During times of poor earnings, big corporations often undergo restructuring to cut costs in order to keep revenues and profits stable and to maintain a strong public image. Unfortunately, Barclays is currently undergoing this time of distress.
Barclays has been reporting poor earnings for the past few years. Specifically, Barclays posted a steep fourth-quarter loss of £514 million, driven in part by restructuring costs, an increased levy by the British government related to riskier financing and a £331 million charge for litigation and regulation penalties. That compared with a loss of £364 million in the same period a year earlier. (NYT Dealbook)
It is also still recovering from a series of scandals in the past few years, specifically the manipulation of global interest rate benchmarks. Understandably so, this really hurts Barclays image in the public eyes.
In order to deal with this ordeal, Barclays has undertaken a restructuring initiative in which it is cutting a lot of jobs. In 2013 alone, Barclays cut 3,700 jobs which reduced expenses by about $2.8 billion. These job cuts were primarily aimed towards individuals who worked in business lines that promoted riskier trading activity.
This year, Barclays announced that it would like to continue cutting costs by shedding up to 12,000 jobs. These 12,000 jobs make up about 8% of the workforce.
Whenever we delve into this touchy subject of job cuts and downsizing, we business students always get anxious. Many of us are looking into a career in finance and more specifically Investment Banking and so when we see that companies are cutting costs due to poor earnings, it triggers two possible reactions: the first being that we should try to break into another industry and the second that we need to work harder to become the best possible employee. These same two triggers are present among current employees as well. Given a tighter office space now and the impending loom of job cuts, employees are going to either work harder to ensure that their good performance will help them keep their jobs or give in to the pressure and lose their jobs. Unfortunately, during times like these, high performers may also lose their jobs.