Financial institutions have introduced large cost cutting programs in recent years to counteract losses from troubled loans and falling asset values. Many studies suggest these programs fail to deliver results in the short term. While it may be too soon to tell, it appears some of these initiatives will actually worsen the situation in the medium term. Most frequently, headcount is reduced, but existing inefficient workflows and quick hit expense reductions are often left intact. A permanent culture change is required to ensure long term operational efficiency and to maintain an operation that runs as efficiently as possible.
Operational efficiency is the ratio between the input to run a business operation and the output realized from the operation. When operational efficiency improves, the output/input ratio improves.