Big Red Car here. Nice, lovely crisp day in the ATX. Going to be a beauty–move to Texas kind of wonderful. But, hey, you already knew that.
So The Boss’s offspring are an investment banker and a startup graphic designer. One foot in a legacy company wrestling with becoming a more timely enterprise and a startup going through adolescence. Got The Boss thinking about evolving ways to run a business.
You know The Boss loves the idea of buying an Old Economy company and transforming into a New Economy Company. I wrote about that here Old Economy v New Economy Transformation Series.
We are talking about something a bit different but related today. It is how legacy companies are forced to view their businesses in a different light because of current economic conditions, legalities and work conditions as well as the evolving and perhaps competitive implications of startups.
Legacy businesses
Investment banking was once upon a time an almost certain death sentence to becoming wealthy. Certain wealth.
Of course, you had to work incredibly long hours, be a glutton for punishment, become an Excel wizard third class and generally forego a “life” in return for which you were highly compensated and moved up the food chain from junior analyst to eventually getting a seat at the grown ups table. Not everyone could do it. Still the truth. Not for everyone.
Comes along the witches brew of a bad economy, a surfeit of talent, compressed fees, the corporatization of it all and the automation of the Internet. The compressed fees are the big driver of the pronounced downward spiral of compensation. Investment banks are not getting the fat fees they once did. The big dogs are still feeding at the trough but those who are living on table scraps find there is not as much in the way of table scraps. Said another way — analysts are not getting theirs.
This would be OK if there had also been a change in the working conditions. Until recently, there was not.
The basic trade — you can work me like a rented mule as long as I can get rich in the process is no longer the deal.
The bosses want to say — we can work you like a rented mule because there are fewer investment banking jobs out there. But now they have to compete with private equity, home offices and the startup ecosystem. This is a competition they are not used to undertaking.
The rented mules are wiser than they’ve ever been. They are revolting and voting with their feet. No alluring riches, few folks auditioning to become rented mules, fewer sticking with it, fewer willing to put up with the abuse. Investment bank managers who ignore the realities of employee turnover will find themselves out on the sidewalk. Harsh reality.
Second big problem is the reality of the workplace. Employers cannot expect folks to work until 1:00 AM from a purely legal perspective. Young analyst drops dead and the class action coroners begin to circle the wagons.
So what happens now, Big Red Car?
Investment banks are starting to see the light and telling analysts to squeak up and to expect to work shorter hours, improving work conditions and engaging with a slice of their work force they have ignored until now.
This is enlightened self interest in many ways because if they lose their analysis capabilities — experienced analysts in particular — the IBankers cannot throw stuff on someone’s desk and say: “Pitch book in the morning, rented mule.” Some of the IBankers would have to dust off Excel and actually crunch the numbers. That is NOT going to happen.
This is a current and cutting edge struggle.
Bit of an aside — in organizing their businesses, the IBanks are pretty smart. Intake window on Wall Street, workplace in say, Charlotte. A middle manager making NYC money in Charlotte is living large. This is already happening, so give the IBanks high marks for smarts. They are still wicked smart.
Startups
Startups, on the other hand, are still hiring extraordinary talent and providing fabulous working conditions with seemingly big incentives. Stock options are back, ya’ll.
Unlimited vacation, options, high compensation. Remember many of these companies will not exist a year from today and have to sprint every day. Well treated while sprinting is the order of the day.
While many want to decry the work ethic of the Millenials, these two segments of the Entitled Generation are workers. Hard workers. Sometimes insanely hard workers.
Having known no other work environment, they are creating a work environment unburdened by “how it was done in the day.” Every day is a new day if you have no frame of reference. Every meal starts with dessert.
This is spawning a completely different problem, not what we are talking about today, but there is a decidedly SV, NYC, Austin, Boston style of work which suggests different work conditions, different comp levels and different life styles. Can you get a big enough paycheck in Silicon Valley to live as well as you can in Austin for much less money? Can you get SV talent in NYC? These are the questions of the day for entrepreneurs, founders and CEOs.
Then there are the underlying tax implications. Getting ready to go to the pay window? Bit of difference if that pay window is in Austin (no state taxes) v NYC or SV. Big difference.
This issue of the operating, financial, working conditions, talent availability of legacy v startup companies is real and only going to become more pronounced.
Think about this and watch your business evolve. Ride the wave. Watch the culture and the work environment change.
But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Can I get a quart of the 10W40, please, Boss?
