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COMMENT: Why banks like Deutsche have too many managing directors

So, Deutsche Bank's London office has nearly twice as many managing directors and directors as analysts and associates. Surprised? Don't be. I worked for Deutsche in London and the senior overhang has been a thing for a while. And DB isn't the only bank with this issue.

Deutsche has been trying to tackle its managing director (MD) problem, but it's not easy. As fast as they've been laying off and losing existing director and managing directors, they've been promoting new ones. You have to do something when your share price keeps falling and your people own a lot of stock, but it doesn't help to make an organisation any less top heavy. 

In the investment banking division (IBD) in particular, my experience of Deutsche was that the pyramid was almost entirely inverted. Is this because people are hanging on for their gold-plated pensions? Maybe - but there aren't that many people who've been there long enough to get the amazing legacy pensions. 

Instead, I'd say that at Deutsche Bank - and other banks - managing directors and directors proliferate for two main reasons. 

Firstly, the bank tries to cut costs without cutting its product or client footprint irreversibly. In pursuit of this, it trims out the mid-level staff and juniors but tries to keep a proportion of the senior franchise people. Sadly this often serves to prolong the agony until the eventual capitulation.  

Secondly, they can't pay people decently (or consistently) and so they overpromote mid-level people and give them fancy titles in an attempt to keep them. This has the side-benefit of making it harder for all those people to find new jobs elsewhere unless they're willing to take a 'demotion.'

The other thing to know about Deutsche Bank in particular is that the rank of associate vice president (AVP) only exists in London in the global transaction bank and the back office. - AVPs are not present in the front office investment bank, which means the hierarchy in IBD is even more skewed than it first appears.  

Samuel Black is the pseudonym of a former MD at Deutsche Bank

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AUTHORSamuel Black Insider Comment

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