I’m a vice president in an investment bank. I’ve been here five years after joining through a side entrance as an associate, and if I’ve observed one thing, it’s that banks are wasteful places. There’s a lot of beating of the cost-cutting drum in the C-suite. but on the floor we’re still spending like crazy. No one seems to see it, or to understand the costs that are there to be plucked out.
If my managing directors (MDs) want to get serious about cutting costs in this business next year, I have some suggestions. They’re simple, but revolutionary in finance terms.
1. Stop making redundancies: Forget cutting costs through redundancies. Redundancies sound like a good way to cut down on costs but the reality is that a lot of the people who are let go just didn’t get on well with their managers. I’ve seen excellent performers cut. Clients often move when salespeople move and this ends up costing the bank millions throughout the year. Redundancies should be a last – not a first – resort.
2. Stop travelling: Bankers think they need to travel to meet clients and colleagues and to close deals. There are probably thousands of trips a year that are completely unnecessary. Some trips are planned around weekends. Hmmmm. I’ve come across an MD who took three people from his team across the U.S. from London to meet clients, all travelling in business class. Imagine how much a trip like that costs! Why not give each employee $100USD per flight when they travel economy instead of business class? Plenty of people would go for the offer. Others need to cut down on unnecessary trips. .
3. Actually complete the lifecycle of software development: Technology and banks are not the best of friends. Tech companies like Facebook, Apple, Snap and so on have grabbed the best talent on the street. This is a problem for banks, which have big IT budgets, but suffer a constant turnover of IT staff. Whenever someone new is hired in, they want to start something new and there’s zero progress on existing projects. Solution: pay IT people more so they don’t leave and actually stay to achieve something. In the long run, this will cost less.
4. Stop moving desks around: Similar to technology, new managers want to change things around and the easiest way to do so is to reshuffle the desk layout. The justification is usually that this is being done to “improve communication”, the implication being that their predecessordid a bad job. Some moves are just a desk or two away. Even so, rumour has it that it costs a £1k or so to move each desk – Ouch.
5. Stop promoting bad managers: Just because you’re good with clients, that doesn’t mean you’re a good manager. Client people are promoted as a means of retaining them. But experience suggests they’re often self-serving narcissists. It ends up costing the bank in resignations: people don’t want to work for bad managers.
6. Ban the taxis and minicabs that wait outside the office with their meters running: We all get stuck on client calls that prevent us from hanging-up and meeting the taxi waiting outside, but there’s far too much of this in banking. The delays end up costing thousands. Set a limit on taxi waiting time.
7. Turn all the screens off at night: A trader now can’t do his or her job without a huge array of screens. I have seen traders with eight. If i were COO, I’d make it a policy to switch these screens off after work. It would save costs and be good for the environment.
8. Give us free coffee and snacks: Bloomberg cleverly provides staff with free drinks and snacks. Most banks, on the other hand, charge more for in-house food and drinks than surrounding shops and coffee houses. Their coffee doesn’t even taste better. So what do we all do? We leave the building to get a coffee from outside. Think of how much this costs the bank. A trip for a coffee in a high-rise building can take at least 10 minutes!
9. Dump the global orientation element of the graduate program. Every year, banks fly all their graduates to a city (either New York, London or Hong Kong) for their ‘global orientation.’ This is a month long program that introduces the future of the firm to the world of banking. It’s exciting when you’re 22 years old, but is it really adding value? I would respectfully say no. Get rid of.
Joshua Braden is the pseudonym of a VP in a U.S. investment bank
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