These days, retail bankers speak in almost mantra-like fashion about building a sales culture. Everyone, it seems, wants to be Norwest Corp., the very model of a modern banking sales organization.
John R. Cochran just might pull it off.
For one thing, the chief executive of FirstMerit Corp. knows the Norwest playbook cold. He spent 27 years at the Minneapolis-based company, including nine years as president of its highly profitable Nebraska operation.
What's more, the Akron, Ohio-based bank has a solid position and strong markets and appears thoroughly committed to strengthening its ties with consumers.
While the bank now has an average of 1.9 relationships per household, Mr. Cochran said, "It's easily within our reach to double that."
As it proceeds, FirstMerit could shape up as a classic case of how to turn a traditional banking company into a nimble and effective financial services retailer that can go up against the best in the business.
In the last year, FirstMerit, a $5.6 billion asset holding company with seven affiliates, has put its platform and teller staff through extensive sales training, introduced incentive compensation, created a standardized product line, and set sales goals for branches and employees that are tracked daily. FirstMerit, formerly First Bancorporation of Ohio, is also rolling out a new platform automation tool and management information system.
To achieve it's retail goals, Mr. Cochran also took FirstMerit through a restructuring and brought in new executives for some key positions, including retail banking and credit policy. Mr. Cochran was named chief executive last March, succeeding Howard L. Flood, who will continue as chairman through October.
Joseph C. Duwan, an analyst with Keefe, Bruyette & Woods Inc. in New York, said FirstMerit's new retail emphasis holds promise, given Mr. Cochran's Norwest experience, the economic strength of its market, and the strong presence it has in Akron, Canton, and some smaller Ohio communities.
Fred A. Cummings, an analyst with McDonald & Company Securities, said that the subsidiary Mr. Cochran ran was Norwest's most profitable. "That bank was used as a model throughout the Norwest franchise," he said. "I think they have the right person leading the charge in terms of rejuvinating the retail franchise."
FirstMerit's sales training began with 75 managers who learned how to coach tellers and customer service representatives. They in turn led 500 employees through two days of classes in the art of selling financial services.
"Every banker, customer service manager, and teller manager went through that training," said Carrie L. Tolstedt, a senior vice president who had previously worked for Mr. Cochran in Nebraska.
The FirstMerit staff also went through two more days of training to learn about the now-standardized product offerings. Employees were also briefed on the incentive compensation scale and recognition programs that spotlight effective salespeople.
"When you teach them to listen to what are the customers needs, and you deliver to that, you get a much more satisfied customer," he said.
FirstMerit employees also learned what was expected of them. "We've built a set of productivity expectations for all our (customer) contact positions," said Mr. Cochran. "They are very well defined in terms of the sales we want per day, the cross-sell that we want with every contact, the dollar volume of business we want to do in deposits, the dollar volume of loans we want to make every day, and the dollar volume of fee income that we want them to generate every day."
Mr. Cochran acknowledged that not everyone has been able to adjust to the new demands.
"We took everybody we had and said, 'Who's got the aptitude to do this?' " he said. "We made assessments as to who should be filling the sales jobs. It wasn't a foregone conclusion that because you sat at the platform that you would be a personal banker. You really had to have a record of being a sales person."
Those salespeople are being aided by technology. Last November, the bank began rolling out a new teller system. And new platform automation technology is expected to be installed throughout the bank by next month.
"It's given a lot of tools to the bankers to help them become more effective as well as efficient," said Ms. Tolstedt.
The platform system, from Software Dynamics Inc., Chatsworth, Calif., helps service representatives match customer needs with bank products. "The screen just helps you build more and more product sales," said Mr. Cochran. "And when it's all done, you push a button and all the applications and documentation is printed for you."
For example, a customer might be shown the benefits of consolidating debt through a home equity loan. While the service representative explains the program, the system will perform a credit check and get a preapproval on the loan.
The system also guides the banker through a series of questions to gather financial information about a customer. Once the information is captured, the bank won't need to ask again.
That feature is designed to create a ready data base of prospective sales. Mr. Cochran noted that while FirstMerit has relationships with 320,000 households, nearly 90% don't have a direct loan with the bank, fewer than half have a checking account, and fewer than one-third have a savings account.
"The idea is to get our people to focus on that opportunity every contact they have with the customer, whether it's in person or over the phone," said Mr. Cochran.
Those contacts will be carefully managed. "We literally measure daily . . . what our sales are per branch, what our sales are per banker," he said.
Branches are also being redesigned to promote better sales. The best elements of a 1994 pilot program will be rolled out throughout FirstMerit's 156 branches this year.
The company also underwent a restructuring last year designed to improve efficiency. Whereas affiliates had been locally managed, the bank hadn't yet capitalized on the other part of the super community banking equation - keeping costs down by handling back-office tasks centrally.
In 1995, the bank consolidated its core systems to eliminate redundancies. Since the lead bank accounted for 60% of the FirstMerit's asset base, it was a relatively painless task to convert the remaining affiliates onto those systems, said Mr. Cochran. "We've consolidated both deposit and loan operations, and the administrative functions of accounting, marketing, human resources, legal, and audit," he said.
That helped reduce the efficiency ratio, or noninterest expense per dollar of revenue, from about 64% a year ago to just under 60%. Overall employment has also been cut, by nearly 10%. The bank took an $17.8 million pretax charge in the fourth quarter to cover costs related to the restructuring.
But Mr. Cochran said the bank has avoided the deep cost-cutting that has marked reengineering efforts at many larger banks. Operating expenses in 1996 are expected to be about 5% below the 1995 level - far less than the 10% or 20% reductions posted in some of the high-profile projects.
"What we're after is generating more revenue," said Mr. Cochran. "We want to be efficient. But our focus is not going to be on trying to drive all of the costs out of this operation."
The full benefits from the sales training and restructuring have yet to appear on the balance sheet, however.
Net income for 1995 was $31.3 million, down 56% from a year earlier. Return on assets fell to 0.55% from 1.32% during the period. Without several one-time charges - primarily for the restructuring and the bank's acquisition of Civista Corp., Canton - the 1995 ROA would have been 1.10%.
"We have an aggressive set of financial goals and growth goals for our company," Mr. Cochran said. "We are building the core earning power now that will help us ... realize them."
"I think they are positioned to have a very solid 1996," said Mr. Cummings of McDonald & Co.
While FirstMerit has its sights set on boosting revenue and earnings per share through its emerging sales culture, the bank may also reenter the acquisition market. It's last major purchase was of $800 million asset Civista. A later agreement to buy Madison Savings and Loan Association unraveled when FirstMerit pulled out of the deal, saying the Clearwater, Fla., thrift had failed to disclose relevant information. Madison sued for breach of contract, and FirstMerit quickly countersued. The parties eventually settled.
The bank already operates a trust company in Clearwater, catering largely to retired Ohio customers who spend all or part of their time in Florida.
Mr. Cochran said FirstMerit is keeping it's eyes open for potential acquisitions in Ohio and western Pennsylvania and northeastern Indiana.
It's also possible that large regional banks in the area have their eyes on FirstMerit. But Mr. Cochran said, "Our goal is to provide a superior return to our shareholders and stay independent."