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Wall Street has a knowledge gap.
The last time U.S. finance was operating in an environment of high inflation and high interest rates, like today’s economy, that was almost 40 years ago. This means that most of today’s managers, born in the era of easy money, do not understand the complexities of running a bank in today’s conditions.
As top executives at financial institutions begin to accept that interest rates are likely to be higher for longer, they are scrambling to find leaders with the skills needed to succeed in such an unpredictable environment. Some CEOs decide they need to make drastic, expensive, and often unpopular institutional changes to help them keep up.
What is happening: Citigroup CEO Jane Fraser announced a sweeping restructuring effort last week aimed at reorganizing the bank’s management, increasing accountability and boosting the stock price (Citi’s stock is down ‘around 11.6% over the past year).
The changes will not be popular among staff, Fraser said, and include “very uncomfortable” layoffs.
Citigroup is part of a broader trend of reorganizations at the highest levels of the banking industry.
Wells Fargo Chief Financial Officer Mike Santomassimo told Reuters last week that more layoffs were likely; the bank has already cut around 40,000 jobs since the end of 2020.
Truist recently announced a plan to cut costs by $750 million, including layoffs and a major shake-up of senior management. And Barclays CEO CS Venkatakrishnan told CNBC last week that he planned to cut hundreds of jobs at the bank, a move he said was in line with a broader industry trend.
Late last year, Goldman Sachs also announced it was planning a broad reorganization, combining leadership in investment banking and trading.
It’s not just managers who feel the pressure. The general managers are also reshuffled.
Discover recently announced that CEO Roger Hochschild would step down and Morgan Stanley announced that CEO James Gorman would leave this year.
Banks currently have strong leaders, but few strong leaders, said David Schiff, senior partner at West Monroe.
Before the current interest rate hikes, banks had been operating with low and stable interest rates for almost two decades, he explained. It’s a really friendly environment.
“Now the seas are rough and a lot of people are not used to managing in that kind of environment and yet leading alone,” Schiff said. “In order to create more accountability for what happens, CEOs want fewer layers of management and deeper insight. »
This is new territory for the majority of bankers, Schiff said, and banking industry executives now recognize that the environment has fundamentally changed.
“It really requires vision, clear strategic ambition and leadership to be able to exercise the will to get there rather than just operating the bank the way it has operated over the last few years,” he said. “There just aren’t a lot of people who have experienced this.”
Where have all the bankers gone? So what can a bank do when all its experienced managers are gone?
CEOs should focus on building a leadership team with core soft skills, Schiff said. “There is a certain level of skill, I think, among leaders who are most successful in managing uncertainty. And that’s really what it’s about.
Large financial institutions have created layers and layers of management, which breeds indecision and lack of accountability, he said. Banks now realize they need to create more visibility and reduce bottlenecks.
The union representing Canadian auto workers at Ford has suspended strike plans, keeping its more than 5,000 members on the job at three plants and bringing good news for an industry grappling with unprecedented work disruptions, reports my colleague Chris Isidore.
“Unifor is extending negotiations with Ford Motor Company for a period of 24 hours,” according to an update posted on the union’s website. “The union received a substantial offer from the employer minutes before the deadline and negotiations continue through the night. Unifor members should continue to stand ready to strike.
The contract between Ford and Unifor was set to expire Monday at 11:59 p.m. ET, four days after the expiration of U.S. contracts between the United Auto Workers union and Ford, General Motors and Stellantis, the automaker that makes vehicles under the Jeep brands, Ram, Dodge. and the Chrysler names.
“We will continue to work collaboratively with Unifor to create a model for the auto industry that supports a vibrant and sustainable future in Canada,” Ford said in a statement.
In a recording for members earlier in the evening, Unifor president Lana Payne said the two sides were still very far apart.
Ford traditionally has the best relations with its unions of any U.S. automaker. There has not been a strike in its Canadian operations since 1990 and there has not been a strike in the United States since 1978.
A cyberattack on Clorox is causing large-scale disruption to the company’s operations, hampering its ability to manufacture its cleaning products, Clorox said Monday.
Clorox said some of its products are now in shortage as it struggled to meet consumer demand during the disruption. Clorox has not specified which of its products are affected, reports my colleague Jordan Valinsky.
The company disclosed in a regulatory filing Monday that it detected unauthorized activity in some of its computer systems in August. Clorox said it immediately took steps to stop the attack, including scaling back its operations. She now believes that the attack was contained.
However, Clorox has failed to restart its manufacturing operations at full capacity. The company said it fulfills and processes orders manually. The company does not expect to begin the process of returning to normal operations until next week.