McKinsey's Advice To Cost-Cutting Wall Street: Fire Us

When slashing expenses to offset collapsing revenue, it’s important not to demoralize remaining employees. Forcing staffers to take taxis, fly commercial, and fix their own Blackberries is bad enough. So wise firms hire consultants to figure out how to cut the rest.

Integrity points to McKinsey for spotting a huge cost line-item that, if eliminated, no one would miss.

Adam Jones, FT:

As well as getting rid of staff, financial firms have put the squeeze on their travel and entertainment spending in response to deteriorating economic conditions.

Now McKinsey claims that some US investment banks could save up to $2bn a year by cutting costs in ways that are less likely to antagonise their remaining workers.

The consultant reckons that for some banks, spending on things like real estate, IT and office supplies grew too fast during the fat years and could now be pruned aggressively without sowing discord among the troops:

Inititatives to curb expenditures need not be extremely demoralizing to frontline employees… 80 per cent of fixed costs have minimal or no impact on a bank’s employees or culture. Launching initiatives that target these areas, we estimate, could in many cases produce most of the noncompensation savings that banks aim to achieve while reducing the possibility of targeting areas that could damage employee morale.

Hang on a minute. I’ve just noticed the fifth entry on McKinsey’s list of investment bank costs that could be cut with “minimal or no impact on employees/culture”. The entry says “consulting”

See Also: Hard Times on Wall Street: Goldman Bankers Must Pay To Fix Own BlackBerries

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