Executive SummaryIn recent years, there has been a steady increase in the popularity for the RA program among Financial corporations, most probably due to the higher turnover rate in the finance field (nearly 19%), where youngsters are leaving demanding finance careers for opportunities at less demanding, yet more rewarding tech companies. With a tight labor market and with the unemployment rate reaching its lowest rate since December 2000, the demand for Finance professionals continues to be extremely high. With this in my mind, I began analyzing different options for the Markets Group to develop and maintain a competitive workforce. In order to demonstrate the commitment to this rotational program, senior management should include it in the goal-setting process for Markets Group. The RA program should be implemented with clear objectives for each segment of the rotation in terms of expected outcome.
The program should also include feedback and evaluation of the RA and their manager to measure their performance against the objective and effectiveness of the program. This feedback and performance should also tie directly to managers’ bonus and their performance evaluation structure. We will implement frequent opportunities for formal multi-directional feedback such as ‘360 degree’ feedback.An effective RA program will bring many benefits to the Markets group, some of which include a reduced employee ramp-up period and a productive employee from day one. Management can also identify whose ideals aligns with the internal culture of their group to find the best fit.
But in-order to establish this program, we would need to secure funds in the range of $2.3 to $2.5 million, comprising mostly of recruitment fees, benefits, and 1-year salary for the analysts. For year 2and year 3, I added a 10% increase to include additional benefits (including merit increase, external training, etc.) Though this allocation is not currently budgeted, I am sure we can make a proposal to the Board who will see the benefit in implementing this program within the Markets Group (MG). Background’The MG business lines within the Federal Reserve Bank of New York (FRBNY) fulfills a range of responsibilities for the U.S. Treasury, including planning and executing open market operations (OMOs), analyzing global financial market developments, executing lender of last resort operations, providing financial services for international customers and serving in a fiscal agent capacity for the U.
S. Treasury’ . The MG business lines use several tools to implement monetary policy in support of its statutory mandate to foster maximum employment and stable monetary policy. OMOs are conducted by the Trading Desk (within MG), which act as the agent for the Federal Open Market Committee (FOMC). Historically, OMOs have been used to adjust the supply of reserve balances to keep the federal funds rate around the target federal funds rate established by the FOMC.
The average daily balance of the Federal Reserve System Open Market Account (SOMA) holdings as of December 2017 is approximately $4.2 trillion. After providing for the payment of dividends, the Reserve Bank remitted $61.7 billion (profit made from the holdings) to the Treasury. In order to continue managing operations on behalf of the UST, it is essentially to have the necessary human capital. The task of training and retaining talented candidates in strategic positions has always been one of the challenges for many corporations, and the bank is no exception. With the implementation of this RA program, we can focus our energy on hiring bright graduates of Economics/Finance programs who have an interest in helping to stabilize the economy and support the underlying functions.
This program within the Markets group will ensure a constant supply of resources and workforce available should an experienced resource leave for the other opportunities. Project ProposalAfter analyzing similar RA programs in the industry, I think it is important for the RA coordinator to focus on the following objectives:1. Establish clear objectives for the overall program2.
Establish clear objectives and detailed tasks/activities for each segment of the rotation 3. Establish procedures to ensure the opportunity provides meaningful experience4. Establish formal multi-directional feedback 5. Establish formal job posting program where the candidates can select to find opportunities of their choice.
In order to ensure the flawless execution of functions to support all operations, my proposal is for us to hire 15 RAs who will be rotated through the five main business areas in MG. Each RA will spend 6 months in each of the business lines and will be placed into a support function within the MG after the conclusion of their last rotation.Business Line No of Rotational Analyst (RA)Markets Operations, Monitoring and Analysis (MOMA) 3Central Bank and International Account Services (CBIAS) 3Discount Window and Collateral Valuation (DWCV) 3Group Shared Services (GSS) 3Business Technology (BT) 3 As the RA coordinator, I will ensure that the RAs effectively meet the requirements of their rotation before transitioning into their next scheduled business line.Expected Benefit from the ProjectSteady Source of Qualified ResourcesApart from having a steady source of qualified resources, role rotation boosts succession planning efforts in a couple of ways.
For one thing, when a senior position is vacated, an RA will be better prepared to step into that role if he or she has already gained exposure via the rotation program. In more general terms, these RAs need to understand the big picture of the Markets Groups’ operations, before they are ready to take on advanced roles in our organization. These RAs will gain a broader view of our organization and see how different business lines and policies contribute to the financial stability to help them make better business decisions in the Groups where they end up. The holistic benefit of the exposure to different divisions within multiple functions will better prepare them to deal with the unpredictable nature of the economy. Reduced Employee Ramp-Up Period and Established Cross-Functional RelationshipsHaving an experienced RA will also reduce the ramp-up period which is the time it takes an employee to get acclimated to the work environment.
Some sources suggest it can take as long as six to eight months for an employee to become fully productive. Often, new employees get less work done because they’re still figuring out how to execute their responsibilities, navigate new communication workflows, and establish relationships. For example, there is a Code of Conduct that every employee must follow to ensure confidentiality of their work. Any signal made to the external market, even the sale of a stock during the FOMC period by the staff, staff’s spouse or their children could cause market fluctuations. Hence participating in these rotations where they prepare relevant intelligence reports, sit in on high-level policy meetings, and participate in communicating with the Federal Reserve Board under the guidance of a mentor would give them the confidence to dive into their position.Another benefit of the RA program is that it helps builds networks where resources learn the different working styles and cultures within each area of the Markets Group.
Fresh New IdeasQualified RAs, fresh out of college have innovative ideas and a unique ways of thinking, which can help bring the latest ideas and renewed energy into our business lines. We can benefit from their academic and technological capabilities where they are quick to build the latest models with greater accuracy and insight. Challenges and How to Deal With ThemRA’s leaves the Bank after the RotationIf an RA leaves the Bank after the three year rotation, FRBNY will fail to reap the benefits that were invested in their training. Though we cannot prevent this from happening, we should implement successful measures to reduce the likelihood of occurrence by understanding the needs of young professionals.
Lack of EngagementIt is known that young professionals, especially millennials are the least engaged employees of all generations (29%). They want a comfortable, well balanced life where physical and mental fitness are priorities. By increasing flexibility in work arrangements and the level of their engagement in the decision making process, we can increase their level of ownership and alignment with the overall mission of the Bank. Lack of Program StructureOne of the other potential pitfalls is the lack of structure in the program. In less structured programs, RAs are often made to work on meaningless tasks, leaving them less engaged in the mission of the organization. The Markets Group must make a plan for each employee to receive the training and mentoring they need to succeed.
Assigned managers must sit down with them on a regular basis and gauge their experiences and assist with areas for improvement. Relevant questions may include: “Do they have the resources they need? Have they encountered any problems with processes or co-workers?”. Takes Time Away from Senior ResourcesOne of the other challenges with the RA program is that mentoring and providing feedback could take time away from senior resources, who are already constrained.
Even though many believe that mentorship is the best path to career success, adding responsibility to an already busy executive can be exacting. One of the ways to best alleviate this stress is to have the RA engaged with a few associate mentors in each group where there can be structured weekly feedback sessions and an opportunity for the RA to discuss their progress and shortcomings.Cost of ImplementationCost-per-hire (CPH) is a general term used across the industries to calculate all the costs associated with hiring a resource. Based on my calculation in the corresponding table below, the estimated cost for Year 1 is around $2.
3 Million.The estimate for Year 2 and Year 3 should include a 10% increase to match raise, merit increase, variable pay, training assistance or anything else the management would like to provide them with . The estimate for Year 2 and Year 3 would be approximately $2.5 million. The following table is based on estimated calculations of both external and internal costs. 1. External CostThis is the cost that is usually associated with screening and onboarding candidates and are listed in detail in the table below. Since the Fed already has an established system to handle all Human Resource associated expenses, this program can leverage existing services to keep cost at a minimum.
Since many of these fees are scenario based, my estimate per RA is approximately $5,000 for a total of $75,000. This fee will only be incurred in the first year as the investment in the hiring of RAs.2. Internal CostInternal costs include expenses that are associated with the items listed in the following table. These are also yearly recurring costs that we need to take into account for Year 2 and Year 3. ConclusionAfter conducting thorough cost-benefit analysis, it is evident that the Bank should allow me to start executing on the plan to implement the RA program within Markets.
The MG on behalf of FRBNY has remitted $92 billion in profit in year 2016 and $61.7 billion for the first three quarter of 2017 to UST . Creation of the RA program would ensure a constant supply of skilled resources to efficiently conduct operations on behalf of the UST. In comparing with the profit generated year after year resulting from OMO, financing the establishment of the RA program is well worth the investment.After reviewing the details of my proposal, I am sure you will see the benefits of the RA program in mitigating the risk of losing this young demographic at the Bank. We will easily be able to reduce the ramp-up period and these individuals will be productive from Day One as they will already be acclimated to the workstyle of the groups that they chose.Young professionals, unlike their predecessors are not interested in the extra income that the financial field offers.
They are more interested in a balanced life, are moving away from the large financial institutions and are gravitating towards tech companies such as Google, Facebook, and Amazon, which resonate more with the younger workforce. FRBNY has a responsibility to ensure young professionals are given the attention and the training to co carry out its mission of stabilizing the economy. The rotational program will help the bank in many ways including recruiting and retaining the best and the brightest.