One major byproduct of the industry's downsizing is the dissolution of the social contract that used to exist between employees and the bank.

An individual who obtained a bank job used to feel that this was a lifetime assignment, provided only that he or she was diligent, loyal, and competent.

In return for this lifetime assignment, the banker accepted lower wages than many people with similar jobs earned and displayed a dedication to the job that often exceeded employers' normal expectations.

To a vast host of people - those with college educations, high school diplomas, or even less - the bank was their life. And the banking industry benefited greatly from their dedication.

Toll of Layoffs

Now all this is passing.

As bank after bank announces giant layoffs, the numbers mask the hoards of individuals who gave 20, 30, or more years their lives to the bank and now find themselves out on the street.

One cannot blame the banks. Had the leaders in banking decided that they must continue to provide full lifetime employment, even though the chances in operations techniques made many of these people redundant, the industry would have found itself with a great many failures. It was prune the staff or risk everyone's job.

In many instances, moreover, the banks are far better off with a smaller corps of employees.

The Seniority Fallacy

To be honest, in today's complex and competitive environment, the bank that makes cuts based on seniority will be at a great disadvantage in competing against the bank or nonbank that has on board only those people with the skills and personal contact talent to meet present needs in the financial services sector.

In sum, Gridley, who said he had 30 years' experience, but really had one year's experience 30 times over, is no longer needed in his job of, say, entering data or preparing forms for management. Computers now gather needed information at its source and eliminate the need for much processing and many so-called middle managers.

So, harsh as it may seem, in breaking its social contract with its diligent staff members whose talents have become obsolete or who offered hard work and devotion but not the other talents needed today, many banks have gained a major plus.

A Day's Work and No More

But this downsizing and the breaking of the social contract is by no means all to the good. For at the same time as many workers have been pruned to the bank's benefit, many others - both in the bank and those entering the work force - look at what is happening and are deciding that they would be foolish to give the devotion to the bank that a generation ahead of them did, because it will not be appreciated.

As a result, bank top officers report that young trainees and young officers who formerly would have given their all to the bank now have the attitude "Eight hours a day for work is plenty, and the rest of my lifetime is my own."

The bank managers reading this column may respond: "Nonsense, my people are just as dedicated as ever, willing to put in the hours that I put in when I was their age."

Motivated by Fear

But how much of this is out of dedication and loyalty to the bank - as was the case in the -- t - and how much is out of sheer fear that if they don't provide the extra effort, they will be out on the street themselves in an environment in which new bank jobs are not easy to come by?

With the social contract broken, it may well be that when the economy recovers and jobs are more readily available, these young people we are counting on will no longer be willing to go that extra mile or, worse yet, may move on to other opportunities where this extra dedication is not demanded or expected.

In other words, banks may have a time bomb on their hands. They may be expecting a level of loyalty and pride that has been eradicated as a byproduct of the downsizing process.

What can banks do to counter this?

Recent History

One suggestion is to treat all employees the way banks started to treat women about two decades ago. Until that time, most banks refuse to give women authority even though the distaff side accounted for two-thirds of bank employees.

The attitude was "They are going to leave to have families, so why bother training them to be officers?" (In my first 15 years teaching at the Stonier Banking School we did not have a single woman in the class.)

Then the banks recognized that they needed this talent, so they took the attitude "O.K., they may leave to have families in a couple of years, but we will challenge them and work them so hard in the time we do have that they will have earned their keep so we will not be the net loser when they leave."

It worked. Some women have stayed, some have left banking. But few banks still lament, "We trained them and then they left us without any benefit from the training we gave them."

Maybe a similar attitude toward everyone is needed.

Perhaps bankers must reshape jobs so that they get top benefits from every worker every day and do not count on reaping the benefits in the years ahead. It may be only eight hours, but, boy, will we get our eight hour's worth!

This is one approach. There are many others. But the key must be a recognition that the loyalty of the Gridleys who made banking hum has been seriously breached.

The new Gridleys will work. But they will place serious limits on how much work they will be willing to do. And in forward planning, bank managers must keep this in mind at all times.

Mr. Nadler is a contributing editor of American Banker and professor of finance at the Rutgers University Graduate School of Management.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.