The US head at one of the top trading firms in the world says he's cracked a Wall Street riddle
It's a question just about every business head on Wall Street has had to ask themselves over the last five years. A tough trading environment for fixed income, currencies and commodities, coupled with increased costs, has forced banks to pick which businesses to cut, and which to invest in.
Business Insider recently sat down with Slawomir Krupa, the head of Societe Generale Americas, and asked how the bank had tackled this conundrum.
The French bank was ranked 12th by investment bank revenues in 2016, according to analytics firm Coalition, ranking second globally for equity derivatives and third for futures and options.
It too has downsized, cutting US non-branch assets by more than $10 billion, taking the total below the $50 billion threshold requiring foreign banks to set up an intermediate holding company. It recently cut its mortage-backed securities sales and trading team in the fixed income business.
Krupa told Business Insider that the bank had been table to double revenues while cutting teams in half in some cases by spending a large amount of time figuring out which individuals actually contribute. He said:
- "Sometimes you have a team of ten or fifteen or twenty, and you wonder what is the addition you can make, and you end up dividing the team by two. You start subtracting people and all of a sudden the business flourishes."
- "It is really about understanding that in a team of 10 or 20 people focused on one specific segment, I am stating the obvious, there are specific dynamics. There is a leader. There are sub-leaders or leaders of sub-pockets. And in our business, including on the sales and trading side, that sort of dynamic doesn't work. It actually can be extremely detrimental to the business."
- "People in management sometimes tend to not spend enough time listening to people. This is where you catch the weak signals."
- "Sometimes you need that senior person to spend more time, and that's what happened here. It is understanding in a team of 50, or 20, or 5, who exactly is creating value? Who is the one who is very good at managing? Who is the one who actually sees clients? And who is the one who understands the flows in the market? And who can work properly with the sales force? And that is a very cumbersome effort, it hurts, but you really need to do it."
Here's the full transcript:
Matt Turner: How do you deliver growth while staying disciplined?
Slawomir Krupa: It is the people. I've read about this in books, and now I've experienced it here in my career. Sometimes you have a team of ten or fifteen or twenty, and you wonder what is the addition you can make, and you end up dividing the team by two. You start subtracting people and all of a sudden the business flourishes. Getting it right from that perspective is also a very thorough, very slow process. But it is part of getting it right, it is part of the growth. Being better at what you do involves stopping doing the things you are not good at.
Turner: That's an interesting point you make, because I feel like that is something that is happening across Wall Street. What's the secret to doing more with less?
Krupa: It's much to the credit to the team who did it. In the example I gave, it is really about understanding that in a team of 10 or 20 people focused on one specific segment, I am stating the obvious, there are specific dynamics. There is a leader. There are sub-leaders or leaders of sub-pockets. And in our business, including on the sales and trading side, that sort of dynamic doesn't work. It actually can be extremely detrimental to the business. Doing more with less, here it is making sure that basically you address the real reasons for underperformance, instead of thinking about more or less people. Doing this very systematically, team by team, maybe takes two years. It did take two years in our case. But it works. And the other comment I would make is that you get more support, because it's not in the firm's DNA to fire a couple hundred people, and then re-hire a couple hundred people. That's not the way we operate. Because we've done this very carefully and precisely, I think the engagement of the people in the team, the ones remaining, is much stronger, because they understand what we are doing.
Turner: What does that look like? You have a team of 20 and they are putting out revenues of X. And then you cut the team in half. What happens to revenues?
Krupa: In the case I have in mind they kind of doubled the revenues.
Turner: Really? with fewer people? So is that a result of people getting in the way of each other?
Krupa: Yes absolutely. The people dynamic sometimes results in unclear strategies at the execution level. I am not talking about big picture strategy, but what are the names we trade, what are the names we are very good at? What sub-sections and clients should we focus on? Not having the right dynamic in the team is translated usually into a lack of choice and or the multiplication of choices that don't make sense together in terms of that execution level strategy. And so getting rid of the dynamic issues helps you address the underlying tactical questions, and that's what is creating the value in the end. The combination of all those things.
Turner: When you look at the 20, how do you figure out who the right ten are to keep?
Krupa: There are two main things. One, listening more. It is not a catch phrase, it is real. People in management sometimes tend to not spend enough time listening to people. This is where you catch the weak signals. I have other examples, completely different, where everyone believes X about a situation, and then you know this tends to be the reference point for every one and the bias. Person A is the person who makes it happen and person B does this. I had a recent example where we started to listen around the situation a little bit more, and by taking the factual parts of the feedback that flies around and thinking about this, we realized about person A and person B, and I am simplifying here, but it was the other way around. So questioning your own biases in the way you assess people's performance is the first step. And how do you do this? By listening more to the stake holders of a given business. Two, spending the right amount of time focusing on these issues. Sometimes you need that senior person to spend more time, and that's what happened here. It is understanding in a team of 50, or 20, or 5, who exactly is creating value? Who is the one who is very good at managing? Who is the one who actually sees clients? And who is the one who understands the flows in the market? And who can work properly with the sales force? And that is a very cumbersome effort, it hurts, but you really need to do it. Deciding who exactly should stay and who should go requires lot of work and a lot of commitment. And you know we were lucky and I think determined enough to do it this way. I think we got a lot of things right. And I am very glad to have the team we have.
Turner: Where are you guys looking to grow? And is the redrawing of the boundary basically finished?
Krupa: This process is mostly finished. And the only reason I say mostly is because we are open to new ideas we could have or the staff could have. You have to be open to experiment. But it is mostly behind us. CMBS is an area of growth. Securitization as a whole has been a strong growth driver. Again, it is a historical business for us but we see more opportunities on a very selective basis. The pockets are adjacent to each other, so thats really the concept. Next to CMBS we opened our bank loan for real estate business. And then it is a case of really keeping on investing capital and resources in the areas where we are good, such as equity derivatives, fixed income where it makes sense.