82% Utilities Cost Reduction

Here’s another Pete Fasano story that I hope you’ll enjoy…

Our li’l Special Projects team (back in the early ’80s) designed, created & implemented a number of cost savings initiatives that put a significant dent in our Region’s expense base: Telecommunications redesign & equipment purchase; Checkbook contract renegotiation; Stationery & Purchasing cost reduction; Direct Deposit enrollment campaign (to name just a few), etc. that saved millions & millions of dollars annually!

1980 dollars.

The Region was under constant expense pressure as we were expected to lower our total “Other Operating Expenses” (everything but Staffing & Salaries) by 5% annually…and that means having to somehow absorb normal price increases & growth implications.

Certainly not an easy task, but we were pretty inventive & examined every single nook & cranny.

As well as Nick & Granny!

Most companies find keep expenses flat, or even below a 5%-10% annual increase, an insurmountable task.

And that’s why we constantly looked under every rock for any opportunities.

One day, Pete calls me into his office.

He tells me that Clarence Cuddy, VP & District Manager for a group of 5 nearby Brooklyn branches, was able to save 82% on his electricity bills!

My immediate reaction was “Impossible, Pete! Unless he replaced every single light with candles & all the air conditioners with big hand-held fans in his branches, there is no way on Earth he could ever approach anything near that number!”

He hands me this write-up that Clarence has put together, detailing the results of his “power & lighting expense reduction” project.

“Take a look at this & see what we can replicate here at the RSC/Regional Service Center.”

His report came in a clear binder so I was immediately impressed! 😱

(I knew Clarence from a few previous encounters as he was stationed at the 18th Avenue branch in Brooklyn, less than a mile away from our back-office facility. I would often use that site to gain additional insight into the workings of a branch, especially since I knew a few people there & they were always so very accommodating to me.

He was, indeed, a unique dude.)

There was no way possible to save 82% of an organization’s electric bill. Absolutely impossible.

And, duh, as we later found out, I was right!

In looking at Clarence’s analysis, he took his 5 branches, one by one, and spelled out the anticipated full-year savings.

The first branch was Ave J/East 13th Street #147. It was one of our “mini-branches” with only 3-4 tellers & a few officers for account opening & servicing. The branch itself didn’t have a large footprint (square footage) at all.

Blah, blah, blah, blah, blah.

“We were able to save 18% of the branch’s current electric bill.”

Onto the next branch, Kings Highway #58. This was a much larger, much busier branch, with 2 stories & a large banking floor. It also housed our B/SI Facilities Management team & had some Training rooms/equipment upstairs.

“We were able to save 13% of the branch’s electrical costs.”

In no way was this going to average out to an 82% save for the entire district…unless Con Edison was actually paying US a king’s ransom to simply turn on the lights, power the equipment & run the A/C at the 3 remaining sites.

Branch #60, 18th Avenue.

“We were able to save 14% of our electrical costs at this branch.”

Nah, he couldn’t have done what I think he did.

No, that’s impossible. He’s a VP, after all. This is banking. We deal with people’s money.

Numbers, numbers, numbers.

I couldn’t take the suspense any longer so I just turned to the summary page.

He had a simple table listing each of the 5 branches & their realized cost savings (in %s). Nowhere in this ANALysis did I see any actual dollar figures…just % savings.

BRANCH SAVINGS
#147 18%
#58   13%
#60   14%
#140 20%
#149 17%

Total District 82%

The first thing that came to mind was “Wow! If he only had another branch or 2 in his district, he could’ve saved the entire electricity bill!!!”

Yes, I’ve sarcasticitis ever since birth!

It was at that very moment that I thought, “If these two mental midgets are VPs, then by God, I’m gonna be CEO one day!!!”

I reran the numbers…USING WEIGHTED AVERAGES THIS TIME after I obtained the actual raw numbers from Finance…and estimated average costs based on square footage.

The total savings for the entire district was a little more than 14%, especially since the largest branches had the smallest savings %-wise.

I can’t tell you how frustrating it was trying to explain “weighted averages” to Pete & exactly why you simply can’t add a bunch of individual averages together to get an “overall average”.

I even went to the white board & did a simple example to illustrate the concepts.

Branch A spends $100. Decreases spending by $10. 10/100 = 10% save

Branch B spends $20. Decreases spending by $10. 10/20 = 50% save.

Total expenses $120. Save $20. 20/120 = 16.7% save

NOT 10% + 50% = 60% save

I was actually thisveryclose to saying that we should all now put our heads on the table as it’s time for our afternoon nap, kindergarteners!!!

Pete asked me to follow up with Clarence on my findings.

I called Cuddy & explained everything. I then asked him what they specifically had done at each branch to get these cost savings.

As it turned out, we at the RSC had put all those programs into place already.

So from a possible 82% cost reduction for electricity expenses that was probably dancing around in Pete’s head somewhere, none of this was useful in any way whatsoever.

Amazing. Simply amazing.

I’ll never get that hour-and-a-half back! I could’ve used it now…

 

As always, thank you so much for listening!