Fleet vice chairman Robert Higgins says corporate makeover is working.

Robert J. Higgins, a 22-year veteran of Fleet Financial Group, emerged as a big winner in a major reorganization unveiled by the Providence, R.I.-based banking company in March. Previously president of Fleet's Connecticut bank, Mr. Higgins was elevated to vice chairman and given broad responsibility for all commercial businesses at the $45 billion-asset company.

Mr. Higgins, 47, also is a key player in managing the reorganization, which realigned Fleet's businesses by function rather than geography and appeared to undermine some of the power of the bank company's regional presidents.

In August, Fleet launched the second phase of the program, a cost-cutting campaign dubbed Fleet Focus '94 that is designed to reduce the company's efficiency ratio from 67% to under 60% over the next two years. Mr Higgins sits on the five-member committee that is steering the program.

In the interview below, Mr. Higgins discusses the complexities of implementing a major organizational change and of competing in a slow economy.

Q.: How has Fleet's radical change in management structure and centralization of control over product lines changed the company's culture.

HIGGINS: It has provided for a sharper focus on products, on customers, and on the role of the individual bank presidents [in marketing banking services].

On the commercial side, for example, each Fleet bank had its own cash-management business. As a result of taking a functional approach, we consolidated many of those products and are now creating a unified sales force to market them around the franchise. That kind of approach is difficult to carry out unless you have a broad corporate approach to the business.

Q.: How has the reorganization affected the people on the lines?

HIGGINS: The reorganization gave us the opportunity to empower people. I am a strong believer, particularly on the commercial side, that you can't consolidate lending authority. As an industry and as a bank, we have done too much of that.

So when we looked at how we were operating our various lines of business, on the commercial side, we empowered our market managers with significant expanded lending authority.

In the New York upstate bank, for instance, we established fairly significant authority at the various regional market locations. So while Rochester, Buffalo, and Syracuse are all regions of one legal bank headquartered in Albany, each has expanded lending authority.

Q.: Has that increased your credit risk?

HIGGINS: No. In many cases, we put in place individuals in whom we have significant confidence in their credit judgment.

In upstate New York in particular, there has been a fairly significant reshuffling of talent, not because the individuals in those jobs weren't effective bankers, but because they weren't experienced credit people.

Q.: That must have made some of the old-timers unhappy. Has there been a downside to the reorganization?

HIGGINS: We were concerned about a perceived reduction in the role of the bank presidents and a loss of cooperation among various lines of business in the markets. But neither has taken place. The bank presidents view their roles as much more focused on the commercial side, which is logical since they have typically played a community leadership role in each of our markets.

We also put in place monthly market meetings where the heads of the various lines of business meet to work out any issue that might exist and affect another line of business.

Q.: How is Fleet Focus different from other reengineering programs?

HIGGINS: A principal difference between this and other approaches is that Fleet Focus is an employee-driven exercise. It is a bottom-up approach which involves several different channels for employees to present their ideas. The whole idea is not to revise any kind of strategic thrust but to take a look at the company as it exists today - given its distribution system - and change the way we operate.

It's a holistic approach that taps into all parts of the banking structure here, and includes 20,000 of 27,000 people. The architecture of the approach basically involves 200 people here, 50 full time, and 150 working on it 50% of their time.

We are working with Tandon Consulting in New York, but the process is being run by our people themselves with an aim toward coming up with, literally, thousands of ideas.

Q.: How has it been going so far?

HIGGINS: It's off to a terrific start. The whole idea of Fleet Focus is to tap into the frustration level that exists among employees in terms of getting their jobs done.

In the majority of cases. there are things that are done in our industry that don't make a lot of sense but were created as a result of layers of change in the business.

When you go out to employees to discuss a dysfunctional process, they light up and see it as an opportunity to change the process and make their jobs more rational.

Myself, the other vice chairmen, Terry Murray, and Gene McQuade, the CFO, just completed a first round of meetings with 20 different employee groups consisting of anywhere from 25 to 150 employees. Each of us conducted 20 of those site visits.

Q.: Could you give an example of a dysfunctional process?

HIGGINS: The size of the under-writing age that might exist for a commercial loan, which in some cases might be 40 or 45 pages, and the whole credit approval process in place here.

As a result of having separate banks. there are several credit approval processes in place at the various banks, each one acceptable in its own right. But at a $46 billion company, there ought to be one consistent approach to how we approve credit.

Q.: Are some employees fearful of being reengineered out of their jobs?

HIGGINS: Realistically, that is probably on people's minds. But the dynamics of the process does not target jobs and positions. it targets process. The purpose is not to question whether a job or position is relevant.

Overpowering the concern is a sense of confidence, of pride that we are an innovator by taking this approach to our cost structure. Any concern about loss of jobs is overwhelmed by employee enthusiasm.

Q.: Let's switch to the near-term outlook for business. How is the New England economy looking these days?

HIGGINS: In general, the banking industry in New England in the next two or three years will not be a growth industry from a revenue perspective.

We'll probably see low single-digit growth [in loan demand in] the fourth quarter and in 1994 and 1995. That is really the thing that pushed [Fleet chief executive] Terry Murray into considering and committing to Fleet Focus,

Q.: Are other lenders stretching their credit standards?

HIGGINS: We face competition every day, and we see deals being done under a structure, and at a price that is unacceptable to us. But I don't know as a general statement that our competitors are lowering standards.

We are getting into a market where there are relatively few high-quality deals and there is a lot of competition going after a fairly limited number of opportunities. When that situation exists. historically standards suffer.

But we are trying to hold the line. In the last several years, the pendulum swung too far toward excessive process and excessive checks-and-balances and excessive underwriting standards. We have brought the pendulum back to what we think is reasonable level.

Q.: Fleet has recently suffered a rash of bad publicity, such, as the "60 Minutes"' story on unscrupulous lending practices at Fleet Finance and, more recently, controversy over the bank's loan to [New York City Comptroller] Liz Holtzman's senate campaign. Has that caused frustration for you and your employees?

HIGGINS: We all watch the media and read the media. The solution is making sure we effectively communicate our position to employees, and we have done that. In each case where there has been controversy surrounding the company, we've made an effort to make sure our employees are aware of the facts on the issue from our perspective, not the conjecture.

I've been at this company for 22 years, through the good times and bad times, and I know the company for what it is - an honorable, ethical, profitable, very successful company.

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