Early in the COVID-19 pandemic, State Street Corp.’s chief executive, Ron O’Hanley, took layoffs off the table for 2020 to give employees some added security during a troubling time. But the State Street workforce won’t get the same assurance for 2021.
Chief financial officer Eric Aboaf told analysts and investors on an earnings call Tuesday that the Boston financial services giant will eliminate about 1,200 positions in 2021, mostly in middle management, to be partially offset by some new critical hires. That represents about 3 percent of State Street’s global workforce of 39,000, although many of the affected employees may find other jobs within the company.
The company is accounting for a one-time charge of $82 million to pay for the severance costs associated with these job cuts.
Aboaf said the decision complements reductions in senior-management ranks made in 2019. State Street, which provides services to mutual fund companies and other asset managers, started out that year with a plan to cut 1,500 jobs. By the time 2019 was over, State Street had cut about 3,400 jobs in high-cost locations, including Boston, through layoffs or attrition.
With the latest cuts, the company plans to save $120 million in 2021 and about twice that amount in the following year, Aboaf said. State Street expects to save another $30 million in real estate expenses this year by shrinking its office footprint.
However, O’Hanley said that State Street remains committed to its plans to lease about 500,000 square feet for its new headquarters in the One Congress tower that is being built at Government Center; O’Hanley said the company is on track to move in at the end of 2022.
State Street has repeatedly faced pressure from Wall Street to keep expenses in check, and the events of 2020 did little to ease that pressure. State Street’s revenue declined 4 percent in 2020, in large part because low interest rates drove down its interest-related income. But O’Hanley said the main reason for the job cuts is that automation in financial services has simply become more effective and efficient.
“The power of automation is the biggest thing that’s driving it,” O’Hanley said. “The same thing is happening in [financial] services which happened in manufacturing, starting 30 years ago. . . . The jobs that are left are higher-skilled content, and frankly more interesting.”
O’Hanley said he expects many of the employees who will lose their current jobs will find new ones internally, through the company’s Talent Marketplace job-placement system.
State Street did not have information about how the Boston area would be affected by the job cuts. The company employs 10,000 people in Massachusetts, primarily in Boston and Quincy.
O’Hanley made the unusual no-layoffs pledge in April, one month after the COVID-19 pandemic clobbered the local economy. The move was intended to stabilize morale during a time of economic upheaval.
“Nobody knew back in April what was going on here,” O’Hanley said. “Nobody knew [when] there would be a vaccine. Not that we’re out of this by now. But at least one can envision the end here.”