University of Toronto study shows that too much work-life balance won’t lead to better results
Work-life balance is one of the most prolific phrases in today’s financial services industry, however hard it can be to achieve it.
Back in March, a group of junior analysts at Goldman Sachs drew attention to the pressure they were under with an open slide presentation detailing their 98-hour working weeks and trying to survive on just 5 hours sleep each night.
The story grabbed headlines across the world and Goldman’s CEO David Solomon responded publicly to address the issue.
But can too much work-life balance start to erode performance?
According to a newly published study from the University of Toronto’s Rotman School of Business, there appears to be a limit to the improvement that can be made to financial performance from a balanced life.
An analysis of 6,000 Glassdoor employee reviews of workplaces and forecasting accuracy reveals that improving the work-life balance of hardworking analysts does produce positive results for both the analysts and their firms.
Too much balance?
The importance of balancing working with home life to avoid burnout has been acted upon by some of Canada’s major financial institutions in light of the pandemic and the Goldman Sachs revelations.
But, when looking at accuracy of analysts’ forecasts including future earnings and whether stocks are a good pick, there was no improvement once analysts reached 3.5 out of 5 on a scale of work-life balance.
The same was true for investment returns based on analysts’ stock recommendations. Researchers believe this may be because a certain amount of demand and mental stimulation is required to efficiently process information.
"If you have too much work-life balance, that means you're not focusing enough on work," said Ole-Kristian Hope, who is the Deloitte Professor of Accounting at the Rotman School and worked on the research with three colleagues. "A little bit of stress is probably a good thing but if it's too much then the pressure becomes daunting and you can't do anything."
The study is the first to examine the role of work-life balance in financial analysts' performance and career advancement.
Despite the long hours that financial analysts often work, especially during quarterly earnings seasons, the researchers acknowledged that those in these roles are not typical workers, tending to be professionally aggressive, career-oriented and having a higher tolerance for stress.
"They're not your typical animals," said Prof. Hope, making it less obvious that work-life balance would affect them the same as it does other workers.
The full study is available at: https://www-2.rotman.utoronto.ca/insightshub/
