Strategies for creating attrition-proof middle-office operations

Published on December 10, 2024 by Amrita Chakraborty

Middle offices are facing increasing employee attrition as companies strive to attract and retain top talent. In the past, employees would stay at one organisation for a long time. While turnover can enhance performance in certain contexts, excessive turnover, particularly in middle offices, could brand an organisation as high-risk. Retaining top talent is crucial for improving productivity, efficiency and innovation.

Introduction to middle-office functions

The middle office is an integral part of any financial services organisation. Key middle-office functions can be grouped as trade operations, performance and risk support and fund operations, as shown in the following chart:

Why employee retention in middle offices is important

As technology advances, nearly half of the current jobs could be automated within 15 years, creating a hybrid human-machine work environment. This shift will introduce new roles and skills, especially in middle-office operations, amid high worker turnover and intense competition. Retaining middle-office employees is crucial for maintaining operational continuity, ensuring compliance and smooth transaction processing. High turnover could lead to inefficiencies, errors and weakened risk management, potentially causing regulatory breaches and financial losses. Additionally, middle-office teams are frequently required to adapt to evolving investment strategies, increasing regulations and technological advancements, requiring experienced employees to navigate these changes and maintain a competitive edge. Smooth and effective implementation of strategic initiatives and aligning them with regulatory requirements would ensure high retention rates.

Main reasons for attrition in middle-office roles

1. Employee-specific reasons

• Tasks in middle-office roles are often repetitive and operational, making the work environment monotonous.

• The middle-office job profile involves less direct client interaction than does a front-office role. This may not be suitable for employees looking for client-facing roles.

• Middle-office roles require high attention to detail and accuracy, which could be stressful. This stress is compounded by constantly changing regulations and compliance demands, necessitating continuous updates and adjustments.

2. Industry dynamics

a. Evolving investment strategies

• The uncertainty of roles in the future due to the adoption of new technologies such as AI and automation could lead to employee attrition, with AI transforming financial operations.

• The importance investors attach to ESG factors further strains middle-office duties, as they require ESG data to be incorporated into risk assessments and reporting.

• The rise of digital assets and cryptocurrencies is a new risk, and increasing regulatory requirements are pushing middle-office teams to build expertise in these areas.

b. Increasing regulations

• Increasing scrutiny of anti-money-laundering (AML) systems, data privacy and cybersecurity demands that middle-office teams stay up to date and compliant with changing regulations.

• The diversity in regional regulations makes compliance increasingly difficult for multinational corporations and, as a result, their middle-office functions.

• The focus on capital adequacy and liquidity standards increases the middle-office workload, requiring assessment of whether firms comply with these standards.

3. Market dynamics

• High market volatility necessitates frequent assessment of middle offices, increasing stress and workload, especially during periods of turbulence.

Strategies for creating attrition-proof middle-office operations

A number of strategic approaches need to be followed:

• Vary tasks and automation: Automate repetitive tasks and provide employees with opportunities to engage in a mix of strategic projects so that tasks are not routine.

• Increase recognition: Develop recognition initiatives for middle-office staff who play critical roles, fostering morale and job contentment.

• Provide training and development: Provide employees with opportunities for continued learning in areas such as ESG criteria and digital assets, so they remain valuable in shifting landscapes.

• Ensure work-life balance: Provide for flexible working hours and maintain their mental health through implementing support mechanisms that reduce stress in dealing with regulatory demands and peaks in workload.

• Facilitate better communication: Relationships between front-, middle- and back-office staff must be less tense and foster a more work-friendly environment.

Long-term benefits of employee retention

• Enhanced expertise: Employees gain expertise and institutional knowledge, enhancing operational efficiency and ensuring effective decision-making.

• Consistency and stability: Less turnover leads to fewer process-related inconsistencies, higher service possibilities and smoother operations.

• Cost savings: Reduced turnover results in lower recruitment and training costs, enabling these resources to be used for other strategic initiatives.

• Strong team dynamics: Long-term employees create a collaborative culture, improving teamwork and intra-departmental communication.

• Improved compliance: Experienced staff are much better at handling complexity in regulatory environments, ensuring the firm stays compliant.

Building a resilient middle office

The backbone of maintaining productivity, reducing costs, enhancing morale and improving customer relations is retaining top talent. As employee retention increases, so will the quantity and quality of contributions towards a stable company culture and retaining vital knowledge. Middle-office functions thrive on task variety, recognition, training, competitive compensation, work-life balance and improved communication. All these strategies would help mitigate high turnover.

How Acuity Knowledge Partners can help

We are known for our customer experience research, insights and advanced analytics that help businesses meet the changing needs of customers. Certified as a Great Place to Work and recognised as one of India’s Best Workplaces for Women, we prioritise employee wellbeing, believing that satisfied employees lead to satisfied customers. We offer comprehensive healthcare and wellbeing support for employees and their dependants, including LGBTQ partners, reflecting our commitment to diversity and inclusion. By investing in our employees’ wellbeing, we foster a positive work environment that drives innovation, productivity and superior customer service.

Sources:

• World Employment and Social Outlook: Trends 2024 | International Labour Organization.

• It’s Time to Reimagine Employee Retention (hbr.org)

• What Is Employee Retention? Importance, Benefits, and Calculation | Oracle India

• 7.1 The Costs of Turnover – Human Resource Management (umn.edu)

• Understanding the Factors Driving Employee Attrition in the Modern Workplace (greatplacetowork.in)

• The Future of the Asset Management Operating Model (accenture.com)

• Middle level managers are the heart of your company | McKinsey

• Asset Management Trends: 7 Key Insights to Know | Morningstar

• Driving Change in Middle Office Operations | J.P. Morgan

• How financial firms can prepare for the 2024 regulatory landscape | EY – Global

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