Why the CEO of the world's biggest financial services company didn't fire anybody during the financial crisis

Bill McNabb was named Vanguard’s CEO in August 2008, just a month before the financial crisis really started breaking down.

In September 2008, Lehman Brothers would file for bankruptcy, Merrill Lynch would be taken over by Bank of America, and the world would watch in awe as the global financial system began a free fall.

Though McNabb had just taken over the company he had worked at since 1986, he was prepared to remain calm while everyone else seemed to be panicking.

And while other firms were laying off workers en masse, Vanguard — which is the world’s largest financial services firm with over $US3 trillion in assets under management — did not get rid of a single employee because of the economic downturn.

“It probably will be one of the defining parts in my career,” McNabb told Ritholtz on Bloomberg’s Masters in Business Podcast last month. “It was Armageddon in financial services and people were laying thousands of workers off.”

But McNabb decided to take a different path. In addition to making sure the firm’s funds were secure, he worked to ease employee fears, telling them that no one would be fired.

“We said to our people ‘Don’t worry about your jobs. You all have jobs and you’re here to serve the client. No one is going to lose their job over this. We want you focused on being here for the client,'” McNabb said.

“And boy, that set a tone inside. I also think that it really helped with the client interaction because people had confidence when they were talking to clients.”

McNabb told Ritholtz that his actions during the crisis were not something he openly discussed before. But he explained that keeping his employees calm was crucial to the functioning of his company during the tumultuous time. Keeping his employees calm, he said, helped to keep his clients calm as well.

“You can tell when you’re on the phone with someone who is worried about their job,” he said.

You can listen to the full 2-hour conversation here ยป

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