Consecuencias educativas.

This chapter begins with the question of organizational adaptation. In the previous chapter, several of the pathways involved in the preservation of norms and routines proved to offer effective selection criteria: they made it likely that the surviving norms and routines would be somewhat better than those that had failed at a sub-organizational level. This chapter will again document the selection process, but findings follow a very different narrative. Here the norms of investment banks meet with wide distaste, and many choose not to work in the industry because of its norms, yet the norms do not yield to the force of exit. This chapter demonstrates some of the mechanisms through which unfavorable norms persist. It also takes up a second topic that the previous chapter left unsettled: how exactly do routines and norms survive failure? To this end, specific examples of routines and norms demonstrate firm legacies, documenting the process through which norms and routines are habituated into employees and teams.

Method

The first issue confronted in the study of investment banks relates to the specification of the activities and services provided in diversified and complex

organizations. Rather than seeking to fix a definition of an evolving organizational field, I aim to track the career paths of a specific subset of employees within that field. While it is challenging to characterize the entirety of large and complex organizations that provide diverse services to diverse clientele, it is somewhat easier to take individual employees

and their narrow job tasks as instances of larger organizational processes. A

disaggregation of this sort would be less appropriate within newspapers because of the importance of the specific purpose of those firms, but the diversity of investment banks makes disaggregation both appropriate and necessary. Given the diversity of roles within investment banks, it proved impossible to isolate a single task-group within multiple banks. Instead, I sampled from multiple sub-specialties, almost all of which were employed at one of two large organizations, Global Investment and Capital Investment. Three methodological notes are necessary as preliminaries.

First, as with newspapers, pseudonyms have been used to de-identify all firms and study participants. In such a small industry saturated with journalistic accounts, the goal of confidentiality may seem futile, and while I have changed some basic features of the account to create ambiguity around which of the several bankrupted entities is subject to the analysis, an industry insider is likely to be able to discern the organization’s name through some of the defining norms and values of that organization. The conundrum is a serious one, for I have set out to convince the reader that some of what is distinctive about an organization is carried through the careers of those who inhabit these firms, and in order to do so I must explain distinguishing features that would help a reader to identify a firm despite the use of a pseudonym. Because the conundrum admits of no simple solution, responses are often cited in a way that is intentionally vague about which respondent provided a given insight. This is meant to enhance the protection of study participants so that any person who could identify someone from his or her organizational position and career trajectory could not discern that person’s private perceptions about his

or her career, occupational struggles, and organizational frustrations. The study participants were informed of these risks before they participated, but it is nonetheless incumbent upon the researcher to do what he or she can to protect confidentiality as much as is possible.

The use of pseudonyms becomes increasingly important in the age of searchable online information. The simplest protection that a pseudonym provides to a study participant is the assurance that an online search will not immediately uncover the participant’s private contribution to research. The possibility of such a search constitutes a much larger intrusion into the privacy of the participant than the accidental

identification of a participant by a person whose interest in the subject brought them to the text. The use of pseudonyms was a basic expectation of all investment bank

participants, but the same practice was confusing to many journalists who would prefer to have their stories told with the names and facts intact.

The second methodological note concerns accrual. Contacting investment bankers was difficult from the start, and grew more so over time. Thus the sample of bankers is smaller than the sample of journalists, and sixteen respondents provide the data for this chapter. Certain aspects of the transition, particularly post-failure entrepreneurship, are rare enough to be unobservable in a sample of this size. For a study of post-failure entrepreneurship, a larger or more focused sample would be necessary. Because of the sample limitations, much of the study is focused on a single firm, Global Investment, and its various post-failure progeny. While the newspaper sample provided more diversity in firm trajectories by focusing on four firms, the examination of careers within Global

Investment provides a more in-depth look at the divergent fates of failure where the entity itself experiences an incomplete preservation.

As a third methodological note, the present analysis takes this overall setting as exogenous to the actions of its individual participants. It does not judge the role of bankers and their banks in the financial collapse and the economic repercussions that ensued, nor does it attempt to determine the counter-historical possibilities of how the industry would have changed without the intervention. The position is methodological rather than political.

Rather than attempting to evaluate bankers and their conduct from some external lens, it is quite interesting to focus on the internal evaluations. These will be

distinguished between two sets. First, I will focus on the sources of frustration for bankers, some of which led study participants to leave the industry. This begins with observations of why they leave to demonstrate, in turn, some of the organizing norms within banking, and some of what banking lacks. The second section documents three routines that persisted after investment banks failed. The third section specifies the mechanisms through which this persistence occurs as continuity processes and contrasts these processes with continuity processes in newspapers. The final section examines the organizational processes for post-failure organizing in investment banks.

Banks as Structure and Process

The economic crisis of late 2008 involved an intense spate of organizational collapses among some of the largest and most well regarded investment banks. Layoffs became common in an industry where human capital is the coin of the realm, and

organizations changed shape through acquisitions and failures. The Troubled Asset Relief Program averted many outright failures that might otherwise have occurred by sustaining insolvent organizations, adding further complexity to the process of post-failure

organizing. In this section, I document some of the processes involved in banking. All information, unless otherwise cited, draws upon detailed descriptions of banking provided by study participants in qualitative interviews.

Investment banks are unlike traditional retail banks. They do not hold deposits or maintain accounts. Instead, they perform a pair of sometimes conflicting roles in service of capital. As an advisor, investment banks provide clients with information and advice on how to approach various financial decisions, including the sale of stock and bonds, the processing of international transactions, the coordination of mergers and acquisitions, and the process of dissolution or distressed acquisition. Investment banks also serve as

dealers, buying assets from one client in order to sell them to another. This may include stocks, bonds, fixed income, and other financial instruments, most of which were fairly mundane until quite recently, when exotic financial instruments like derivatives and mortgage-backed securities became important business activities for investment banks. Regulatory changes exacerbate the emergent complexity, making it even more difficult to characterize what investment banks are and what they do. In fact, some authors have proposed a new category:

Large, complex financial institutions (LCFIs)… [are] financial intermediaries engaged in some combination of commercial banking, investment banking, asset management, and insurance, whose failure poses a systemic risk or externality to the financial system as a whole. (Saunders, Smith, and Walter 2009: 139)

The breadth of purpose of these firms has become a very significant issue in making sense of the bailout decisions, a topic revisited in the concluding chapter.

Though many different activities occur within investment banks and large, complex financial institutions, they share a number of characteristics that draw people into them and expel them in equal measure. The next section describes the sources of exit among investment bankers. Later sections demonstrate some of the reasons why exit does not change the norms of practice within the industry.

Norms at Work: Why Bankers Quit Banking

The people who leave banking typically leave because of the norms. They leave because they do not want to adhere to the intense work ethic that would hold them

captive in an office late into the night and make any social plans secondary to last-minute projects. They leave because banks lack a norm of purpose, like the calling that draws journalists, and they want to do something that is more meaningful by pursuing a personal project or passion. They leave because banks maintain norms of incivility and cutthroat competition that undermine collaboration. These dominant motives are not universally felt, but one or more of them applies to every former banker whom I interviewed. Nonetheless, the fact that norms motivate exit should not be viewed as an indication that former bankers regret their experience. Most prize the experience that they’ve had and speak highly of their former colleagues. It would not be difficult to extend these departure motives into a broader critique of the industry, but former bankers rarely do so. Their narrative describes a mismatch between personal motivations and organizational norms. Less often do they judge the industry for its norms.

In this section I will describe a few of the main norms that former bankers invoke in their descriptions of why they left investment banking. These are work intensity, motivation, and incivility. Later, I will note other norms that are salient within the industry, but not typically articulated as a reason for departure.

Too Much Work

Investment banks are intensive work cultures: the dominance of work over other life priorities is a basic feature of these firms. Former bankers note the difference

between their current work environments and the work that they did at a bank in terms of the allocation of time. They are surprised that their colleagues outside the industry go home from work on a daily basis before six and rarely work weekends. Here, norms and routines overlap once again. Global Investment provided a car service for its staff when they worked late. Global also offered a special food service that charged the company directly so that employees were well fed as they worked late into the night. These are routines that establish the practices around constant work.

The dominance of the organization within the lives of the employees is therefore nearly complete, and while Global Investment does not quite meet Goffman’s definition of a “total institution,” it is not unreasonable to compare investment banks with boarding schools, army barracks and work camps that subsume nearly every aspect of the person’s life into the same entity (Goffman 1961). What is less clear about investment banks as total institutions is whether they are sufficiently cut off from outside interaction. Goffman allows for this in recognizing that the serving staff of a mansion may be wholly

directors and senior staff, employees below the VP level have relatively less external interaction through their work. Though many positions are meant to open onto the wider financial world or an industry in a way that is not so different from what newspapers are meant to do, the intense internal competition, high expectations of work product quality, and long hours are not necessarily conducive to a broad external perspective. Very few analysts and even fewer traders and bankers have access to a breadth of information that would give them experience akin to the newsroom.

Total institutionalization may not be necessary to impose a work ethic upon employees, but it helps. Because employees are expected to be available at all times, and because amenities are provided to ensure this end, there are few acceptable excuses for not working. Most people put their relationships on hold in service of career objectives.

Rebecca spent her entire first year working from 7 AM until 11 PM, and

continued that level of commitment for some time afterwards. Even after she got better at managing her time, the work still got in the way of other parts of life:

Rebecca (quit Global before the bankruptcy): Forget finding a husband. that was definitely not going to happen. That was so not part of the equation....I got married at 39. I was like an old fart. I was the Last of The Mohicans. [As an analyst] I was on the road four days a week. The pace was brutal.... I don't know how you can be working 80 or 90 hours a week and have a relationship. At least for me, I couldn't do it. I know there are people who do it, not me. I have to say, when I left [investment banking] my relationship with my husband improved. It wasn't like I was waiting on him hand and foot, but we just had more time for each other, and I wasn't exhausted all the time. [While working in banking] I'd be cranky. I'd be exhausted. I wanted to sleep. Anyway, my relationship definitely improved when I was able to slow down a little bit, [and] smell the roses.” For Rebecca and others, time management skills learned as a junior associate made the work more manageable, but only as a matter of degree. Even though all bankers

experienced the burdens of an overwhelming workload, a few respondents noted the special burden that the banking lifestyle placed upon women.

Adam (Interned at Global just before the bankruptcy): I guess it was disheartening to see the disparate experience between men and women in banking. There’s only one managing director I knew of that was a woman. And, she did not have any kids, no family, kind of like work is her life, and it was a weird dynamic to think that that it was a ceiling. It’s just that women have to decide about having families or not, and guys aren’t expected to have to make that choice between family and a career.

It isn’t just life outside of the firm that is disrupted by the work intensity, it is life within the firm as well. Socialization is impossible when there isn’t enough slack (Hirschman 1970) for interpersonal exchange.

George (a former consultant was laid off by Global): The thing with the trading floor… it was awkward at times. Because you would meet someone, let's say, out for a drink, and you'd bump into someone that you see on the trading floor, and you don't even know his name. And you're looking at this guy's face for three hours a day. [laughs]…. You sit at the same place all the time. You have your own desk. It's an open plan office, and, from the moment you go 'til the moment you leave you just work. You don't stand up and walk around, do lunches, and get coffees. So, immediately, that means that you know the people that you work with, and, apart from that, it's very hard to meet other people.

The intensity of work becomes an issue in each of the three key norms identified as reasons for leaving the industry. An overwhelming workload is linked with the incentives of the organization and with the manifest incivility within the workplace (see below), and all three are related to employees leaving the industry.

Some of those who leave the industry are driven by a moment of catharsis in the wake of failure. Being laid off forces some former employees to reevaluate their careers and to chart a new course. George had a background in management consulting, but he sought an MBA in order to move into finance. After completing an MBA, he got a job at

Global at a trading desk, and when Global collapsed he decided to change his industry and location in search of a different life:

George: I decided that I was going to move somewhere - first of all, I was thinking about changing industry and going back to consulting. And, also, I wanted to move somewhere in a country or a city where people may not earn as much, but the work-life balance was much better. So it was more like - in order to take perspective on how you're doing in life, you know, you have to take a step back and see if things are going well, if things are not going so well, and, actually, what's truly important to you, because it was a good opportunity to start from scratch. [if I hadn’t been laid off] I think I wouldn't have realized all the negative aspects as easily as I did - as clearly as I did - after the collapse of Global. It's the same thing as - when you work within a group of people, you tend to lose context after a while. So, I think the more I stayed at Global, the more likely it would be that I would stay in Global for the long term - or in the industry for the long term.

So, I decided Iwould move to [another country], and I would go back to consulting or private equity. Because I have more experience there, making it easier for me to find a job -and, also, I started to appreciate things in consulting that I didn't appreciate before, having worked in another industry.

The abruptness of the transition from the failed firm serves as inspiration for post-failure career changes.

Though the work in banking requires long hours, the effort is often undertaken on a relatively short-term basis. Many junior employees do not intend to stay in investment