office work, the CEOs of some of Wall Street’s biggest banks are clear, working from home is over.

David Benoit: The CEO of Goldman Sachs called it an aberration. The last year was an aberration, working from home.

Ryan Knutson: The CEO of JP Morgan?

Jamie Dimon, CEO of JP Morgan: It does not work for younger people. It doesn’t work for those who want to hustle. It doesn’t work in terms of spontaneous idea generation.

Interviewer of Jamie Dimon: How does it work for your culture?

Jamie Dimon, CEO of JP Morgan: It doesn’t work for culture.

Ryan Knutson: Morgan Stanley.

James Gorman, CEO of Morgan Stanley: At Labor Day, I’ll be very disappointed if people haven’t found their way into the office.
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Ryan Knutson: Welcome to The Journal. Our show about money, business and power. I’m Ryan Knutson. It’s Wednesday, July 21st.
Coming up on the show: Some of the Wall Street’s biggest banks are rejecting work from home. Even if it’s worked so far.
First of all, why should we care what banks are doing?

David Benoit: Because we are the Wall Street Journal, right?

Ryan Knutson: It is Wall Street that’s in the name. That’s true.

David Benoit: They set the tone for a lot of the businesses they work with. It’s their clients. It’s the Amazons of the world. It’s the Walmart’s of the world; all these people. They deal with them all the time and they rely on them for advice. What they’re doing internally, is something that matters. Firms across the country are going to take their cues from what these guys are doing and how they’re deciding to work.

Ryan Knutson: David says that after the pandemic began, bankers adjusted pretty well to working from home.

David Benoit: We spent a lot of time last March and April trying to find out if everything was working smoothly. If trading was working, if deals were getting done, but the banks managed it pretty well. What they learned was, hey, you know what? I don’t have to be on a plane. I can see clients that whole time. I can sit in front of a computer and a Zoom screen and see clients starting in Hong Kong very early into my morning and work straight through to U.S. West Coast time, have meeting after meeting, after meeting.

Ryan Knutson: A lot of bankers use the pandemic to transition to new ways of living.

David Benoit: I think a lot of people on Wall Street fled New York last year, for sure. We saw a lot of people move to Florida. We saw a lot of people go to their vacation homes. It was always entertaining to talk to sources on Wall Street and find out where exactly in the world they were at that very moment, because it was almost never in New York City.

Ryan Knutson: Working remotely wasn’t working for everyone. For entry level workers who were still learning the ropes, it was really hard.

David Benoit: Some of them started in the pandemic and never met their bosses face to face. Some of them were working crazy long hours because of how busy it was. It meant there was so much extra work. There were stories about Goldman Sachs analysts sort of revolting publicly, which almost never happens.

Goldman Quote: Junior analysts at Goldman have complained about a crushing workload. Analysts are quoted as saying, « My body physically hurts all the time, and mentally I’m in a really dark place. I can’t sleep anymore because my anxiety levels are through the roof. »

David Benoit: We talked to a lot of young people. There are stories about some of these kids that are fresh out of college, are living with their parents because it’s the only place to be. Their parents are like, « What are you doing for a living working until 2:00 AM all the time? » It was a pretty brutal existence.

Ryan Knutson: Goldman said it took the concern seriously, hiring more staff and protecting time off like Saturdays. Long and grueling hours have always been part of Wall Street’s work culture. David says that for a lot of young staffers working from home made it worse.

David Benoit: You didn’t have that culture of being in the office with people suffering the same thing. You didn’t have those after work drinks or extracurricular activities that kept you bonded. You have a computer screen and faces that you don’t really know.

Ryan Knutson: James Gorman, the CEO of Morgan Stanley said at an investor conference recently that this is a big reason why he’d like his employees back in the office full-time.

James Gorman, CEO of Morgan Stanley: Make no mistake about it. We do our work inside Morgan Stanley offices. That’s where we teach. That’s where our interns learn. That’s how we develop people. That’s where you build all the soft cues that go with having a successful career that aren’t just about Zoom presentations.

David Benoit: Young people are a big reason why even the top executives say they need to be back in the office on Wall Street, because the way to learn and to train people, especially young bankers, is to be face to face and next to each other. Learning by osmosis is what happens on Wall Street. They all talk about bringing in the young workers and quote unquote, the apprenticeship model of Wall Street.

Ryan Knutson: Another downside to working from home was that bankers struggled to make deals with new clients.

David Benoit: What we heard from people was, look, last year was a big year for deals. They did a lot of transactions, but you only got hired if you already really knew the client, right? Your client would talk to you on Zoom if you already knew them. You would talk to your aunt or your mom on Zoom, but you didn’t necessarily make new friends over Zoom in the last year. It was sort of that same way for investment bankers. They needed to already have a good client in order to get hired last year. Whereas, the only way to get a new client is to go visit them in person.

Ryan Knutson: Bank executives say that even though their financial performance was strong, there were signs that people didn’t always work as hard while they were home.

David Benoit: I know that the bank spent a lot of time tracking their people. We would hear anecdotally, productivity was down, especially on Fridays and especially Friday afternoons.

Ryan Knutson: Goldman Sachs brought all its employees back in June. JP Morgan did it in early July and Morgan Stanley wants everyone back in September. The banks say they’re taking steps to ensure the return is done safely, and that they’re keeping an eye on the Delta variant, which has caused other companies to delay reopening.

James Gorman, CEO of Morgan Stanley: If you can go to a restaurant in New York City, you can come into the office and we want you in the office.

Ryan Knutson: Gorman, Morgan Stanley CEO, said the company would give employees some flexibility, but not too much.

James Gorman, CEO of Morgan Stanley: There’ll be more flexibility because we’ve learned that we can function with a little more flexibility. That doesn’t mean, hey, it’s Monday, Wednesday, Friday and I’m in Florida. If you want to get paid New York rates, you work in New York. None of this, I’m in Colorado, I’m working in New York and getting paid like I’m sitting in New York City. Sorry, that doesn’t work.

Ryan Knutson: Being in the office is only half the battle. Many CEOs are also pushing their bankers to travel more.

David Benoit: The way to win a client or to win a big deal, which comes with several million dollars in fees, is to show up in person. David Solomon at Goldman is the one who sort of kicked this off shortly after April. We understand he started telling his bankers, « Look, you’re vaccinated, get on a plane and go see people, and I want you to be first. I want you to be the first person, the first banker, our CEO clients see. »
Then Jamie Dimon realized that Goldman’s bankers were out there. It seems like he heard that his team lost a deal because they didn’t get on a plane. He said, « Get on a plane. » We understand he made some comment about, we’ve got several private jets over here. There’s no excuse for you not to go see a client.

Ryan Knutson: Not all bankers are eager to get back on the road. How they’re being encouraged? That’s after the break.
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For many Wall Street employees, work from home was working, but at a recent Wall Street Journal conference, Jamie Dimon, the head of JP Morgan, expressed a different view.

Jamie Dimon, CEO of JP Morgan: People don’t like commuting, but so what.

Interviewer of Jamie Dimon: You’re not getting any blow back on that really internally.

Jamie Dimon, CEO of JP Morgan: We are, but that’s life. It’s got to work for the clients. It’s not about whether it works for me and I have to compete.

Ryan Knutson: How are banks like JP Morgan trying to incentivize workers to get back out there and go see clients?

David Benoit: At JP Morgan, they’re head of North America deals… in there, they have a weekly meeting of all their deal makers, where they talk about what they’re working on. He said, « Look, we need to get out there first. So I’m going to Institute a contest and we’re going to award points for people and I’m going to track it. If you get a CEO to go out to dinner or go out to lunch or have a beer or something, you get ten points. If you get to go to a board meeting in person, you get seven points. If you see the CEO just in his office, you got five, and sort of down a few more levels. We’re going to run it through June. We’re going to see who gets the most points for the stunning prize of having dinner with me and our boss. »

Ryan Knutson: Hold on, hold on a second. So the prize for getting the most meetings is another meeting?

David Benoit: Yes. It is a dinner with you and three other bankers. It wasn’t even just a solo dinner.

Ryan Knutson: Does JP Morgan feel like this contest was a success in getting more people to have more meetings?

David Benoit: Yes. We were told that they had more than a thousand meetings in June, which to be honest, I have no idea how that stacks up with any other months.

Ryan Knutson: It sounds like a lot.

David Benoit: It sounds like a lot of meetings, right? Especially in a month where a lot of people are still sort of tiptoeing out of lockdown. They believe they were successful. They also believe that a lot of those times they claim they were told, « Hey, we were first. We were the first bank to see you. » So, in their world, that seems to be racking up wins.

Ryan Knutson: Is there a chance that any of this push to bring workers back to the office, could backfire for some of these banks, that employees may either revolt internally or simply be driven away to other industries?

David Benoit: I think there’s definitely a chance that they lose some staff on this, including high-level staff. There are plenty of high level bankers who were sitting in the Hamptons all year and said, « What are you talking about? I’ve done my job. I’ve brought you in plenty of the deals. I brought in fees. There’s no reason for me to be in the office all the time just to sit there. »

Ryan Knutson: That’s a sentiment that the competition wants to capitalize on. For instance, Citigroup has not required its employees to be in the office every day, and it’s touting that policy when recruiting.

David Benoit: Citigroup is actively saying, we think that our flexibility is going to be a recruiting tool. We’re going to go out there and get people. The people who are already on the fence about staying in banking after a few years and maybe want to be in technology or private equity, other places that are being more flexible, are probably going to leave more. I don’t think that’s something that Goldman and JP Morgan would refute. They’re aware that that’s going to happen. They just will take that trade.

Ryan Knutson: If this doesn’t work out and they return to the office full time and people start to revolt, do you think that could have a big impact on the rest of Corporate America?

David Benoit: If working for a bank becomes a less sexy job or a less flexible job, you’ve actually already seen this for a few years. The banks have been fighting with the tech world, right? Who wants to work for JP Morgan when you can work for Facebook? Then that spread is going to widen with flexibility of working from home and not working from home. We could see that ripple through the financial world for sure. That’s why I think this next year is going to be really interesting on Wall Street because if we see talent flood to Citi or other banks where they’re being more flexible, it’s possible that this experiment of the next year does set the next 10 years of working on Wall Street. How people work will be determined by who wins this experiment.
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Ryan Knutson: That’s all for today, Wednesday, July 21st. The Journal is a co-production of Gimlet and the Wall Street Journal. Special, thanks to Carolyn Bartow and Julia Ambra Verlaine for their reporting in this episode. Thanks for listening. See you tomorrow.