Morgan Shuffles Tech Area In a Key Change of Strategy
J.P. Morgan & Co. is laying off some employees and transferring others in a radical restructuring of its technology division.
Peter L. Woicke, a managing director in charge of global technology and operations, confirmed the overhaul Tuesday, saying it is aimed at speeding the development of new products and streamlining operations.
Laggard in Technology
Despite its reputation as the soldiest of blue-chip banks, Morgan has long been seen as a laggard in back-office operations. At the same time, its annual technology budget of $600 million ranks Morgan among the biggest bank spenders in the United States.
Mr. Woicke oversees almost 38% of Morgan's work force of 12,500 people. Between 1,500 and 2,000 employees work directly in technology. The rest of the division includes business lines such as securities processing, global custody, and corporate trust.
"My objective is to have an aggressive back office in two years," Mr. Woicke, who took over his post last November, said in an interview. "The back office has to make a contribution to competitiveness."
The changes began filtering down last January as Morgan began implementing recommendations of a companwide efficiency study conducted in conjunction with McKinsey & Co., the New York-based consulting firm.
Morgan officials, usually loath to unveil internal details of their operation to the public, said the changes in the technology unit reflect a recognition of the company's need to establish standards for business units. Although systems had been centrally controlled, various units over the years developed their own disparate software systems in frustration over slow response from the systems department.
Too Many |Cadillacs'
"They always wanted to give us Cadillacs, and all we needed were Chevrolets," said one executive, who asked for anonymity.
The new push will result in removal of layers of management and layoffs, Mr. Woicke said. He would not give exact numbers.
Mr. Woicke emphasized that the reorganization also will permit Morgan to continue its rapid push into new products as a result of better technical support.
In assigning technology experts to various business units, Morgan is following the lead of several other banks. Bankers Trust, in the mid-1980s, was the first to pursue a strategy of allocating technical support to specific business units as long as they adhered to centrally controlled standards.
"The real profitability comes from linking the products" that have been developed in different business units, Mr. Woicke said.
New Securities Powers
Morgan became convinced it had to change the way it handled systems development once it was granted securities underwriting powers by the Federal Reserve Board, Mr. Woicke said. The new business demanded flexibility and speed. The systems group, he acknowledged, had focused on reliability at the expense of speed.
"The systems department did a great job in building the processing systems of the past, but the rapid building of systems requires a different approach," Mr. Woicke said. "We were a little bit overwhelmed."
Mr. Woicke, who himself used to run Morgan's securities operations, said that a gap had grown between front- and back-office operations, partly because Morgan's policy of frequently shifting front-office was not pursued to the same exent in the back office. The rigid back-office structure did not allow bright young people to learn the business, Mr. Woicke said.
As part of the reorganization, some top technologsts are being redeployed to business units.
The most striking example is William D. Raben, a senior vice president in advanced technology who last week was transferred to the bank's corporate finance operations.
"This is a fundamental change in my profession," said Mr. Raben. "My objective here is to get cross-trained in corporate finance."