has become the latest retirement plan specialist to slash its staff. Yesterday, the New York City-headquartered firm cut 500 jobs a number equal to 7.7 percent of its total workforce of 6,500. All of the employees cut were notified of the decision immediately. The cuts marked the first time TIAA-CREF employees have faced a layoff since the firm was founded by money donated by Andrew Carnegie in 1918.
They are also not the only break with tradition as the firm also revealed plans to open its first branch offices.
Top executives of the firm explained that the cuts are part of a reorganization intended to boost efficiency at the provider. The reorganization also promises to change the way the firm interacts with its customers.
"We are restructuring to better meet the challenges of rapidly changing markets and to become better able to serve our customers," wrote Herbert M. Allison
, chief executive officer, chairman and president, in an e-mail sent to employees Monday. "The new organization links authority with accountability and reduces layers of management."
Allison took over as CEO of TIAA-CREF last November and was a loser in the succession wars at Merrill Lynch (he left the brokerage in 1999). He may be trying to adopt some of Mother Merrill's distribution tricks at his new firm. He is also imposing a new bottom-line focused culture on the firm.
Part of the reorganization calls for TIAA-CREF to open walk-in offices as a way to both build rapport with its existing shareholders and to attract new retail customers. The strategy is a reversal from the firm's historic practice of focusing on educational institutions for its distribution. In the past two years the firm has also tried to work more closely with financial advisors, though it has no retail sales force of its own.
The first of these offices will open next month in Princeton, New Jersey. Offices in Hamden, Connecticut and Charlottesville, Virginia will follow along with dozens of others.
Most of the positions cut on Monday are based in New York, although the firm also cut staff in Charlottesville, Virginia and Denver, Colorado. TIAA-CREF employs 1,200 operations workers in Denver. It cut 70 of those jobs Monday. The cuts in Colorado are part of a double whammy in the state and come a day after reports of American Century closing its Denver office.
Among the areas in which the company made cuts were its technology and operations department. That unit accounted for 29 percent of all costs compared to an industry average 15 to 19 percent, according to the company.
Also leaving the firm at the end of September is David Shunk, executive vice president of TIAA-CREF's consulting services. He plans to retire at the end of September.
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