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«The Changing Nature of Financial and Professional Services in the City of London The Changing Nature of Financial and Professional Services in the ...»

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The Changing Nature of Financial and Professional Services

in the City of London

The Changing Nature of Financial and Professional Services in the City of London is

published by the City of London Corporation. The author of this report is Kerri Bridges.

The report is intended as a basis for discussion only. While every effort has been made

to ensure the accuracy and completeness of the material in this report, the author, Kerri

Bridges, and the City of London Corporation, give no warranty in that regard and accept no liability for any loss or damage incurred through the use of, or reliance upon, this report or the information contained herein.

September 2015 © City of London Corporation PO Box 270 Guildhall London EC2P 2EJ www.cityoflondon.gov.uk/economicresearch Contents 1 Introduction

2 How are workspaces changing?

2.1 Survey responses

2.2 Interview responses

3 What is the impact of technology on organisations?

3.1 Survey responses

3.2 Interview responses

4 What is the impact of regulation on the City?

4.1 Survey responses

4.2 Interview responses

4.3 Job advert analysis

5 How is FinTech changing the City?

5.1 Interview responses

6 Conclusions and implications for the City of London

7 Methodology

8 References

1 Introduction This report aims to draw together themes from recent research looking at the City of London, and how financial and professional services organisations are changing. This research primarily focuses on financial and professional services and changes in workspace design and layout, regulation, and technology. A number of strong trends have become apparent in these areas, and have caused some large and influential companies in the City to change their long-established working practices. Surveys were undertaken and leading City professionals were interviewed as part of the research process to test trends that had been identified through the examination of existing academic and journalistic research. This approach was used for each theme covered by this report (please see Chapter 7 for full details of the methodology).

Taking each theme in turn, the main observations at the outset of this research were:

–  –  –

Each of these themes presents challenges but also opportunities for the City. The next major change in the City is likely to involve the development and increasing prevalence of Financial Technology (‘FinTech’). The open-plan collaborative spaces of tech start-ups in this new sector are presenting a model for larger corporate organisations in the City to adopt a more entrepreneurial atmosphere. These new firms are creating ‘disruptive’ waves within the financial services industry, and as they are often well funded through mechanisms such as crowd-funding or venture capital, they are able to innovate extensively.

This report aims to assess to what extent FinTech is a force that could strengthen the City from within, as the competition that it is beginning to create for existing institutions, and ensuing innovation, may amount to the disruption that London might need to maintain its position in today’s sophisticated globalised marketplace.

1 2 How are workspaces changing?

There is a prominent trend in the City of London and in many workplaces in the UK towards collaborative workspaces and an open-plan layout, for reasons including the rise in agile working, changing technology, and the cost pressures on employers to be more cost efficient.1 Large tech companies are leading the way with this change.2 Facebook’s new head office in Silicon Valley, designed by world-renowned architect Frank Gehry, is one mile long and contains ten acres of open-plan desks. According to Gehry, the Facebook Chief Executive Officer (CEO) Mark Zuckerberg did not want any sophisticated or complex design, simply a flexible and cost-efficient space that facilitated collaboration and could adapt to the continuous changes of the business.3 Many City companies, over the past few years, have adopted more efficient, costsaving design strategies and hot-desking in order to maximise the number of workers per square foot.4 Hot-desking normally occurs in an open-plan setup, so the two often go hand in hand in the infrastructure of some companies. According to Martin Jepson, senior vice president at top office-owning company Brookfield, financial firms including banks want ‘more efficient and flexible buildings’.5 Other practical reasons for this shift to the open workplace include the fact that managers can supervise staff more easily and workers stay on task more where a supervisor is able to see employees’ screens.6 Workplace design in banks and financial services companies could therefore also be attributed to the pursuit of effective and compliant reporting lines, as well as saving costs.

There is a certain degree of criticism of open-desk setups, however. There is the risk to efficiency and productivity because employees may be distracted by activity within their line of sight or hearing; and employees may be apprehensive toward telling others who ‘steal’ their time that it is disruptive to their productivity.7 Distractions reduce quality of performance, add to mental workload and cause stress and fatigue in the David Ward; ‘Beyond the Open Office’, HR Magazine, published by: Society for Human 1 Resource Management, Vol. 60 No. 3; April 2015 pp.30-35 (p.31).

2 Patricia Brown, ‘The future of London’s workspaces’, Architectural Review [Website], 11 May 2015; Available from: ≪http://www.architectural-review.com/view/overview/the-future-oflondons-workspaces/8681430.article≫ 3 Oliver Wainwright, ‘Step into Zuckworld: rollerblading and selfie stumps at the new Facebook

HQ’, The Guardian [Online]; 8 April 2015; Available from:

≪http://www.theguardian.com/artanddesign/architecture-design-blog/2015/apr/08/facebookhq-mark-zuckerberg-frank-gehry-new≫ 4 Tom Bill, Lionel Laurent, and Christian Plumb; ‘Slimmed-down banks tighten belts on real estate’, Reuters [Online], 22 August, 2012: Available from: ≪http://uk.reuters.com/article/2012/08/22/ukbanks-property-idUKBRE87L09120120822≫ 5 Bill, Laurent and Plumb, 22 August 2012.

6 Liam Ward-Proud, ‘The open-plan office debate: pros and cons’, City AM, 28 March 2014, Issue 2096, p.43.

7 Edward G. Brown, ‘Making Open Office Plans Work for Your Organization,’ Society for Human

Resource Management [Website] Available from:

≪http://www.shrm.org/hrdisciplines/staffingmanagement/articles/pages/making-open-officeplans-work.aspx ≫ 2 workplace.8 Open-plan offices can bring about other costs, such as loss of privacy, spread of germs, and drop in employee morale.9 On the other hand, open-plan working and particularly hot-desking can allow people within an organisation to become more integrated. Mark Carney, Governor of the Bank of England, has his own office but also likes to hot-desk frequently, to get a better idea of how other teams are working, what they are working on, and also shorten the reporting line if something needs to be brought to the top.10 Having management and senior people interspersed through the workspace could work to reduce hierarchies and encourage collaboration, so in that respect hot-desking can be very positive.

Responses to hot-desking are mixed, according to an extensive survey carried out for the Institute for Operations Research and Management Sciences. The general trend identified in this research was that hot-desking fosters affinity to an organisation, identifying more with ‘the whole’ than ‘the team’, whereas assigned desks, proximate to one’s direct team sees greater identification of employees with that team.11 Where employees had their own desk, they tended to be more positive, and where they had to hot-desk, they were more negative about an assigned desk. Some research accredits this trend to physiological reconciliation to arrangements provided for them by their organisation.12 One journalist suggests that office design specialists need to be able to create different types of areas to cater to different working styles.13 This would indeed be a positive development. A hybrid approach is commended because it allows for the fostering of collaborative working but also allows for privacy and concentration, which is not always available in open-plan spaces. What is becoming a key feature of the City is the need to empower employees and give them control in order to create a successful workplace.14 The main question now is whether architects and office planners can design physical spaces that combine modern management philosophies with new technology to foster ‘healthier and more productive employees’.15 The answer to this question is in the affirmative as regards the new development at 22 Bishopsgate Liam Ward-Proud, ‘The open-plan office debate: Pros and cons’ 8 David Ward; ‘Beyond the Open Office’, p.32; Mike Williams, ‘Is hot desking all good?’; BBC 9

iWonder [Online]; Available from:

≪http://www.bbc.co.uk/guides/zgjmtfr≫ 10 James Ashton, ‘Mark Carney: the hotdesking Governor of the Bank of England who runs to

work’, London Evening Standard [Online], 12 December 2014, Available from:

≪http://www.standard.co.uk/business/business-news/mark-carney-the-hotdesking-governor-ofthe-bank-of-england-who-runs-to-work-9920553.html≫ 11 Millward, Lynne J.; Haslam, S. Alexander; Postmes, Tom, ‘Putting Employees in Their Place: The Impact of Hot Desking on Organizational and Team Identification’; Organization Science, 1 July 2007, Vol. 18, Issue 4, p. 547-559 (p.556) 12 Millward, Haslam, Postumes; ‘Putting Employees in Their Place’ p.553 13 Padraig Belton, How the tech industry is redesigning the future workspace; BBC News [Website] 1 May 2015; Available from: ≪http://www.bbc.co.uk/news/business-32523448≫ 14 Donna Flynn and Melanie Redman; ‘Balancing “We” and “Me”.’ Harvard Business Review.

Oct 2014, Vol. 92 Issue 10, pp. 50-57 (p.57) 15 David Ward; ‘Beyond the Open Office’, p.32 3 (previously referred to as the ‘Pinnacle’), which is built around the needs of employees and enabling them to have more control. Sir Stuart Lipton, whose company owns the development, recently gave the following statement on the 22 Bishopsgate


“Technically advanced with care for people at the heart of its strategy and taking new ways of working as its essence, the building will assist personnel to feel motivated and earn its place as the finest working environment in Europe.”16 This building is physical evidence of the fact that some workplaces are now being designed with employees in mind and contributing to competitiveness.

In summary, the workplace is used as a medium through which an organisation can show its values and culture to its employees and clients.17 The open-plan office is a social place, and working in that environment can build trust that leads to effective collaboration, leadership and information-sharing.18 Strategy, features and value are becoming more important than cost efficiency.19 Employees are going to be given an ‘ecosystem of spaces’ to work, giving them power over their workplaces, and allowing them to find areas best for them to work most efficiently.20 Companies are beginning to offer people choice about where and how they work, which is going to be ‘the main defining characteristic of the office of the future’.21

2.1 Survey responses

The vast majority (80%) of the participants surveyed for this report either ‘agreed’ or ‘strongly agreed’ (with most responses falling in the latter category) that they preferred their own assigned desk. Of those surveyed, but not all of those who preferred a desk of their own, 80% did have their own desk, and 84% spent most of their time working at their desk; which supports, therefore, the theory of reconciliation to the setup they have been given, for the nature of the work that they are expected to carry out.

David Rogers, ‘First images of new Pinnacle building’, Building Development [Website] 15 June 16 2015; Available from: ≪http://www.bdonline.co.uk/first-images-of-new-pinnaclebuilding/5075958.article≫ 17 Rob Harris, ‘The changing nature of the workplace and the future of office space’; Journal of Property Investment & Finance; May 2015 Vol. 33 No. 5.

18 Donatella De Paoli and Arja Ropo, ’Open plan offices – the response to leadership challenges of virtual project work?’ Journal of Corporate Real Estate, Vol. 17 No.1 2015, pp. 63 – 74 (pp.70Ben Waber, Jennifer Magnolfi and Greg Lindsay, ‘Workspaces That Move People’, in Harvard Business Review, October 2014 Vol 92 No. 10; pp.68-77 (p.72) 20 Flynn, Redman; ‘Balancing “We” and “Me”’ Harvard Business Review. (p.57) 21 Quote from Mark Eltringham, Matthew Jenkin, ‘Robots, hot desking and heat sensors: meet the

office of the future’, The Guardian [Online], Available from:

≪http://www.theguardian.com/small-business-network/2015/apr/27/robots-office-technologyflexible-working≫ 4 What needs to be emphasised is that those who prefer to have, or who are given an

assigned desk did not see much benefit if they worked in a solitary or isolated manner:

63% of respondents felt that they worked more effectively when they collaborated with others. This reveals that employees are willing to collaborate even though their desks are fixed. A respondent working in insurance stressed the importance of meeting with people from other teams to ask questions, for example, but stated that it is up to individual initiative to do that rather than perhaps send an email. Of the survey respondents, 58% use email at least daily because they do not feel they need to make calls or meet. This may have a lot to do with the culture of individual firms, however, and the way employees feel about approaching others. Even in an open-plan set-up, it may not feel like there is an ‘open door’ policy: certainly something for companies to consider.

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