Managing Expectations in a tough year.
As we round the corner on the 2010 Wall Street bonus season, we take note of some changing attitudes and expectations. Shrinking bonus pools, uneven disbursement of bonuses and an array of deferred schemes have left Bankers feeling uncertain about their earnings prospects. Many on Wall Street were disappointed and frustrated with their bonuses, especially with the break from traditional correlations between production and payouts. A London think tank expects a turnover of 20% due to bonus dissatisfaction. Flattening revenues in Q3 of 2010 in capital markets impacted 2010 and lingering concerns about regulations are effecting earnings projections for 2011. The majority of those we surveyed had seen their bonuses drop by between 10 and 30 pct from 2009 levels and even some have joined the “zeros” club. We observed VP level professionals faring better relative to their fellow Directors and MDs. We have also received many more requests from traditional sell side bankers to look out for buy side opportunities – perhaps in reaction to how this year’s bonus season and to get from under the regulatory hold. There seems to be a high degree of frustration felt on the street. That said, we have also noticed that not all bankers reacted to the softer bonuses the same way. It seems those bankers who were given early warning signs by their managers and who had time to adjust to the reality of shrinking bonus pools, seemed much more likely to accept the news and move ahead. People, like markets, react poorly to uncertainty. Managers who were successful at managing expectations and reducing uncertainty should expect a better return for their efforts via less defections.