Wall Street’s Big Paychecks

Forbes

Tara Murphy

December 2005

TM: Bonus Wall Street what happens when bankers aren’t happy with the numbers we’ll talk to one executive coach who talks about how this prompts bankers to switch firms when Forbes.comvideo network returns.

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TM: Welcome back I’m Tara Murphy. December is the month were Wall Street bankers find out just how big their bonus checks will be. But when the numbers fall shy of what they’re looking for they sometimes jump ship from one firm and head to another. It’s a common trend that plays out at the end of the year. Here to tell us more about the trend is Maggie Craddock, Maggie is an executive coach at Workplace relationships she is also a two-time Lipper award winner at Scudder Stevens and Clark. Maggie thank you so much for being here.

MC: Thank you so much for having me.

TM: Now, I know this is a really nerve racking time on Wall Street everybody’s waiting for their numbers They are really anticipating a good year a bad year, tell us about it…

MC: Well the tone is certainly focused at this time of year on compensation. My cell phone is ringing constantly with clients who are talking primarily about bonus negotiations. Either what they can say to their boss at the last minute to make a good impression, how they will respond if the numbers seem to be down and also for a lot of employers a many people are anxious about hanging on to top performers at this time of year. So what do they need to say or do or in some nuances even pay them to keep them happy within the firm?

TM: So when an employee hears their numbers and they are not where they want them to be now automatically everybody is on the phone they’re calling you know, Goldman Sacs, JP Morgan everyone is calling other banks now is this really the most prudent way to go about it?

MC: No, Obviously when somebody’s disappointed they seem to think at that point that a conversation or a magic phrase is going to change things. Now there are some cases in which people’s numbers actually does go back and get revisited, those tend to be fairly aggressive negotiations and often not in the employees long term interest. I think the thing for people to bear in mind too is that number is often decided in people’s minds long before the final conversation when they’ve had it and so they need to be building the credibility and building their case for their bonus over the course of the year. As opposed to responding excessively to the to the number when they receive it.

TM: Now how about for the employer that has to break the news that this bonus isn’t going to be what the employee is looking for?

MC: Well this is tough and it’s tougher for the cases where compensation is fairly arbitrary. Often times these things are divided up into bonus pools and the more clarity and transparency people can give employees about how their bonus is actually related to their performance, the easier those conversations go. There is a level of financial reality in terms of how people feel appreciated; there is a level of emotional reality too and to the extent that this is mercky people are working very hard to try and understand the nuance of why why, Why didn’t I get a little more why did this one get a little bit more. So the clearer they can be about the formula they use for compensation even if it’s not an equation the easier those conversations tend to be.

TM: Absolutely, Maggie are there any conditions where you would tell your clients that yes you probably should look elsewhere?

MC: Oh, absolutely those often are not necessarily as related to the compensation numbers, which really is not gained that, much to keep people or lose them. They’re related to situations where lets say internal managements changed and the emotional politics within an environment is something that’s causing them to feel that their emotional health is at risk, their physical health is at risk, or perhaps their relationships with people that they care about. One of the interesting things is that people look at the compensation number and they think I’m not happy I’m just going to go to another firm. It’s not quite that simple because there is a tremendous emotional cost to changing firms they have to get to know a whole new system.

TM: It’s a different culture.

MC: Absolutely you know so there is your standard of living of one hand your standard of being on the other. Cause you’re going to have to work hard to build the relationships and to get your platform back in the organization.

TM: Now, what if I am an employee and I am bond to enter these negotiations. What are some of the things I should keep in mind?

MC: Be as clear as you can about how your compensation reflects your contribution to the overall department. If you’re disappointed with anything try not to put it in terms of your personal disappointment but put it in terms of what you think is required to make the overall organization as profitable as possible. For example, one gentleman that I talked to was concerned about his compensation; he had made more than everyone else on his trading desk. They think that his payoff for the year is bigger than the bonus pool and he was concerned he might be paid down. When we talked about the fact that everyone else was going to be paid down we considered the fact that the organization itself wants to reward excellence. It wants to be fair to the out performers as well as the under performers. So he needs to talk in terms of the overall culture and how that’s going to extend profitability rather than give me more personally cause I need it and I’m worth it.

TM: Now, how about four of these highest producers on the desk I know that these guys they do demand a high salary and they will threaten to go elsewhere. What will you tell your clients that are the employers on how to keep them?

MC: Oh absolutely, these are some of the trickiest situations that I deal with constantly because of course star performers are very fickle.

TM: True ha ha.

MC: That’s what makes them a star and they will push you. Often times when I talk to star performers what keeps them in an organization is really not money at that point. These individuals stay because they feel they have a platform that intellectually challenges them, they feel that the overall emotional tone of the organization is healthy enough not to detract from their quality of life, and they feel that they’re respected and given the right amount of management responsibility to be able to make their contributions in the industry. It really doesn’t all pan out but they will push and sometimes they will respect people more who come back and push back on them gently. So there is a net worth comfort zone to a star. They kind of have an idea in their mind of what they’re worth if you pay them too little you’ll lose them and if you pay them too much you’ll have a problem as well.

TM: All right well we’ll leave it right there. Thank you so much for being here Maggie

MC: Thank you so much

TM: For these and other stories you can log onto forbes.com and check out the market section.