Filene's Ideas Grow Here

Reminded me immediately of a rumor two years ago about a similar approach – only the other was purported to be looking to fire customers rather than employees. (That purchase did go through, btw.)

Dropping 45,000 people just like that to get revenue per employee in-line reads, to me, like “People? Who gives a damn about people?”

Contrast that Citi’s “We Love People XOXOXO” promise of this:

this:

and this:

...and it’s just a tad ironic.

William B. Smith’s heart is as cold as his smile is gigantic.

To even suggest dropping 45,000 employees in such a casual manner gets me all angsty. How can you expect to build employee loyalty, much less customer loyalty, with that kind of approach?

Citi is a victim of its own size. Changing economic times can lead to huge swings in employment in an organization that big.

I’m not sure this highlights any difference between CU’s and banks – instead, it highlights the risks (and rewards) of becoming huge. Unless, of course, you are suggesting a asset/member cap for CU’s?

It should be noted these are mutual fund managers not Citibank execs. That wasn’t immediately apparent upon the first read.

That said, while 45k is just a crazy number the part after it, and I may be in over my head here, is a bit telling. They need cut 45,000 people to get the revenue to employee ratio in line with what the competition is doing (which is more, with less). That screams horrid inefficiencies regardless if they’re money grubbing or not. The stat here is: either get revenue up, or costs down.

To me it sounds like Citi grew too fast started throwing people problems and now needs to do some sorting out. However, if they were to follow Billy Smith’s suggestion here they’d be severely damaging their brand (considering their current marketing esp) – at very least in the eyes of their employees. Of course being a Fund Manager I somehow doubt he’s as concerned with Brand as he is with Balance Sheet.

It’d be best if they can find a less dramatic way to iron out those inefficiencies – but even that would probably mean cutting jobs somewhere. Just not on the scale of a college town. Eck.

Why do we keep hearing this ‘noise’? Yes let us do something to create longer line ups for the owners? Let senior manager’s run the system, not the owners. I guess if your drop these people you look better and get what? 1. golden key to the exec washroom 2. bigger parking space 3. BMW 700 series company car

@Credit Union Warrior

So true, I actually written something along these lines (though not so eloquent) and then deleted it.

To me the difference here would be that instead of Fund Managers licking their chops at the possibility of better employee to revenue ratios because what it means to them, you’d find that an under performing CU who starts to perform better suddenly can offer much more to their members. (Member’s licking their Chops perhaps?)

Thus the CU difference for me here is: Banks running a business well = Moneyhats for Investors

CUs running a business well = Killer Services, Rates and Moneyhats for Members

You know, this whole for-profit, reward-the-shareholders thing is killing Citi right now. If they switched to a CU, they could reduce some of the pressure. ;)

On a related note, has anyone been following the recent foreign investment in some of these large banks? I am talking substantial investments. I propose that financial institutions add “nutrition facts/labels” just like you see on our food items. The label would disclose who owns the financial institution. I really don’t think the average American knows about this foreign investment and if they did they might care.

I am not advocating protectionism as I believe in a free market. I do like full disclosure and transparency.

Brent, you get the award for most creative response…I trust Mr. Smith won’t be sending you a fruitcake this year.

When I read this article, I got a vivid sense of how stock held entities are influenced. If a credit union is performing like Citi, you wouldn’t have Wall Street fund managers talking about slashing head count. Instead you’d have a volunteer group of members discussing long-term options like a capital draw-down, innovations in the delivery of services, or something generally focused on a long-term perspective.

The trick is how to effectively communicate that difference. I like Doug True’s idea of a nutrition label. Maybe you can get Ralph Nader on that one, Doug!

Banking is so ripe for revolution…this is how it all begins.

Reading the article and these posts the stark difference is profit motive, size, risk tolerance, and foreign ownership.

While foreign ownership has its own set of issues, I don’t think that extends the difference with credit unions; bank owners want profit. It is the same regardless whether the owner is domestic or foreign.

Profit motive and risk tolerance are linked. When Citibank was ramping up personnel chasing the profit, they purchased the risk of a down cycle and are now faced with the unpleasant task of adjusting the size of the organization.

Size just makes the numbers bigger than a credit union will see. We can’t reduce by 45,000 people because we don’t have 45,000 people.

So what is the stark difference?

Credit Unions do not, and in some cases cannot, chase the profit chain as aggressively as others. Therefore we do not incur as great a risk in the down cycle.

That being said, the impact of economic cycles are just as real regardless of size, and a a good steward of member assets we need to be more proactive in maintaining the appropriate economies of scale.

As margins compress and competition increases we will be required to sharpen out pencils. Perhaps not at these draconian levels, but the economic facts are the economic facts.

We are kinder and gentler, but how long can our not-for-profit, tax-exempt, cooperative-ownership status allow us to be kinder and gentler as opposed to a more bottom-line focused approach?

We do not have the analysts calling for drastic cuts; but in our stewardship role do we have the responsibility to call the question?

I found it interesting that the fund manager mentioned only cost-cutting as the way to deal with Citi’s problems—nothing about growing top-line revenue. The previous post echoed this line of thinking: a) things are tough; therefore b) we must cut costs. Down markets would seem to be great times for Citi – or CU’s – to add customers (members) and increase revenue (new products per member), b/c this cost-cutting/retrenchment mentality is so prevalent among financial institutions. In short, the competition is sucking wind and their shareholders are demanding cutbacks. Given the general overcapitalization of the CU industry, shouldn’t CU’s go against the grain on this one and really make hay? I don’t see why not. We’re not Citi – or any other bank – after all.

I’ve got a couple of thoughts on this:

• Citi claims some 370,000 employees worldwide, so the reduction we are talking about represents a little over 8% of their workforce. Don’t get me wrong, that is a lot of families, but unfortunately layoffs of this size are not unheard of in our present day economy.

• It looks like Citi wasn’t going on a hiring tear to increase profitability or throwing people at their problems. They were playing the acquisition game that our financial institutions (both banks and CUs) are so in love with. The people were just by-products of the acquisition.

If you’ve got some spare time, look at the Citi 4th Quarter and Full-Year 2007 Earning Review. If I’m reading everything correctly, I read that 50% of Citi’s 2007 Expense Increases and that 75% of the Headcount Increases were due to acquisitions. All this to get a 4% boost in revenue. I know it’s crazy, but that’s the game everyone is playing right now.

What does this article and these comments tell me about the CU difference?

The difference between shareholder and stakeholder value is intrinsic in the bank v. cu debate. While some say the everyday corporate world needs to approach value from more of a stakeholder position, this article makes it clear that this is currently not reality. Credit Unions naturally take this position and it is evident in the way they approach everything they do.

However, I also believe that as banks become focused on stakeholder value, triple bottom lines, and the like, the magnitude of this competitive advantage could shrink significantly.

Havent seen anything here that translates to a “CU difference” that can be/has been leveraged into more households, increased household penetration or an increase in market share.

everyone raise your hand if you believe CUs give the best service… now raise your hand if you believe you’re in the service business… now, explain why CUs (and likely all the CUs who have posted) dont have a leadership share of the deposits/loans nationally and locally. either the service isnt better enough to create trial/retention…or it is and the marketing is’nt effective in creating trial. challenge the “sacred cows”... fear taxation and hating banks doesnt build market share. if you’ve been using the same marketing advisor/strategic planner for years and your CU’s growth and earnings is on par with the CU movement (and therefore WAY behind the banks) then you might want to consider a new marketing advisor. Then, we’d need to find the funds to market/advertise/brand build/branch on the same basis as the competitor…but with ROA 30-45 b.p. lower. thanks.