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The Federal Reserve

A History of the Federal Reserve Bank of Atlanta, 1914-1989


Introduction

Origins of the System

The New Bank Meets “The World War”

The Bank Meets Its First Crisis

High Winds from Havana

Droning through the Roaring Twenties

Governor Black Meets Black Friday

The Collapse

The Fed Rebuilt

World War II

The Postwar Period

The Bank in the 1960s

The Making of a Leader

Technological Pioneer

The Most Efficient Bank

The 1980s: New Challenges

Moving Forward with Forrestal

Conclusion

Leaders of the Atlanta Fed

Acknowledgements

The Most Efficient Bank

t he drive for operating efficiency and the project work on technological innovations fed off each other, and the results were most gratifying to President Kimbrel. Kimbrel, Fossum, Rawlings, and Forrestal all were in their respective places in the Bank’s hierarchy by 1974, when they were joined by a forceful chairman, H.G. Pattillo, who also wanted to make the Bank excel. Together, they launched a program of operating efficiency that took the System by surprise and established Atlanta as an indisputable leader in Bank operations.

The San Francisco Fed, in 1974, hired McKinsey and Company, a noted management consulting firm, to study that Bank’s operations and recommend improvements. Looking at the San Francisco Bank’s McKinsey report, the Atlanta leaders thought they could do similar things in the Sixth District without outside help. An Operations Improvement Committee, chaired by Rawlings, was appointed. The objective, according to the board minutes for December 1974, was to use in-house talent to “make a detailed study of all operations in all offices to identify areas of cost savings and operations improvements.”

By June 1975 there were results to report. Fossum told the board that month that the committee had reviewed 111 proposals and approved 14 that would save the Bank $492,000 and reduce the staff by 145 within six months. “Specialists, some of them industrial engineers, are assigned to study those proposals accepted by the committee and make firm recommendations. Regular line management is then charged with implementing them,” the minutes record Fossum as reporting. By December the targeted operational savings had grown to $557,000, and the 145 reduction in staff nearly had been reached. In April 1976, the Bank’s budget for that year had to be revised—and reduced by $2.8 million or 4 percent—because the push for efficiency was working so well.

Ahead by a country mile
The best “bottom line” index of efficiency was the System’s quarterly “aggregate unit cost” figures. Here Atlanta for 1976 ranked first in nine of twelve categories and first overall. The Bank continued to improve and to widen the gap between it and its peers. The top scores were the lowest ones, and, through 1988, the Bank, with monotonous regularity, continued to score between 72 and 80. Which Bank was the second most efficient changed from report to report, but rarely scored below 90. There simply was no contest after 1976 over which Federal Reserve Bank operated most efficiently. The following excerpt from the board’s minutes for January 1983 reports on a good year but not an unusual one for the post-1976 Bank: “We have again achieved a new record in our unit cost index. For fourth quarter 1982, the Atlanta District achieved an index of 75 compared with an average of 100. Our performance for the full year 1982 was at about 77. We are well ahead of the other Districts in cost containment. The next Bank is San Francisco with 94. In third quarter 1982, the latest period for which we have information on individual office performance, the six Atlanta offices ranked in the first six positions of all Federal Reserve offices.”

There was serious discussion, Atlanta Chairman William A. Fickling gloated in June 1983, after returning from a Conference of Chairmen, “about the possibility of sending a team of people to this District to study the secret of our success.”

The efficiency scores resulted from a relentless drive to eliminate waste, one that permeated the organization. The formal program started by Pattillo, Kimbrel, and Fossum in 1975 ended in 1978, but the effort continued and spanned a variety of leaders. It was no longer any one person’s program; it became the Bank’s. The push for efficiency went hand in hand with a change in the Bank’s culture. There was a move away from bureaucratic controls and slow decision making toward an environment in which merit and achievement would be recognized quickly. Challenges were issued and results measured; one branch would compete with another for the best scores, or one shift would vie with another to see which could process the most work. It was, for a central bank, surprisingly entrepreneurial. Many private companies did not compete so hard to excel. There was stress, and some people left because of it. But there was also excitement, which led others to stay.

One consequence was a 31 percent cut in the Bank’s work force; 891 jobs were eliminated between 1975 and June 1984.

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