UK
Recruitment decisions aren’t quite so straightforward in the wake of the credit crisis, says Andrew Pullman.
I am sure that when depositors were queuing up outside Northern Rock recently they didn’t worry too much about financial services recruitment in the New Year.
However, many thousands are now facing the prospect of a rocky period ahead if they are looking for a new job in the City in 2008. How are banks and financial institutions making recruitment decisions in the face of so much uncertainty?
The first major question is whether firms can actually afford to hire anyone. Given recent losses, the emphasis is on cost cutting – and that means people, who account for between 60% and 70% of the cost base. Hiring may be limited to people with a proven track record and specialism in a particular field. Often at year-end people are let go in order to free up space for hiring – fire 20 and hire back 10 better ones! However, many firms are now being forced to cut their overall headcount.
The second major issue is those redundancies themselves. When a company has cut staff, employment legislation dictates that if a role is truly redundant it cannot hire someone back into that role. This can limit the number of new roles available.
On top of this, the hiring process is liable to become more convoluted. Each organization is different – parent firms in Europe or the US often demand that most hiring approvals have to go back to head office at times like this. This will cause delay.
In times of uncertainty individuals will be looking for employment guarantees, particularly about bonuses … conversely, employers will want to limit their guaranteed liabilities; this friction adds to a further reduction of opportunities.
Overall, most firms will be wary of rushing into recruitment at the moment. Many are still not sure how exposed their business is to the changing market dynamics; there is uncertainty about recession in the UK, and the US. Costs for each person hired are high when you take into account salary, national insurance, desk space, computers, life insurance, pension etc.
My advice is, like the Northern Rock customer, get out your folded chair with thermos of coffee and wait until opening time at the recruitment office. It will happen, just don’t count upon it happening too soon.
Andrew Pullman is managing director of City HR consultancy People Risk Solutions, and a former head of capital markets human resources at a European investment bank.
“fire 20 and hire back 10 better ones!” – sounds like the headhunters’ wildest dream. Why don’t you ask it to Santa Claus as a Xmas present?
Sounds like every bloody year to me….same situation every Dec, Jan and Feb, just a different reason.
Every year, market goes quiet, bonuses are paid and people start to move on again. Redundancies or not, there is still movement in the market and jobs to be filled.
I predict that this year will be fairly busy as only last week we read on here that the likes of Goldmans arent allowing any kind of retainer allowance to their bonuses. My guess is that I’ll be as busy as ever in the New Year and Im looking forward to it !!!
Banks simply cant afford not to hire new intake or they will feel the backlash in 2-3 years time when they are short of experienced analysts (and all the previous ones have jumped to hedge funds/ Private Equity)
This not the fist shock to the market (Currency Crisis Asia 1998, Dot Com Bubble 1999/2000 Sept 11 2003) Its a market, subject to cyclical trends. Only a myopic organisation would damage future growth prospects by not recruiting.
“Out with the old and in with the new” is much more cost effective anyway !!! ;-)
I agree with the above comment. However, for students I belive it will put the old ‘oxbridge vs. everyone’ debate back into focus.
I am not in an oxbridge or London uni myself and was rejected, sight unseen, by the banks I applied too. Meanwhile, my friends in oxbridge & London have a tougher time of late, but still seem to get offers.
Oh well…I am not bitter; the accounting firms seem to be busy!!!
The market was dead in Oct/Nov/Dec, but the early movers are starting to hire again. Things will really start to move when Q4 results are in and those institutions damaged by the credit crisis will be hit twice – serious losses in 2007 and an inability to hire in 2008, meaning loss of capacity, flexibility, market reach and failing customer service etc. I think we will see shifts in market share and other KPI – if they aren’t hiring in 2008, the competition will overtake them. My prediction is that some of the bulge bracket banks will lose out to smaller more nimble organisations. I also think that the US based banks will lose out to European houses. I see a real shift in dynamics away from the big, slow moving “mega banks” and I would not be suprised if some of the mega banks split down their portfolios into smaller companies – separate the performing assets from the deadwood.
the “Oxbridge vs everyone else” debate is an interesting one indeed. at my bank (us, bulge bracket), junior hiring decisions are taken way above my lowly head (i’m a VP), but our campus recruiting policy is in-line with the rest of the street and, in my opinion, flawed. as Anon aludes to, in reality we target only Oxbridge plus London, and (maybe, just maybe Bristol, Durham, Warwick). Reality is that from a UK university perspective, if you didn’t go to one of the aforementioned institutions, you’re CV/Application will be fast-tracked to the bin at the HR stage. This leaves potentially very suitable candidates from other top-20 institutions high & dry, without even the chance at interview, simply for a decision that they made aged 17/18 (i am assuming that some non-Oxbridge types COULD have gotten in, which they clearly could). this is a particular problem for Sales / Flow trading candidates, where pure academic measures are often not the most appropriate. incidentally, i myself am a Cambridge grad (2000).
interesting you should say the recruitment policy is flawed, I’ve witnessed it first hand. I sit around 4 cambridge graduates: MD to AVP, and one of the senior members of the team was quite rightly moved from Sales into a less client facing role. The two best Sales people I’ve ever worked with were grads from non-desc. uni’s who were lucky to be at the right place at the right time. Its a real shame its down to luck and ultimately having open minded bosses. We’re now recruiting for another member of the team with our header reading “Oxbridge Phd wanted”, I can see a real diversity in thought going on there.
My thanks to the two contributors above.
I feel that the majority of the larger banks (US bulge bracket especially!) are very selective when it comes to the university their potential employees attended; especially in the upcoming months.
I also note it is increasingly a game of not ‘what you know’ but ‘who you know’. I was unsuccessful in my applicatuions: but I am aware of a very few people at my university (not Oxbridge or London but top twenty) who DID get jobs based upon contacts and internships in such banks, as well as smaller European ones.
I grant such people’s jobs may well have been based upon merit, as well as the fact that some banks recive so many applications that University selection is the only viable method of seperation. However, I am still irked by constant pledges from HR departments that all application selection is based upon merit when this clearly appears not to be the case.
Forgive my rant.
In short, based upon my little experience, I would argue that the coming year will see a cut in graduate positions in favour of those already accepted for internships this year. However, I doubt any cut will rival 2001-2003 for numbers
This constant moaning of pessimism will lead into a recession just because people are led into thinking everything is so bleak! Isn’t it time to rationalise all these fears and COUNT how many defaults -outside US subprime mortgages- we had in 2007? 1,2,3… it is so easy!