Unformatted text preview: tworks across the organization.
Third, a relentless focus on the accountability and short-term earnings of business
units has “sealed” the silos, crowding out time for cooperation among them.
Investment banking has the most individual performance-based compensation
structure among professional organizations: remuneration reflects, first, individual
results and only secondarily the results of groups and the whole company. (In this,
the industry has more in common with a pure sales function than with the
partnerships most banks evolved from.) While this structure may discourage
collaboration, it has attracted and rewarded extremely talented and individually
Missed opportunities While many banks credit their strong product-focused groups with great
accountability and excellence in delivery, few would deny that they miss
opportunities: even in today’s consolidating industry, few enjoy 100 percent of their
clients’ wallets. Consider the potential linkages between M&A and financing,
corporate equity-options programs and risk management, sales of privately held
companies (or IPOs) and wealth management, pension fund immunization and
asset management, debt issuance and treasury services.
Within geographies, the linkages become even more compelling. Firms with a
foothold in some emerging markets, for example, have severely handicapped
themselves by failing to leverage that presence more fully across a number of
products or businesses. Other firms understand that the opportunities from greater
integration can be substantial.
Banks have responded with a range of organizational answers, often switching
between global product lines and geographic P&Ls, as well as using a range of
hybrid structures typically intended to deepen client relationships (for instance, with
geographic coverage), to answer the competitive threat of thinner margins (say, by
combining debt and equity capital markets), or to assert better control (for example,
by consolidating support functions). But as soon as a bank patches one problem,
other fissures surface, and each new structure, in turn, is often a veneer: reporting
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- Spring '14
- Options, investment banks, business units, Osman N. Nalbantoglu