Automation in the financial services industry isn’t just an imminent threat to the jobs of back-office workers, brokers and a financial advisors. As State Street Corp. demonstrated on Wednesday, employees at the top of the compensation pyramid are increasingly at risk, according to Bloomberg.
According to Bloomberg, the Boston-based bank is laying off 15% of its senior management on the orders of recently arrived CEO Ronald O’Hanley (who is presumably trying to bolster shareholder confidence after shares of the custody banking and asset-management giant underperformed shares of other major US banks last year). The bank, best known for its ownership of the pioneering SPDR ETF business (which runs some of the world’s largest ETFs), announced O’Hanley as its new CEO on the day after Christmas.
O’Hanley first hinted about the layoffs during a Goldman Sachs conference last month, when he said the bank needs to “structurally compress” its upper management. O’Hanley is continuing to tackle costs, and BBG’s sources said that the bank has hundreds of senior managers, and those affected include executive vice presidents and senior VPs.
During that presentation, the CEO referenced “Project Beacon”, State Street’s plans for cutting costs via automation (which presumably means this round of layoffs won’t be the first).
Marc Hazelton, a spokesman for Boston-based State Street, which has more than 30,000 employees, declined to comment on the number of senior managers who are being laid off.
“When you do that, one, you’re simplifying the way business gets done at State Street,” he said. “But two, you just don’t need as many top-end senior managers to get the work done.”
Effectively, what O’Hanley is showing that low- and mid-level employees in the financial services industry aren’t the only ones who are vulnerable to losing their jobs due to automation: The senior managers who are responsible for managing those employees have suddenly found themselves with much fewer employees to monitor.
State Street’s shares are down 35% since Jan. 1 2018, compared with a 27% drop for the S&P’s index of 18 asset managers and custody banks.
If the bank’s shares don’t rebound, expect more “cost compression” in the name of automation.