Visa U.S.A. president Carl F. Pascarella is digging in his heels-and shaking the ground underneath his organization like never before.
Never one to rest on Visa's laurels as a market-share leader or back away from any good fight, Mr. Pascarella is putting his pugnacity to a new and perhaps ultimate test.
He says he is blasting away at bureaucracy, moving quickly to streamline and retool the company before electronic commerce and other emerging challenges pass it by.
Word is out that some in the rank and file are nervous. Visa has acknowledged that the restructuring extends to offering retirement packages to some long-term workers.
Mr. Pascarella sounds willing to let the chips fall where they may.
"We may not be talking about radical change," he said in an interview last week. But there definitely will be a "different process."
"Nothing is sacrosanct," the U.S. chief executive officer said in describing a top-level reassessment of strategy that began in the fall. At a company meeting two weeks ago, he said, "I told my people that from today on, Visa is never going to be like what it was in the past.
"When you're winning is the optimal time to take a company to the next level," he said, repeating what he told senior managers in October at the meeting that kicked off the project. "We had to change the way we do business."
Five-and-a-half years into his tenure at Visa U.S.A.-he headed Visa's Asia-Pacific region for 10 years before that-Mr. Pascarella, 55, is the kind of guy whose constant drum-beating can make him sound like Chicken Little.
The sky was falling when he first arrived at Visa headquarters near San Francisco. To hear him talk, it never really stopped. Based on Visa's record, he must have done a lot of things right.
His first assignment was to get Visa back to taking market share away from MasterCard. Visa's East Coast rival had been quicker to embrace the notion of cobranding, which allowed companies from AT&T and General Motors on down to take a marketing ride on the banks' electronic payments infrastructure.
Mr. Pascarella not only managed a reversal of Visa's policy on that issue, but also invested heavily in Visa's own brand. He views that as the foundation of everything Visa stands for-including the current 53% share of U.S. general-purpose card spending.
"We worked very hard to get to where we are in the physical world-in terms of brand perception, the market leader," he said. "The preeminence of the Visa brand is something we have to leverage" as the battleground moves to the Internet.
But being No. 1 and operating as an association rather than an explicitly profit-driven corporate enterprise are not the preferred prescriptions for injecting a sense of urgency into the organization.
So Mr. Pascarella turned to the tried-and-true mechanism of reorganization. That included some new hires at senior levels, and a new approach to holding business units accountable for what they develop and sell. With this change, they are taking responsibility "from cradle to grave," he said. This is supposed to eliminate the dreaded "silos" that inhibit communications and efficiency.
"We can't have handoffs and bureaucracy," Mr. Pascarella said. "Bureaucracy always creeps in," but now there is an emphasis on resisting it. "Our job is to be the best partners that our banks have. The timing for what we are doing is right-maybe more right than it was in October-November when we started down this road."
This was not what people outside Visa were perceiving back then. Edmund Jensen, who worked closely and had a lot in common with Mr. Pascarella, had just retired as president of Visa International. As the head of the largest regional entity, and with years of company service and international experience, Mr. Pascarella was considered the favorite to succeed Mr. Jensen.
When the job went to an outsider-Malcolm Williamson, group chief executive of Standard Chartered Bank of London-Mr. Pascarella could easily have packed his bags. But throughout the selection process he talked like a team player, expressing confidence that he and his peers would pull together behind whoever took the helm.
The way Mr. Pascarella dived into the reorganization seems to prove both his sincerity and tenacity. Characteristically, he is not looking back.
Competition, whether from MasterCard, American Express, or other nonbanks, is not letting up. The Internet "changes everything," as the cliche goes. And then there are the nettlesome matters of a federal antitrust suit against Visa and MasterCard, a second one filed by major retailing companies, and the recent flap with the perennial leader among bank card issuers, Citibank, that resulted in the resignation of two of its executives from Visa's board.
"Five years ago, this was a cakewalk compared to what we have now," Mr. Pascarella said. "We have technology changes, bank consolidation, and regulatory issues all at the same time. And consumers are looking for value and convenience.
"This is a difficult time. We are going through this because we are as strong as we are."
David Robertson, president of The Nilson Report of Oxnard, Calif., and a close observer of Visa, said it is "strategizing to determine what financial institutions in the United States are going to need from MasterCard and Visa-and what it will take for Visa to be the preferred partner."
Mr. Robertson suggested that "the challenge is away from cards," and that is "uncharted territory for the associations," which only complicates management's task.
Mr. Pascarella's organizational vision has emerged gradually over the last few months. It may not yet have filtered out visibly to the membership. One consultant active in the field said he has not heard Visa's internal moves remarked upon.
Mr. Pascarella brought in an executive vice president for corporate relations, John Onoda, whose international experience with General Motors Corp. underlined Mr. Pascarella's insistence on assembling a "world class" staff.
Mr. Onoda was one of several people who report to Mr. Pascarella-others included executive vice presidents Michael Beindorff and William Stewart and general counsel Paul Allen-who spent two to three days a week for eight weeks "reviewing every activity we do," Mr. Pascarella said. "They asked, 'What is relevant to the banking industry today, what is peripheral, and what isn't relevant?'"
They found too much "handing off" and not enough accountability among systems, operations, product development, support, and other functions. "When we finished, we realigned according to lines of business, with market-focused accountability," Mr. Pascarella said.
Indicating the seriousness of Visa's commitment to the Internet and electronic commerce, the company has 16 people who "do nothing else," Mr. Pascarella said, in a unit headed by Jim Degracia, a senior vice president and former American Express executive. "These folks' only accountability is to see that we win in the e-commerce arena," the CEO said.
Visa is off to a good start. About 1% of its annual volume, or $2 billion, is traceable to Internet transactions. Market researchers put Visa's share of on-line card sales at 51% or 52%, closely tracking physical-world results, and Visa says it is expecting that 10% of a projected $1 trillion of U.S. volume will be on-line by 2003.
Mr. Pascarella said he sees the commercial or business-to-business market being "as or maybe more important" than the consumer, though Visa's considerable visibility on the World Wide Web is the result of advertising and promotional partnerships with the likes of Yahoo, Travelocity, Music Boulevard, eToys, and GeoCities.
"We are trying to stretch" the market-share target, Mr. Pascarella said. "This should be an area of growth for us, not stability."
In his loudest organization-chart message, Mr. Pascarella this month announced the hiring of Bond Isaacson from International Business Machines Corp. as head of member and merchant relations. Those duties were previously split.
In view of sensitivities with retailers over recent rises in interchange fees and the pending lawsuit over debit card acceptance policies, Visa wants to tilt its attentions a bit in the merchants' favor. Mr. Isaacson, who arrives at Visa next week, will try to strike the right balance.
Mr. Pascarella said he held the job open for some time because "I wouldn't hire anybody who was not world-class." He called Mr. Isaacson "one of the premier marketing people" at IBM, with experience selling to and managing relations with major institutions.
"We are going to have a pure sales and solution-driven person running sales and support," Mr. Pascarella said. "We have never had somebody like this before."
This is not to say that Visa has neglected its merchant friends, or adversaries, as the case may be. Mr. Stewart, a longtime lieutenant of Mr. Pascarella's whose duties have been consolidated in systems and operations, "has been a merchant champion," the CEO said.
"A year ago I challenged our merchant group to be a value-added provider to the merchants, not just a cost item," Mr. Pascarella said. "We will be as creative as we can be from a pricing and efficiency standpoint.
"We need the merchants, the merchants need us, and we all need consumers. It's a partnership. We have to spend more time listening and being more of a solutions provider to merchants."
Mr. Pascarella invokes the notion of "consultative selling" to describe how he wants to engage the retailing community. He pointed to a tiered-rate system that gives retailers an incentive for doing more business with Visa, but he acknowledged that "we could do more."
When asked whether the litigation is a distraction, he said it is crucial to minimize it. "We have to keep running a business day to day," he said. "That's what we get paid to do."
He said the same about what happened on the bank-membership side in recent months, when a dispute over branding policy led Citigroup co- chairman John Reed and consumer banking executive Robert Lipp to leave the Visa board.
"When you have a major customer looking at a process like this, you want to work with them," Mr. Pascarella said. But it came down to Citigroup "almost wanting to substitute the Citi brand for Visa," and the rest of the board did not abide that. Citigroup has taken a MasterCard board seat and will probably begin issuing more MasterCards.
"Citigroup will continue to be a very good customer of ours," Mr. Pascarella said, adding that discussions with Mr. Reed were "very amicable and totally straightforward." He hinted that there would be further developments confirming that the Visa-Citigroup relationship is anything but over.
Mr. Pascarella has also cultivated close relationships with some of his Silicon Valley neighbors, whom Visa draws on not only to help promote Internet sales but also to improve business practices. Visa was a "strategic investor" in Yahoo Inc. and Verisign Inc., for example. Mr. Pascarella is friendly with Yahoo co-founder Jerry Yang and sits on the board of BroadVision Inc., a marketing systems company headed by sales automation pioneer Pehong Chen.
"Talking to these people influenced my thinking," Mr. Pascarella said. "It made me ask, Are we nimble enough? Should we be a faster-to-market, more paranoid type of organization? How do we change our culture?
"These guys may not be changing their cultures all the time, but they know how to change their businesses on a dime. We have to have the same type of urgency. We have to be totally and completely market-focused."
What does he tell employees who may be shaken by the force of his message?
"You may not be doing what you were doing last week," he said, "but who cares? Keep doing everything the way you have been, and you're out of business in three or four years. We have to be relevant to the banks, or we are out of business."