I couldn't believe my ears, but Victor Riley, Keycorp's energetic CEO, was preaching relationship banking to me: "To compete in the next century we need to establish a relationship with the customer in order to protect the franchise.

The key going forward is to do banking differently. We also need a distribution system that is large enough to reduce the per item cost, and an array of proven, effective products. We must provide a full range of products, yet not be all things to all people."

This sounds very much like super community banking to me: a community banking/relationship orientation to the customer; cost efficiencies; and a broad product line to capture a greater share of the customer's wallet.

Riley was sharing his future vision for Keycorp when I asked what's next for Keycorp. The company's merger with Society has raised some eyebrows in the industry. Many were not sure whether the new Keycorp is looking to become the snow belt's megabank, or whether the vision will take the company elsewhere. Riley set the record straight. "We need a threelegged stool to compete effectively, now that we have sufficient mass":

* Employees in the branches who believe in the sales culture

* A sophisticated information system to provide the employee with instant information on the individual in front of them

* Sophisticated training and compensation programs to provide the incentive.

"We must do more with what we've got" said Victor. "We need to strengthen the franchise and the sales culture is an important ingredient to getting there. Our incentive compensation is geared to the customer needs, to ensure relationship selling."

More with What They Have

In other words, Keycorp's challenge for the coming years is not necessarily to grow more (although that is an integral business to banks today), but to make more with what they've got, understand what the company needs to become a full-service financial institution and implement it.

"We will not be like the railroads," says Riley. "We recognize that we are in the financial services business. We cannot compete as a bank; we must become a financial services institution. What banking needs now is relationship orientation, in order to protect the franchise. Historically, U.S. banks have sold one or two products per customer. In Ireland the ratio is 4 to 5. Our challenge is to reach that level of relationship intensity."

Accordingly, Riley and Keycorp set out to invest in their people, since employee retention is directly related to customer retention. In addition to developing compensation programs where incentives are a major part of total compensation, they are committed to improve the health of employees through a serious investment in health care.

Keycorp has a dietician, medical staff, and several large exercise facilities. Despite traditional skepticism about serving health food in cafeterias, Riley's dietician ms coordinating with the company's cooks toward that goal.

Relying on People

Are we now seeing a new Keycorp? A friendlier, gentler company? Riley transmits that message: "Our management is not vertical, i.e. protecting products, not relationships. The secret for us now is to increase the number of products to push through our distribution system," and the success of that drive depends to a great extent on the people.

"Our people must buy into this approach and team around the customer," says Riley. Time will tell whether this ambitious transition can be accomplished. Victor Riley's track record certainly indicates it is a likely possibility.

Ms. Bird is a partner of Financial Management Advisors, a New York-based consulting firm, and author of "Supercommunity Banking: A Superstrategy for Success."

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