Barclays (BARC:LN) revealed plans today to decimate its workforce this year, while paying its top performers even more.
The British bank pledged to trim up to 12,000 jobs this year, roughly 9 percent of its workforce. The cuts will span all parts of the company and all seniority levels, including some 820 managing directors and directors. Some 7,000 of the positions under the axe will be in the U.K.
Meanwhile, Barclays fattened bonuses for investment bankers. The bonus pool rose 10 percent, which on a per worker basis worked out to 60,100 pounds in 2013, up from 54,500 pounds a year earlier.
The rationale for the pay bump was a common refrain in financial services, essentially: “If we can’t hire and keep the best people, we’ll lose.” Here’s how Barclays CEO Anthony Jenkins explained the decision on a conference call today:
We need to recruit people from Singapore to San Francisco. We need the best people in the bank to drive long-term sustainable returns for our shareholders.
It’s sound logic. The problem is virtually every other bank in the world follows the same HR strategy, leading to a sort of arms race for workers whose success, to a large degree, rides on market forces outside of their control. If capital markets are frozen, for example, even the most cunning dealmaker won’t be able to convince a CEO to pursue an IPO or a leveraged buyout.
Ironically, this pressure to buy the best talent is most intense when results are shaky– and results are certainly shaky at Barclays right now. Today, it posted a loss of 642 million pounds for the fourth quarter, widening from a 589 million pound loss in the year-earlier period. Virtually every facet of the bank posted shabby numbers, from its M&A teams to its retail branches in the U.K.
The Barclays workers who are making money in that environment have a lot more power at the negotiating table right now. The flip-side of that dynamic, however, is an industry ruthless about jettisoning employees.
Chirantan Barua, an analyst with Sanford Berstein, lauded the bloodletting. “To be serious they structurally need to cut 15 to 20 percent of managing directors straight off,” he told Bloomberg.
Barclays is undoubtedly shrinking as it adjusts to a post-Recession banking world and tries to move on from the LIBOR rate-fixing scandal. If the company trims a net 12,000 positions this year, it will be 17 percent smaller than it was at the end of 2009 in terms of human capital.
Still, investors did not seem to take too much comfort in the coming cost savings. Barclays shares are down by almost 5 percent in trading today in London.
