Illustration: Sarah Grillo/Axios
In an article published Thursday in the Financial Times, current and former Bank of Silicon Valley employees cited the bank’s commitment to remote work as one of the reasons for its failure.
why is it important: The day after the collapse of the 16th largest bank in the country everyone is trying to understand what happened.
- Whether remote work led directly to a bank failure or whether poorly managed remote work was simply a sign of bigger problems in the business, we may never know. Either way, what happened at SVB will likely enter into the wider debate about returning to the office.
Details: Banking has been leading the charge back to the office for some time, and SVB was an exception in its commitment to something different.
- From the company career touted its flexible culture. “If our time spent working remotely has taught us anything, it’s that we can trust our employees to be productive wherever they work,” the site says.
- SVB’s management team was spread across the country, with CEO Greg Becker sometimes working from Hawaii, according to the FT.
- Yet SVB included remote working as a risk to its business in its 2022 annual report – partly because of the IT issues posed when employees are scattered across the country, but also for productivity reasons.
- The FDIC, which now runs the bank, has told staff they can continue to work remotely — except for essential workers and branch employees, per Reuters.
The big picture: Whether or not remote work is successful in an organization depends a lot on how it is managed.
- “There are well-run organizations that operate remotely,” said Kevin Delaney, CEO of Charter, a media and research firm that works with companies on talent strategy. And some companies abandoned remote work or hybrid work models because they weren’t well managed, he said.
- Best Buy, one of the early pioneers of hybrid working, got rid of its hybrid working policy because it stopped training new employees on how to operate in a flexible work environment, resulting in cultural issues. (Read this 2021 New Yorker room for more information.)
- Yahoo has called all its employees back to the office ten years ago when a new CEO took the helm and tried to turn this sinking ship around.
The immediate cause One of SVB’s failures, as we’ve said before, is that the company failed to consider the risks that a high interest rate environment, coupled with its concentrated, technology-intensive customer base , weighed on its balance sheet.
- Then his public communication around a necessary capital raise incited panic, leading to an unprecedented viral bank run, as reported by Eleanor Hawkins of Axios.
- It is certainly possible that if more executives worked nearby, these missteps would have been avoided. But it’s hard to really know.
The bottom line: Companies looking for a reason to bring workers back to the office can find it in this article.