Morning Coffee: Barclays needs a third opinion on how to cut costs. Compliance officer was not sexually harassed by woman observing his vest

Experienced bankers tend to react to the name of “McKinsey & Co” in much the same way that Harry Potter characters react to “Voldemort”. The Global Consultancy Firm That Must Not Be Named has a reputation for recommending savage cost-cutting and mass redundancies in the investment banking industry.

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But Barclays employees might not need to panic so much at the news that McKinsey have been retained to help Venkat streamline their investment bank.  After all, when the top team includes a Head of Investment Bank Management (Stephen Dainton), a Head of Markets (Adeel Khan) and two Co-Heads of Investment Banking (Cathal Deasy and Taylor Wright), all of whom sit on the group executive committee, they might have reasons of their own to draw up an engagement letter that says anything like “ruthlessly eliminate duplication, there are no sacred cows”.

In fact, Barclays has already done some major surgery on its investment banking business lines, with over 200 redundancies already announced as part of a strategic initiative launched last year with the help of McKinsey’s rivals at Boston Consulting Group.  The McKinsey project isn't necessarily the sort of exercise that’s bound to end up with mass cuts, although it may create some.

Rather, the consultants are meant to be looking at things like onboarding processes and KYC to see if there are opportunities to automate them.  Although the project is covering front office, finance, risk and technology, it looks more like a benchmarking exercise to increase the speed and efficiency of the business, rather than to identify underperforming business lines and suggest job cuts.

This is backed up by the company’s statement that although McKinsey is going to be making recommendations, it will be Barclays executives who identify the priorities and take responsibility for implementation.  They also deny that there’s any intention to pull back or remove capital from the business, and say that “over the long term, our simplification effort will create additional capacity to invest in the business”, suggesting that any headcount reductions may be offset by new hiring.

It wouldn’t necessarily be a good idea to get too complacent; although the current McKinsey engagement might be relatively harmless, consultancies tend to always be pitching the next project just as the current one’s coming to an end.  Having possibly gained a client at BCG’s expense, it’s unlikely that McKinsey will be content to settle for a junior role in carrying out business process analysis forever. 

Sooner or later, they will be staking out Venkat’s office with a set of extremely well-argued and well-illustrated slides, recommending a new strategy for Barclays in response to a new set of challenges.  Since McKinsey’s own chief executive is currently saying that global clients are getting more cautious about the US market, perhaps it’s the New York office of Barclays that really ought to be keeping an eye on the consultants.

Elsewhere, an absolute tale of woe, illustrating how badly things can go wrong once an employment dispute goes legal.  Once upon a time, a compliance officer at Commerzbank made an unfortunate decision to wear a thin shirt with a string vest to work, and his female boss told him that she could see the vest through the shirt.  After later being fired for unrelated reasons, he decided to sue the bank.  In the course of the litigation, it seems that the vest incident got blown up into a long list of allegations of sexual harassment involving the observation of the vest. The court ruled that these were “pure invention”.

And so Damilare Adjo gets no compensation, no job and a large legal bill.  But it’s even worse than that.  As a result of the stress of the allegations, the woman who observed the vest apparently ended up developing serious mental health issues.  And partly for this reason, Commerzbank have applied for, and been granted, permission to bring a criminal hearing against their former employee for contempt of court.

That doesn’t mean that he will necessarily be found guilty – the criminal standard of proof is different from that applicable in the employment case.  But by now, Mr Adjo must really be regretting the decision to lawyer up in the first place.

Meanwhile ...

Ken Griffin likes to relax with a scoop of Häagen-Dazs and some hot fudge sauce, rather than any more expensive pleasure.  He also reminisces about the first days of Citadel Miami, in the ballroom of the Four Seasons Hotel. (Bloomberg)

Possibly the most unlikely nepo baby ever?  Nick Leeson claims that he has mates who work at high levels in banking, who would give his twentysomething son a job.  But “that would be more because of a relationship with me and wouldn’t be right or fair on him.”  (The Banker)

If, as we are regularly told, ChatGPT is going to make junior lawyers obsolete, then the process certainly hasn’t started yet.  There is a quite heated talent war going on for newly-qualified lawyers at mid-tier London firms, with some salaries now reaching GBP140k (FT)

At present, the top five European investment banks consist of four bulge bracket firms plus BNP Paribas. After hiring 50 managing directors in the region, Jefferies wants to break into that group.  Who are they going to push out? (Financial News)

It seems that a licence to print money isn’t always a licence to print money.  The Bank of England has a large historic underinvestment in IT systems to correct, a significant hiring need after a review of its forecasting and analysis requirements, and it needs to at least pay within shouting distance of market rates for staff.  It’s beginning to wonder if its own finances are becoming over stretched. (Bloomberg)

One reason banks have tolerated private equity recruiting practices is that their chance of getting an advisory role almost doubles when one of their alumni is on the client’s deal team. (FT)

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