McKinsey & Co, the very esteemed management consulting firm, is known both for its work with banks and for its tendency to feed alumni into the banking sector. For example, McKinsey consultants have helped restructure the Royal Bank of Scotland. Citi has hired a former McKinsey consultant, David Chubak, to help oversee its cost cutting programme. And James Gorman, chief executive of Morgan Stanley, was once a senior partner at McKinsey before he went into banking.
When McKinsey talks about pay, therefore, bankers need to sit up and listen – especially when the firm specifically talks about how organizations can get ahead whilst paying less.
Yesterday, McKinsey hit subscribers to the its Quarterly with a recycled ‘classic article’ from 2009 titled, ‘Getting beyond Money.’ Therein, McKinsey identifies three ways of encouraging employees to get motivated by more than just the money. They are:
- Regular praise and commendation from immediate managers
- More attention from senior leaders
- New opportunities to lead whole projects or task forces
James Gorman seems to have been putting some of this into effect at Morgan Stanley. Having said on various occasions that bankers are overpaid, Gorman praised Morgan Stanley’s capital markets bankers last year after their part in the problematic Facebook IPO. He also said last month that Morgan Stanley’s poor fixed income performance in the first quarter had nothing to do with its people. Meanwhile, at RBS pay has been cut savagely but the bank has more than enough projects underway (the latest being a plan to float 25% of Citizens) to keep its underpaid bankers engaged and happy in mini-leadership roles.
Banks that rely on McKinsey’s principles for paying less may come undone however. Harvard’s recent study of the careers aspirations of graduating students showed that people still expect to spend no more than ten years working in finance after leaving university. Financial services is still seen as a career for earning a quick buck – not for taking control of a change management initiative or getting praise from higher-ups who made their money before the crisis.