As a former chemist, BankBoston vice chairman Paul F. Hogan has had plenty of experience with experiments.
This should come in handy as he tries to transform New England's most traditional corporate lender into a one-stop shopping mecca for corporations.
With responsibility for BankBoston's lending, private equity, and investment banking activities, Mr. Hogan, 54, has been struggling to meld the company's old-time commercial bankers with a growing team of underwriters and advisers.
"We started out with a culture built around relationships, and we want to preserve that," he said in a recent interview. But "we also want a teamwork culture" and not a "culture of individual heroes."
To that end, Mr. Hogan-a Boston native who has been with the bank for 24 years-is putting together incentive programs that link pay to individual performance and team evaluations.
"You want to make sure that the measurement and reward systems are incenting the right behavior," he explained.
It is a daunting task.
Last year investment banking contributed one-tenth of the corporate bank's $1.8 billion of revenues. The corporate banking operation, which Mr. Hogan runs, in turn contributed 46% of BankBoston's profits and revenues.
Thirty percent annual growth in investment banking "for an indeterminate number" of years is expected as the company gains market share in its specialty areas, Mr. Hogan said. Eventually, investment banking could contribute 20% to 30% of revenues at the corporate bank, he said.
Cultural issues have been high on Mr. Hogan's agenda for the last two years. BankBoston moved into investment banking in 1996, with the launch of a debt underwriting and advisory unit.
Many of those hired to bulk up the debt underwriting capabilities were hired from Wall Street. Mr. Hogan said integrating the new people presents unique challenges.
Growth plans for the business may make cultural issues even more important-and difficult. BankBoston has yet to build an equity capability, one reason the $71 billion-asset bank has been on the losing side of some recent deals, Mr. Hogan said.
BankBoston has been on the hunt for a boutique equity underwriting and research firm that could serve as a launching pad for further expansion. Analysts said BancAmerica Robertson Stephens Inc., which was recently put on the block by BankAmerica Corp. as part of its pending merger with NationsBank Corp., has become a favorite rumored candidate.
Mr. Hogan would not discuss possible acquisitions but said the bank was looking for a firm specializing in many of the same industries that BankBoston has traditionally lent to-technology, media, and retail.
But, he added, BankBoston is not under pressure to ink a deal. "I don't think that this is something that we need to have done tomorrow," Mr. Hogan said.
The debt underwriting business is contributing enough to revenues in the corporate bank to take pressure off any need to expand in equities, he added.
Some analysts said BankBoston may shun a splashy acquisition in favor of simply hiring groups of equity specialists from other firms.
"I think they want to build it cheaply and efficiently with minimal execution risk," said Thomas Theurkauf, an analyst at Keefe, Bruyette & Woods Inc.
Mr. Hogan suggested that this may ultimately be the bank's decision. "I'm quite certain that over the next two or three years there will be a lot of people available from other banks where the business hasn't worked out," he said.
Because he heads the bank's most profitable unit, Mr. Hogan is occasionally the subject of speculation that he may ascend to the company's top spot.
The front-runner to succeed current chairman Charles K. "Chad" Gifford, 55, is president and chief operating officer Henrique de Campos Meirelles.
But some industry watchers say it is highly possible that Mr. Meirelles, 52, will return to his native Brazil in the next couple of years to take a high-level government post.
Part of what fuels the rumors surrounding Mr. Hogan is his experience working out bad loans in the early 1990s, analysts said.
As a senior credit officer, Mr. Hogan was part of the team that helped pull the bank back from the brink of insolvency during the real estate lending crisis.
"I think the fact that he's been involved in workouts is comforting to investors," said Gerard Cassidy, an analyst at Tucker Anthony Inc. "He always remembers those days in the trenches when he was fighting with attorneys and borrowers. I think that is a comfort to investors that he won't be doing wild things with the lending team."
"He was in the midst of the turnaround and gets kudos for that," added Thomas McCandless, an analyst at CIBC Oppenheimer.
Mr. Hogan, however, laughs off the succession speculation.
A pragmatist first and foremost, he said his present concern is getting the corporate bank into shape.
Even his decision to leave chemistry for banking nearly a quarter- century ago was marked by a clear-eyed assessment of his own situation.
"I realized that I was really more interested in business problem- solving than being in a lab," he said. "And there was a massive oversupply of chemists in the 1960s."