Bumpy Transition for a Smooth Operator

Huntington Bancshares has enjoyed a reputation as an innovator in the electronic banking arena.

But even a technology-savvy bank like Huntington can face tough challenges when it deploys new systems and redesigns a line of business.

In January of 1994, the Columbus, Ohio, bank rolled out an automated loan origination system as part of a restructuring of its in-state commercial lending business. The effort was featured in the Feb. 28, 1994 issue of Management Strategies.

Some 18 months later, Huntington reports that new systems and processes have significantly speeded up the credit approvals and enabled commercial loan officers to devote more time to developing new business.

But the optimism expressed by Huntington executives early in 1994 has been tempered somewhat by the experience of the last year and a half. While automated systems have been "a dream," according to one executive, the software tools alone could not transform a culture sometimes reluctant to change. Further, the bank will not be able to exploit the full potential of the new systems until another technology - a wide area network - is in place.

"There is a lot that we have yet to do with respect to both automation and reengineering," said Paul Brawner, a senior vice president who is Huntington's top credit officer in Ohio. "But there is a lot we have done."

The biggest efficiency gains came from the bank's "relationship banking system," the core of which is the Pedestal loan origination software marketed by Dallas-based Formation Technologies Inc.

"We do virtually all of our credit approval forms on that system," said Mr. Brawner.

The system is now used at nearly all of Huntington's Ohio offices. It has not been installed at affiliates in Kentucky and Indiana, which have a great deal of autonomy, according to Mr. Brawner.

The major advantage of the system is that relevant information - the borrower's name, dollar amount of the loan, maturity, any guarantors, and so on - has to be keyed in just once.

"All of the information is gathered for the generation of documents, along with the upload to your commercial loan accounting system," said Mr. Brawner. "You get it approved, you print out the documents, you take that out to the customer, you get them signed, you come back into the (bank), you hit the F3 function key, and you automatically upload all of that information into your systems."

The executive estimated that the relationship banking system, along with other changes, has enabled Ohio loan officers to spend between 50% to 60% of their time dealing with customers and potential customers, up from about 25% previously. One local bank manager in Ohio reported that commercial loan volume grew by $80 million with two fewer employees in the department.

"We've come a long way in the last 18 months," said Mr. Brawner.

Another application, a contact management system that tracks and analyzes calls to companies, the loan pipeline, and completed deals, has been "like a dream," he said. "I've grown up as a commercial lender, as a division manager, so I've had to do (these things) manually for years."

The system, called Crisp/Gemini, developed by Norwest Banks Minnesota and Micro Resources Inc., was rolled out to Huntington's urban offices last winter.

"That gives us the ability to do an awful lot of the sales management activities on an automated basis," said Mr. Brawner.

Huntington's sales efforts were also aided by laptop computers, which account executives now take into the field to make presentations.

But the gains did not come easily. "It's difficult for a commercial banking unit to kind of arbitrarily change the way they have been doing business for umpteen years," said Mr. Brawner. "I don't think you can segregate the role of automation in a reengineering with the companion role of management requiring that these tools be used. They are not voluntary activities."

One major hurdle, he said, was that the staff had "no PC literacy whatsoever."

The difficulties were magnified because the system was first installed in Columbus, the location with the largest number of users. "It was probably not the place we should have rolled this out first."

But as it expanded the system into other markets, Huntington learned a great deal. The bank now has a more effective PC training regimen, said Mr. Brawner.

In addition to the cultural issues, the lack of a statewide wide area network has prevented the bank from getting all the benefits of automation.

"What we haven't done in that project is try . . . to build electronic credit files or add electronic approvals," said Mr. Brawner. "We are going to defer the development of those two parts of that until the (wide area network) is in place."

The lack of a wide area network also means that the bank is not using a software module to track collateral exceptions.

The goal is to give loan reviewers located outside Columbus a more active role in the day-to-day process by giving them access to electronic credit files and electronic collateral files.

"That's not really as far along as we would like," said Mr. Brawner.

The network linking Ohio, however, is being rolled out in phases and could be completed by the end of this year.

Despite the dramatic improvements, Mr. Brawner said, "I would argue that we haven't done much more than scratch the surface."

Run the stuff below as a sidebar:

Passing on Some Hard-Earned Lessons

Huntington Bancshares began to reengineer its commercial loan department in the fall of 1993. By the beginning of 1994, the bank began to roll out a key component of the new process, a relationship banking system.

Paul Brawner, a senior vice president who is the bank's top credit officer in Ohio, said the changes have produced big improvements in productivity.

But he shared some lessons for bankers planning to reengineer a line of business:

*"The building of the data base the first time through is the most time consuming. You're going from what amounts to a written credit file and a written loan approval form and putting that onto a data base."

*"You have to understand that we were rolling this out to a group of people who have no PC literacy whatsoever. We had to try . . to give them an application that had a fairly intensive learning curve to it. We learned that you really need a foundation of PC literacy first."

*"We've been heaping change on top of change. . . . For large divisions, this is a transition of months. It doesn't happen overnight.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER