Former Goldome Chief Cooper Urges Cost Control As Cultural Discipline for Survival-Minded Banks

Thomas A. Cooper took the reins at Goldome in Buffalo in 1989, when the institution was awash in a sea of red ink.

Largely because of ruthless expense reduction, Mr. Cooper -- former president and cost-cutting specialist at San Francisco-based BankAmerica Corp. -- lifted Goldome into the black. In 1988, the bank posted a net loss of $119 million. By contrast, in 1990 the bank earned $37.5 million.

Nonetheless, Goldome remained starved for capital, and the Federal Deposit Insurance Corp. last month parceled out the Buffalo bank's franchise to Albany-based KeyCorp and First Empire State, also of Buffalo.

Shortly before stepping down from his post as chief executive officer at Goldome, Mr. Cooper summed up some of his accomplishments.

Many people talk about cost cutting the way they used to talk about the four-minute mile. Too often, they start by assuming that it simply can't be done.

But it has to be done. And cost cutting has to be a day-to-day cultural discipline, not a crisis mentality. The institutions that fail to recognize that fact are going to wither and die.

One problem is that bankers too often try to cut costs by going for the home run. We frequently say things like: "Let's cut the staff by 15%."

My first year at Goldome we were able to get 2,000 people out the door. But, once we completed the layoffs, expense reduction became tougher. We had to look for dimes and nickels and pennies.

It is not very sexy. But you have to look at every mundane detail.

To cut down on overhead, you have to look at such things as how to heat and light your buildings. In terms of maintenance, determine which areas of a bank need to be cleaned daily, and which need cleaning only twice a week.

Trimming Tech Costs

Look, too, at technology and the flow of information. Pin down what you are storing on hard copy, what are you putting on microfiche, and what are you saving electronically.

When I signed on at Goldome, the thinking was that we needed to buy another mainframe computer. But because we examined what was stored away on a page-by-page basis -- and discarded the waste -- we can now process twice the volume of accounts. And that's without the help of another mainframe.

On the advertising front, know your markets. Calculate the pull power of a full-page advertisement versus a half-page ad. Know your demographics: For example, find out which radio stations hit your target markets.

Seeking Suggestions

Ask your employees for ideas. They clearly understand the business and know where unnecessary work is being done. Spread the news about successful suggestions. Make sure the idea that saves pennies gets as many plaudits as the idea that saves $100,000.

A few examples of employee suggestions: A mail courier at Goldome suggested taking a cash advance each day to pay for gasoline. That saves us the couple of extra cents per gallon that customers pay on credit card transactions.

In addition, a team of employees decided that we could print our annual reports in-house.

When I came here in 1989, it cost us $250,000 to turn out an annual report. This year, we're spending less than $25,000.

Loose Standards

In the data-processing arena, four nationally recognized firms make bids on our prospective outsourcing project. But none of these firms could come within 15% of the cost efficiency we had already attained.

Our formula for success is simple: We don't do anything we don't have to do. And we run that shop like it's the U.S. Marine Corps.

In terms of layoffs, look to cut employees who don't have first-hand contact with customers. That means management. It's a tough pill for executives to swallow, but remember: For every guy like me that goes, you can staff a couple of branches.

Banks' cost-cutting efforts have improved in recent years. But one problem: For too long, we -- Goldome included -- have compared our mediocre track records with other performers doing the same things that we do.

We say: |In comparison with our selected market pool, we're not doing so bad.' But, in reality, the standard is already loose.

We have to start from a zero-based formula and ask: What are we doing solely because we've gotten used to doing things that way? How much do we do because our customers think it adds value?

In conclusion, one caveat. To be sure cuts don't affect your level of service watch the market carefully. We survey our customers regularly to determine their perception of our service. Any sign of deterioration there is a big red flag.

We have to remain market driven. We have to determine what markets we want to serve. And we have to get rid of everything not required to get that job done.

PHOTO : THOMAS A. COOPER advises banks to look at cutting back the number of middle managers.

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