New empire faces a tough balancing act.

The combination of Keycorp and Society Corp. creates the closest thing yet to a nationwide bank, bringing together nearly 14,000 banking offices in 18 states under a single holding company headquartered in Cleveland.

Managing such a far-flung network will require a delicate balance of strong local autonomy for the new Keycorp's 14 banking subsidiaries and highly efficient centralized administration and operations in Cleveland, say top officers at Keycorp and Society.

The formula combines Society's penchant for centralized administration of core businesses such as investment management, with Keycorp's decentralized approach to distributing retail banking services nationwide.

Making It |User Friendly'

"We will probably continue [centralization]) in some form or fashion," said Robert W. Gillespie, chairman and chief executive officer of Society Corp., who will be president and chief operating officer of the new Keycorp for the next two years.

"But the trick is to make it user friendly for thousands of employees to get their hands on our products and services and deliver them to customers," Mr. Gillespie told securities analysts on Monday. "Our focus is delivering products through a decentralized banking organization."

Of the two organizations, Society probably faces a bigger challenge in becoming more streamlined. At Monday's briefing for analysts, Mr. Gillespie quipped that the bank's matrix-style management structure, when diagrammed, resembles the control panel of a transcontinental airliner.

"I haven't had the courage to show the management chart to Vic yet," joked Mr. Gillespie, referring to his new boss, Victor J. Riley, who will be the chief executive of the new entity until 1995, when Mr. Gillespie will take over. Mr. Riley will continue as chairman until 1998.

In the Keycorp Mold

The new banking company, which will be the nation's 10th-largest in terms of assets and the sixth-largest in terms of branches, will operate much the same way the old Keycorp did, said Mr. Riley.

The presidents of Society and Keycorp banks will be given a high degree of responsibility for decisions about how the new entity's 50 major product lines will be distributed, priced and marketed, said Mr. Riley.

"It's not going to be any different to distribute the products that Society has than it has been for Keycorp to put forth its products," said Mr. Riley.

"We don't plan to do anything different, except the products are going to be somewhat different."

Similar Systems

Distributing products nationwide will require highly efficient operations. Separately, the companies have been moderately successful at consolidating data centers from acquisitions.

Interestingly, the task of consolidating the back-office systems that support the distribution of the new Keycorp's products will be somewhat simplified because the banks used similar computers and software.

Keycorp and Society both use IBM mainframes and the same software for general ledger, mortgage processing, fund management, and account reporting. The only major system that does not overlap is loan processing.

Unlike an in-market merger, where consolidation of data processing centers yields major expense savings, only 10% of the estimated annual savings of $80 million to $105 million from the merger will come from systems consolidation.

"Given that you have two relatively successful banks and a not much overlap, they will probably continue to run everything the way it is for a while," said Diogo Teixeira, a consultant with Tower Group, Dover, Mass.

"They have the liberty of looking at systems consolidation piece by piece, product by product."

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