There’s a scene in the epic television series “The Wire” that I both love and loathe.
It takes place in the newsroom of the Baltimore Sun. The executive editor is announcing layoffs and he’s doing his best to try to put a positive spin on a grim situation. Then he utters the line that’s all too familiar to me.
“We’re going to have to find ways to do more with less.”
I’m a former newspaper reporter, which is why I have such mixed feelings about that scene. I love it because of how well The Wire’s writers captured a very real moment that’s occurred in newsrooms all across the U.S. in the past few years. I loathe it because it reminds me of the false premise behind that phrase.
In almost every instance (there will always be a few exceptions that prove the rule), newspapers haven’t done more with less. If they’re smart and if they have passionate employees who believe strongly in the mission of their paper, they’ve managed to do the same with less. It becomes a daily struggle to run harder and harder just to stay still. And often, if the paper somehow is able to keep treading water after cutting personnel, it only encourages another round of layoffs and furloughs.
Cutting back on staff may lead to a temporary increase in profit margin, but it’s a short-term gain that leads to a long-term loss. Just look at the numbers. Circulation is down at newspapers everywhere. In 2000, daily U.S. newspapers had a total circulation of 55.7 million, from 1,480 outlets. In 2014, those numbers had dwindled to 40.4 million from 1,331 papers. (Stats from the Newspaper Association of America.) Ad revenue for dailies in 2000: $48.7 million. In 2012: $25.3 million. (Source: NAA)
That’s not to say that cutting operating expenses is always a mistake. Trimming the fat can be part of the solution; but it can’t be THE solution. Newspapers at some point needed to find ways to reverse the tiding of dwindling revenue. Instead, they spent years treating the symptoms, but not the disease.
So what does all this have to do with banking?
Like the newspaper industry, banking also has its share of sobering statistics. The number of U.S. commercial banks is down from 14,400 in Q1 of 1984 to 5,381 in Q3 of 2015. (Source: Federal Financial Institutions Examination Council). Meanwhile net interest margins have fallen from 4.91 in Q1 of 1994 to 2.99 in Q3 of 2015. (Source: FFIEC)
“Do more with less.”
I flashed back to my old career – and that scene in The Wire – just the other day, during a discussion about the internal struggle some banks are having. In one corner they have people looking for software solutions or new talent that will help them bring in more business and drive up revenue. But those solutions cost money. And the idea of spending more during a time when margins are tightening is getting a great deal of pushback from the other camp, which is looking for ways to cut expenses at every turn.
Granted, it’s easy for us to sit here and say that you have to spend money to make money; we don’t have the same quarter-to-quarter scrutiny of the bottom line that many banks have to endure. Everyone though, in every business, has to answer to the customer.
We all know that customers today have more power than ever before. Consequently, they’re more demanding. They don’t just want to do business with you – they want to build a relationship. They want companies to understand their needs and to react quickly and efficiently should those needs change – which they often do.
Customers want more, while many banks are trying to “do more with less.”
We’ve seen this movie – or rather this television scene – before, with newspapers. Let’s avoid a sequel in the banking industry.
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