NatWest mess shows cuts can cost dear

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The Independent Online

An operation suddenly trying to do the same thing with fewer hands is going to come unstuck somewhere.

In the name of efficiency, Royal Bank of Scotland has fired 30,000 staff in the past four years. Doubtless some of them were surplus to requirements and ATMs plainly need less attention to operate than do bank branches.

But since lots of the staff still lucky enough to still be employed by RBS -owned NatWest have been working day and night trying to correct the bank's horrendous computer meltdown, it seems fair to suggest that what it really needed was more people.

Unite's contention that's there's a definite link between the job cuts and the chaos of the last few days is hard to verify. But it must be the case that any organisation suddenly trying to do the same things with fewer hands is going to come unstuck somewhere. The quality of work will decline. And customers will notice.

When the corporate world talks about efficiencies, it assumes they are a one-way street, an improvement that will also lower costs.

In reality there is nearly always a debit on the other side of the balance sheet. It might be hard to detect at first, perhaps coming in the form of a rise in workplace stress that leads to higher sick days (sick days are efficient ways for employees to rest up, but not for employers), but it will be there. Every time a company or government department unveils an efficiency drive, assume it means you're going to spend longer in queues.

For whom is this efficient, we should always ask. Sometimes the answer turns out to be: absolutely no one. Those self-service tills supermarkets have lately introduced are theoretically efficient for the supermarkets, since they are getting customers to do something that previously required a check-out operator. But it makes the customer experience worse and some may defect to stores that still employ humans.

Cost cuts are not necessarily, perhaps not usually, good for companies. Just ask NatWest customers.

Stiglitz: first among equals

Joseph Stiglitz is in the band of economists who talk in something close to English. Endogenous growth theory is not for him, at least not when he's talking to a wider audience than academics.

His new book is called The Price of Inequality. He thinks the coming bill is much higher than anyone realises and unless policies are reversed you're looking at societal breakdown. Stiglitz wrote in Vanity Fair: "The top 1 per cent have the best houses, education, doctors and lifestyles, but there is one thing that money doesn't seem to have bought: an understanding that their fate is bound up with how the other 99 per cent live. Throughout history, this is something that the top 1 per cent eventually do learn. Too late."