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December 3, 2009
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About Nolan
The Robert E. Nolan Company is an operations and technology consulting firm specializing in the banking industry. Since 1973, we have helped banks innovatively redesign processes and apply technology to improve service, quality, productivity, and costs. Our consultants are senior industry experts, each with over 15 years of specialized experience. This depth, coupled with our collaborative approach, enables us to expedite and magnify improvement initiatives for our clients.

Visit our website to download a demo of our annual Efficiency Ratio Benchmarking Study, articles, and client success stories.


Cutting Costs Across the Board:
A Necessary Crisis Strategy?
By Kim Wilkes
Senior Vice President

In times of financial crisis, many companies are forced to initiate cost-cutting measures. For most financial services firms, this means headcount reductions. If you Google "cost cutting strategies" you will find approximately 1.8 million hits. Yet, many executives will take the "easy way out" and demand 10 to 20 percent cuts across the board. This is not a strategy. The expectation is that the "fat" will be trimmed while the result may be just the opposite.

Consider this: An across-the-board headcount reduction will impact the cost conscious manager the most and impact the high-cost manager the least−just the opposite desired outcome. Cutting costs in an area where the manager has always been conscious of the number of employees required to do the assigned work will, in effect, be cutting into the muscle, not the fat. Conversely, a manager who has operated with excess staff will be able to cut and feel less (or no) pain. Unfortunately, this manager will probably also be praised for their ability to weather the storm.

One of the quickest and most equitable methods of determining headcount requirements is development of staff models. These models determine the required time to complete the current workloads and then determine the required number of employees necessary. The models also take into account vacations, sick time, overall staff experience, volume fluctuations, and supervisory personnel. Staff models also yield the invaluable benefit of being able to forecast future staffing needs based on workload volume increases or decreases.

The result of implementing staff models will be the true identification of "fat" and the ability to trim costs with the least negative impact on productivity and service. Companies that have implemented staff models rarely, if ever, resort to across-the-board cuts because they have the ability to focus on areas where cost reduction is deemed appropriate. In fact, many companies that have long utilized staff models do not look at headcount reduction as a first solution when crisis times arise.

The Robert E. Nolan Company has a 35-year history of helping companies develop simple, yet effective, staff models. If your company is looking for ways to reduce expenses in an equitable way, we can help you pinpoint where they exist. Remember, across-the-board headcount reduction is not a strategy; it is, most times, a knee-jerk reaction.


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