Two years ago, when David Sheppard inherited the responsibility for technology at Fleet Financial Group Inc., he could see that 1994 would be an especially challenging year.

Fleet, whose $48 billion in assets make it New England's largest financial institution, had become known for its effective consolidation of acquired banks. And the company was beginning to talk about a mammoth reengineering effort - Fleet Focus - that would build upon the scale economies gained on the acquisition trail.

Under Fleet Focus, Mr. Sheppard's charge, Fleet Services Corp., would shoulder the dual responsibilities of revamping its own operations while acting as an agent for the changes many other areas of the bank would make.

In addition, Mr. Sheppard had the pressure of following the success one of the more celebrated chief technologists, Michael Zucchini, whose performance in the chief information officer's position earned him a promotion to vice chairman.

Undaunted, Mr. Sheppard tackled Fleet Focus with zeal, helping sift through about 18,000 employee-generated ideas for change to arrive at 3,000 companywide efforts that could be completed in a year or less.

And now, as he enters the quarter in which most of these projects are scheduled for completion, Mr. Sheppard has some validation for the premise that has driven his work for the last nine months.

"There is no inherent conflict in trying to improve internal cost efficiencies and improving customer service at the same time," he said.

Undertakings like Fleet Focus "argue for doing things in a more simple fashion, and simple almost always translates into improved service and better cost efficiencies."

Improving customer service, in fact, is one of the main driving forces behind Fleet Focus. Over the past several years, Fleet's penchant for acquisitions has required most of its technology effort to be directed at consolidation.

While Fleet is still active on the acquisition front, its operational ambitions have broadened.

According to Michon Schenck, a former Fleet employee who left the bank in November for a consulting job with the Tower Group, Wellesley, Mass., "When Mike (Zucchini) was originally brought in, there were big-time acquisitions and mergers. Dave was heavily involved in all of that under him, and I think it wasn't until they were finished with that that they were able to then turn to the reengineering effort that you see now."

In the past, Mr. Sheppard said Fleet would "buy a bank and save a significant amount of money just by converting them to our standard systems, like our standard check processing approach, without really going in and saying 'How can we really optimize check processing itself?'"

Under Fleet Focus, however, the bank tried to look at ways to change the way things were done. The results, in some cases, were staggering.

For example, the process of booking consumer loans, once composed of 19 steps that took two to four weeks to complete, has been streamlined into six steps that can get a decision to a loan applicant in 24 hours.

To be sure, the Services group is still concerned with reducing expenses. After examining its check processing operations, Fleet consolidated proof work from 11 sites to six, resulting in significant overhead reductions.

However, it is interesting to note that Fleet Focus aims in large part to counter critics who maintain that cost-cutting efforts hurt the bank's service.

One manifestation of this goal is that a low-volume check processing facility in Hartford, Conn., that might have closed on purely operational grounds remained open in order to ensure that customers in that area would receive prompt funds availability.

"I don't want to imply that we never approved an idea just because it was cost efficient - of course we did," said Mr. Sheppard. "But we would not approve an idea that was cost efficient at the expense of customer service."

Though the corporatewide effect of Fleet Focus will not be totally clear until the end of the first quarter, the portion of the project overseen by Mr. Sheppard is on its way to achieving the goals laid out last year.

Mr. Sheppard said 920 of the roughly 3,000 process changes undertaken bankwide directly apply to internal operations at the Fleet Services group, which employs 4,940 people.

About 80% of the Services group's internal projects have been completed, resulting in a 20% reduction in ongoing operating expenses for the unit, Mr. Sheppard said.

"The key to those is that they are ongoing reductions, not one-time reductions. They are permanent changes laid into the base," he said.

The savings are in line with companywide expense reduction goals of 20% to 30% by March 31. Overall, Fleet Focus is designed to reduce operating expenses by at least $300 million while adding $50 million in fee income, analysts said.

Analysts also noted that Fleet's overhead ratio has dropped into an acceptable 61% range from 66% last year. The goal is to reduce the ratio to 55% by midyear.

"The cutting of overhead expenses has been the big trend in 1994, and Fleet was the first one to really announce a wide, sweeping program," said Katrina Blecher, an analyst at Gruntal Investment Research in New York. She named Norwest Corp. and Banc One Corp. as followers of Fleet's lead.

Some analysts thought Fleet would be unable to hit its overhead ratio targets simply because it made little progress toward them in the opening months of Fleet Focus, she said.

"But the company explained it's the technology and converting of systems that's the slowest process, and that's why the targets were placed a year out," said Ms. Blecher.

As the reengineering effort has progressed, sources close to Fleet believe Mr. Sheppard's interactive management style and approachable nature make him well-suited for the types of projects he will oversee.

Reengineering, after all, is about empowering lower-level employees and acting on their input, and Fleet plans to continually reinvent itself using technology tools in the coming years.

The rank and file employees feel comfortable talking to Mr. Sheppard, according to the Tower Group's Ms. Schenck. "He doesn't stand on formality a lot, the way you sometimes see with people at that level of management."

However, when presenting an idea, "You'd better have your ducks in a row. He's sent me back to the drawing board many times to rethink an idea,"she said.

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