Co-op Bank sends 160 managers packing in cost-cutting measure

Co-operative Bank has sacked 160 managers to contain rising costs.

The bank has 142 branches countrywide and fired the managers at the conclusion of re-organisation conducted by global consulting firm McKinsey & Co.

The firm was enlisted in September to “restructure and enhance efficiency”.

“Some of the roles in the organisation have been realigned while others have become redundant,” managing director Gideon Muriuki said in a statement yesterday. The managers will go home on December 22.

The bank hired McKinsey to for a three-month growth and efficiency review, which is to inform the lender’s next five-year corporate strategic plan.

Its cost-to-income ratio stood at 62 per cent in the year to December 2013. In quarter two of 2014, the ratio rose to 55.9 per cent up from 53.2 per cent over a similar period in 2013.

ADVISORY ROLE

The review by McKinsey was seen as a way of containing the ratio, including staff costs and operating expenses that rose by 13.9 per cent to Sh14.4 billion in the nine months to September 2013.

Globally, McKinsey is referred to as ‘Mr Fix It’ for companies and governments, as it is almost synonymous with job cuts whenever it undertakes corporate restructuring contracts.

In the past three years, Barclays Bank of Kenya has reduced its staff by about 420 at a cost of Sh1.7 billion as it sought to trim its cost-to-income ratio. McKinsey advised Barclays to shed 170 jobs at a cost of Sh788 million last year.

In 2013, National Bank hired the firm for a similar mission, resulting in the scrapping of two positions of deputy chief executive laying-off 200 employees and a freeze on recruitment.

Kenya Commercial Bank also scrapped 15 directorships as well as laying off 120 staff at a cost of Sh1.2 billion in 2011 on the advice of McKinsey.

Co-operative Bank said it was not yet able provide the cost of laying off the managers.

Equity Bank also enlisted McKinsey in August to play a business advisory role in the implementation of the lender’s strategy to change its banking model.

Other companies that have previously hired the firm include East African Breweries, Kenya Airways and the Kenya Revenue Authority.

 TOUGH JOB

Why ‘Mr Fix It’ is required

McKinsey & Co was enlisted in September to restructure operations and enhance operational efficiency.

Apart from Co-operative Bank, other lenders that have sought the firm’s services include National Bank, Kenya Commercial Bank and Equity Bank.

Others are Kenya Airways and East African Breweries. McKinsey has largely been associated with lay-offs whenever it is hired.