At a recent dinner with employees from various Bank of Boston Corp. divisions, president Charles K. Gifford went around the table and asked what referrals each employee had made recently.

The exercise pointed up Bank of Boston's commitment to breaking down the barriers between retail and private banking, said Susan P. Haney, president of the private bank.

Referral programs are a hot topic among private bankers, and Bank of Boston is widely seen as a leader in breaking down barriers between divisions to build more comprehensive client relationships.

"It's working," said David Ross Palmer, a New York-based private banking consultant. "They're doing a systematic job with their program."

Better Communication

Mr. Palmer, who does not work for Bank of Boston, said its efforts to raise the internal visibility of its private bank has fostered direct and effective communication across divisions.

"The human element of building a referral program is at least as important as the financial incentives," the consultant said.

To build the referral culture, the Boston bank has been rolling out a new program over the last five months. Its little: "Joint Resources: A Retail and Private Bank Partnership."

Stronger Cooperation

The program formalizes the referral system and adds some new twists to strengthen the cooperation between the personal-banking units.

"While other people are still hiring [management consultants] to tell them whether they should do this or that, this company is already doing that," Ms. Haney said.

So far, 11 of Bank of Boston's 165 branches in Massachussetts have been enlisted in the joint resources program. All will be on board by yearend.

The program holds employees and bank units accountable for meeting program goals. And the referrals must also go both ways.

"We, as private bankers, must clearly understand the world of retail," said Susan Dick, sales manager for the private bank.

Private Bank Education

Branch employees are given an education about the private bank and its services. Then they learn about compensation for referrals, discuss products, and spend time with private bankers making joint phone calls.

They will then meet regularly to discuss leads and prospects.

In the first five months of the program, the 11 branches have referred $20 million in business to the private bank, while the retail branches have garnered about $5 million in new deposits, Ms. Dick said.

"A strong third of our new business will come from these referral resources," Ms. Haney said. She is looking for 20,000 retail and corporate referral leads this year.

A breakthrough in encouraging referrals from the branches has been the addition of "shadow accounting," she said.

Under this system, the division referring the business will have that business kept on its books and receive credit for it for one calendar year. Also, the person making the referral will recieve a percentage commission on that business, Ms. Dick said.

Success at One Branch

Mr. Palmer is not a fan of the system. He said that while it may break down organization barriers, it can sometimes result in a bank's paying twice for a piece of business -- to the person making the referral and to the person closing the sale.

Ms. Dick, an ardent supporter of the system, pointed to the bank's important Charles River Branch. It had been a poor referral source for the private bank.

Once signed onto the referral program, with its shadow accounting, the branch became one of the best.

In the shadow system, Ms. Dick said, employees are not penalized for making referrals to another area, and the corporation benefits because its business grows.

Created in 1990

The new private bank developments have roots going back to 1990, said Ms. Haney, when the bank took a jumble of separate services for the wealthy and created an umbrella organization internally known as The Private Bank.

The Private Bank manages $11 billion in assets and has 15,000 clients. In 1992, it added $120 million to Bank of Boston's bottom line.

In the corporate climate of 10 years ago, programs like the partnership would not have been possible, Bank of Boston executives say.

"I see such changing dynamics in the banking industry," Ms. Dick said. "These partnerships that have been envisioned for so long are happening."

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