He believes the financial industry has been going through a revolution as drastic as manufacturing experienced in the past two decades. But it is also making the same mistakes and could suffer similar consequences.
Paternalistic companies that used to offer a quiet life and steady progression are forcing staff to accept performance-related pay and sacking those who do not come up to scratch. Financial companies have cut a swathe through middle management and shed 50,000 jobs, offsetting all the new posts created by the 1986 Big Bang.
Mr Rajan says if companies are intent on moving away from 'cradle to the grave' security for employees, then something else has to be substituted. Staff morale and customer satisfaction are linked. If staff are in effect selling their services to the company, they must be made to feel they have been 'empowered' to make decisions.
Of course there are plenty of City businesses - mainly in the securities markets - where such thoughts are just twaddle, since fat bonuses can make up for the absence of caring, sharing management. But they do matter for the giants, especially the clearing banks and insurers.
Mr Rajan warns that unless the financial sector improves its staff management it will fail to weather the 'gathering storm' of European competition.
His worst case is that a further 22,000 jobs could be lost. If firms do hold their own against foreign competition, employment will still expand only modestly by about 21,000, after the disappearance of 10,000 clerical jobs. The increase will come from the likes of fund managers, dealers, corporate finance specialists and accountants. In absolute terms the rise is small, but skills are likely to be scarce and costly 'job-hopping' endemic.
The most alarming message for companies worried about costs is that this year there could be a 25 per cent staff turnover, which Mr Rajan says is largely because of rock-bottom morale.
That sounds on the high side, given anecdotal evidence elsewhere that job-shedding in big financial companies is shifting from natural wastage and voluntary redundancy to forced departures, because so many people are sitting tight, worried there may be no new jobs. But the financial industry would be well advised to take a good look at its personnel policies.
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