The Risk of Juniorising Change

Creating a problem for the near future?

 A little while ago I read about the "juniorisation" of trading desks in financial services, particularly in the City of London.

The argument made was that at times of cost pressure, i.e. pressure to reduce costs, usually in response to falling revenues - something most organisation's are feeling today, there are some very simple economics. The most compelling being that older, more experienced traders cost more than junior traders. As I recall the article argued that a firm could employ two junior traders for the same cost as one senior trader. This is rather simplistic, but illustrative of the point.

In light of this, firms are thinning out the ranks of senior traders (e.g. MDs) leaving many desks manned by relatively junior traders. I don't want to question the intellectual firepower and basic abilities of those traders, but they do lack the perspective that more extensive experience gives. The author reported that many desks are now staffed by traders that have never lived through an interest rate rise or in a high(er) interest rate environment. The UK base rate has been 0.5% for eight years now.

Similarly they have not experienced a market crash!

The author of that report suggested that the ability of trading desks to cope well with either event (and they will happen one day!) is severely impaired by this lack of experience.

So what is the relevance to change?

Well, I see a similar risk developing.

In financial services, the dominant driver of change for the last 5 or so years has been regulation. I have written before about how regulatory change has been the cuckoo in the nest, claiming the majority of discretionary spend and related resources, and squeezing more "normal" and better management business improvement initiatives off the agenda.

I have also written that regulatory change is different. It is often very complex and moves the whole business environment in ways no-one can be certain of until after the fact. Even the regulatory requirements themselves emerge slowly and often very late in the process, yet implementation/compliance is driven by politically motivated and near-immutable deadlines.

The result has been that the majority of change effort has had to adopt a "scrambling" approach, with a lot of unwanted, yet uncontrolled stop/go throughout the process. Project planning has become right-to-left (i.e. how do I get everything done by the date that is set?) rather than left-to-right (i.e. how should we best undertake this initiative?).

This has been a "needs must" response and I cannot criticise it, indeed I have been part of it.

The risk I see now, as firms are under pressure to manage/reduce costs - no more so than in the burgeoning area of regulatory change - is that staff reductions are stripping out a lot of more experienced (and thus expensive) change professionals.

This leaves change initiatives staffed with a preponderance of young, willing and usually bright individuals, but ones who have no experience of what a "good", well managed change initiative looks and feels like? They are not benefitting from the experience of more senior staff and thus making avoidable mistakes. They cannot understand the benefit of investing in the right tools to support the endeavour. I also see firms investing less in the formal training of the requisite skills, preferring instead for the rather more inconsistent, osmotic process of learning as one goes or on-the-job.

I wonder if the risk management functions of these firms, especially the regulated ones, have even recognised the risk, let alone addressed it? I suspect not where the pressure for short term, bottom line results remain the prevalent driver of senior management concern.