Keeping an Eye Peeled for the Little Things
Bank of New York's Bacot Emphasizes the Need For Employees to Board Cost-Control Bandwagon
With cost cutting a top priority at most institutions, and with the industry on the brink of massive consolidation, bankers are studying executives who have already orchestrated mergers to see what insight they have gained. Two years ago, J. Carter Bacot, chairman of the Bank of New York, executed banking's biggest in-market merger after a long and bitter fight with Irving Bank Corp. Mr. Bacot enjoys his reputation as a tough cost cutter and smiles at being called a "black-belt penny pincher." In this discussion, he shares his philosophy for running a tight ship.
In banking these days, if you're not a low-cost player, you're not going to be competitive.
Commitment to cost cutting has to extend from senior management to the rank and file. And it has to be part of an ongoing process: You can't run a big cost-cutting campaign, stop it, then initiate another campaign two years later.
There are lots of little things you can do to cut costs. We sponsor anticlutter campaigns in which employees suggest ways to get the job done right the first time.
The last campaign resulted in ideas that saved the bank $2 million. Winning ideas ranged from complex -- custom software programs that increased productivity -- to simple suggestions to eliminate unnecessary forms and reports.
Banks also should make an effort to trim travel and entertainment expenses. The corporate joyride is over.
Senior management has to set an example. You can't tell employees to travel and entertain one way while you do another.
Looking at The Big Picture
Looking outside the organization, you've got to review the way you do business.
Several years ago, for example, banks were starting trust companies in Florida. Most of them wanted to base their operations in expensive properties.
When we started trust operations in Miami, trust officers saved by sharing an office with our Edge Act company.
We're concerned with the cost of employee health care. As a result, we've adopted a flexible plan that allows employees to pick and choose their healthcare benefits.
It's inevitable that health-care costs will go up. But the flex system is an attempt to contain those costs: Employees know the most efficient way to use their benefits dollars; they don't buy coverage they won't use. The savings at Bank of New York have been substantial.
Making Mergers Work
As consolidation continues in the banking industry, it will become increasingly important to cut costs efficiently in the wake of mergers.
Mergers can result in cost savings if done properly, with a commitment to savings on both sides. Sometimes, however, the two sides in a merger get involved in protecting their favorite operations. One side tells the other: "This division is doing just great." By the time they really get done dancing around, they haven't touched much.
Looking inside an organization, it's important to figure out ways to motivate your own employees to don the cost-cutting gauntlet.
About 70% of our employees own Bank of New York stock in one form or another. They understand that any cost-cutting effort that helps the bottom line helps them, as well.
We give out quality awards and praise people who submit successful cost-cutting ideas.
Remember: New ideas often result in greater efficiency.
PHOTO : J. CARTER BACOT said management has to set an example in keeping down travel and entertainment expenses.