Survive Layoffs

Survive Layoffs - The Issue: Employment in the financial services industry is highly cyclical, creative a constant imperative for employees to be prepared to survive layoffs. During bull markets, when the prices of financial assets are rising, financial services firms expand and hire aggressively. With the slightest hint of an oncoming bear market, when the prices of financial assets appear to be starting a general, prolonged decline, financial services firms ruthlessly slash headcount and payrolls. It is not unusual to see employment in a given firm fluctuate by as much as 50% between market peaks and troughs.

A Case Study: Merrill Lynch was once nicknamed "Mother Merrill" and noted as a bastion of stable and sensible hiring practices relative to its industry peers. Before 1987, there was little need to prepare to survive layoffs. Since 1987, however, total headcount has twice hit lows near 40,000 and highs around 60,000, tracking market cycles. The 2007-08 downturn started with Merrill Lynch again at a high near 60,000 employees.

The Irony: In advising investors, both individual and institutional, financial services firms recommend against crazed buying in bull markets and panic selling in bear markets. They admonish investors to create long-term plans, stick to them, and not get caught up in passing hysteria.

In managing its own operations, however, the industry habitually fails to take its own counsel. Profits are monitored on a daily basis, and the slightest shortfalls from plan or from trend can create full-blown panic in the executive suite. Regarding personnel matters, both bull market hiring and bear market layoffs can be equally excessive. An inevitable consequence is that employee loyalty is generally low in financial services, even when compared to other industries. Additionally, productivity suffers as a result of the need for staff to plan how to survive layoffs.

Long-Term Personal Strategies: Per our discussions of changing jobs and redefining your job, prudence dictates that you structure your career to gain experience in a variety of functional areas. This will increase the chances that, if your current work area is targeted for force reductions, you have the skills and experience to make a transition to another area that is weathering the cuts, and thereby to survive layoffs.

Make a point of staying in constant contact with former bosses, mentors and colleagues who are in other areas of your firm, or who have moved on to other employers. Kept abreast of both the current opportunities where they are, and what the outlook appears to be. Given the mercurial nature of employment in much of the industry, you cannot afford to wait until layoffs are threatening before you plot your escape route. By then it is too late. Developing a good, ongoing relationship with a reliable executive search firm ("headhunting" firm) is equally valuable as a means to keep on top of hiring trends and to survive layoffs by hitting the exits in time, if necessary.

Short-Term Personal Strategies: In the spirit of better late than never, start working your contacts (see the prior section) immediately upon the onset of negative market conditions, negative profitability reports at your firm and/or rumors of force reductions.

Employment and pay in retail lines of business (those serving individual clients) tend to be much less volatile over market cycles than in institutional lines (those serving large companies, both inside and outside the financial services industry). Thus, if you are in an institutional area such as investment banking or securities trading, and depending on your career path and goals, you may consider a shift to the retail side when trouble is on the horizon.