Jonathan Beyman is chief of operations and technology at Lehman Brothers, as well as an executive vice president. In addition, Beyman has served as the firm's CIO since 2000.
Question: "Are cost controls passe now that firms are making money again?"
If only. I can't imagine anyone would disagree that their jobs would be a lot easier if managing costs weren't a part of their responsibilities. Ah, to have an unlimited supply of money to dole out to everyone who asked for some! To never have to sit through another budget review! To never have to have to say, "NO!" In a world like that, I might even be popular, instead of the guy who constantly shoots down other peoples' visions of grandeur!
I suspect that if you asked the CFO of any well-run company if cost control were passe, even in the best of times, you would be looked at as if you had lost your sanity. I think most smart CFO's would define cost control as spending discipline - that is, as not spending money on things you don't need, and instead spending it on things that will generate a return, either tangible or intangible. That kind of cost control will never be passe. If your definition of cost control is just plain not spending money, regardless of purpose, you likely won't stay in business very long anyway.
Well-run companies manage their costs as tightly as they manage every other aspect of their businesses. They hire people to generate revenue, control risk, build systems and control their processes. They compensate those people based on value generated and the market forces required to retain them. They invest in opportunities to make more revenue, manage risk and eliminate cost. That's the job of management, which serves as a proxy for shareholders - the owners of the company, who have invested in the company because they expect it to make a profit. If the company generates a profit, its value increases and, over time, the share price increases. If not, the owners invest elsewhere.
I once asked my boss if I could spend money for an IT project, and instead of turning me down, he asked, "If this was your money, would you spend it on this project?" Sadly, the answer was no, and I didn't press the matter. A few weeks later, I went back to ask him if I could spend money on a different IT project, adding, "If this were my money, I'd spend it on this project." Without batting an eye, he responded, "Well, it's not your money. It's the shareholders money, and we aren't spending it!" -Jon Beyman
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