Firstar Corp. chairman Roger L. Fitzsimonds has a penchant for the catchy, motivational phrase.

"Think globally, act locally," he would often intone. "Soundness, profitability, and growth-in that order" was a mantra.

But another slogan, "managing into the millennium," seemed to fall flat after the Milwaukee company was sold in November to Star Banc Corp. of Cincinnati.

The old Firstar had gone through a painful cost-cutting exercise, causing 26% of its employees, or 2,500 people, to lose their jobs in 1996.

Mr. Fitzsimonds repeatedly asserted his company's independence. The restructuring, he said, would "ensure a bright future for the company and its employees."

"We will emerge from it one of the soundest, most efficient, most customer-driven financial service providers in the U.S.," he said in January 1996.

As other banks move down the restructuring and reengineering road in 1999, in many cases having to undo previous missteps, they could learn lessons from Firstar.

The Milwaukee company had waited too long to address mounting expenses, then tried to do too much too soon and botched the execution.

After struggling for more than two years to make his restructuring work and pay dividends, Mr. Fitzsimonds threw in the towel last July and agreed to sell to Star Banc, which is regarded as one of the best cost managers in the business.

A 10% reduction of the combined companies' work force is slated for 1999.

The merged, $38 billion-asset company has retained the Firstar name, but Star Banc executives, led by chief executive officer Jerry Grundhofer, are firmly in charge. Eight of Firstar's top 13 executives have left or are leaving the company.

Mr. Fitzsimonds, who remained chairman after the merger, declined to comment for this article. Firstar "would rather not dwell on the past," he said through a spokesman.

The 1996 restructuring was, by nearly all accounts, a failure. "Their plan did not work," a former Firstar top executive flatly stated.

"I don't know if anyone at the time recognized this was too much, too fast," said Holmes Foster, who was on Firstar's board from 1991 to 1997. "It turned the entire organization upside down."

Other large restructuring programs have been announced or are in the works. Mercantile Bancorp. of St. Louis is expected to announce details of its reorganization this month, and Huntington Bancshares of Columbus, Ohio, said in October it would lay off 1,000 people and take a related charge in the fourth quarter.

A clear lesson from Firstar's experience is not to disregard the effects of low employee morale on customers and customer service. In the Milwaukee company's case, revenue suffered.

Mr. Foster, who became a director after selling his company, Banks of Iowa Inc., to Firstar in 1991, said once business is lost in a competitive market, it is extremely difficult to get it back.

"All a bank has to sell is service," he said. "If you upset people, you can't make that up in growth because the growth isn't there."

In the end, the company that called itself "Main Street friendly, Wall Street smart" appeared to be neither.

Firstar's cautionary saga began in early 1995. Mr. Fitzsimonds warned board members that, if something were not done to improve profitability, the company was vulnerable to a hostile takeover.

Firstar was profitable but not achieving a self-imposed goal of performing at the top of a group of peer banks.

At the same time, Firstar had not invested enough in technology and was not effectively managing costs. The industry was changing on both counts, and Firstar was not keeping pace.

In commercial lending, a historical strength, margins were getting tighter because of competition. As Firstar's expenses rose, competitors such as U.S. Bancorp of Minneapolis were setting new standards for efficiency.

"It used to be enough that earnings per share was growing and return on equity was good," said Waino Pihl, a partner at Arthur Andersen in Chicago. But efficiency became an important competitive tool. Loyal customers were going to other sources of capital, and companies like Firstar were forced to figure out how to respond.

Firstar's efficiency ratio in early 1996 indicated it spent 62 cents for every dollar of noninterest income earned. It wanted to get that down to 55 cents but never did.

Mr. Foster said Mr. Fitzsimonds sincerely wanted to keep the company from being bought. "If we don't do this, someone will do it for us," Mr. Fitzsimonds repeatedly said.

Firstar considered its options in early 1995. The board listened to Merrill Lynch & Co. investment bankers present their case for selling, but the directors backed Mr. Fitzsimonds' plan to go it alone.

The hiring of Tandon Capital Associates in August 1995 was intended to help assure Firstar's independence. The consulting firm, named for Chandrika Tandon, had a reputation for aggressive cost-slashing, but Firstar officials assured employees they would ultimately be calling the shots.

Mr. Fitzsimonds looked into Tandon's results with others that seemed to have benefited: Fleet Financial Group, Republic New York Corp., Michigan National Corp., and Midlantic Corp. The last two were targets of 1995 acquisitions.

In October 1995, Wells Fargo & Co. made a hostile bid for First Interstate Bancorp of Los Angeles. Though that had no direct effect on Firstar, Mr. Fitzsimonds was under pressure to please Wall Street, lest a competing bank launch a hostile takeover attempt at him.

Mr. Fitzsimonds saw First Bank System, now known as U.S. Bancorp, as the most likely bidder. Coincidentally, U.S. Bancorp's CEO, John F. Grundhofer, is the older brother of the Firstar's new CEO, Jerry Grundhofer.

When the reengineering program, Firstar Forward, was announced in January 1996, Mr. Fitzsimonds said the plan would "not go overboard and harm our future growth potential. The process we used was akin to microsurgery."

The cost cuts were supposed to produce an additional $140 million of annual profits by 1997. But by December 1996, Firstar admitted that it would fall 8 cents short of Wall Street's consensus earnings-per-share estimate.

In July 1997, Mr. Fitzsimonds gave investors his report card on the restructuring. Firstar hit its cost-cutting target, but the amount was partly offset by at least $10 million of additional expenses associated with the restructuring and a $33 million decline in net interest income. A realization that the company would never make its overall earnings goal led Mr. Fitzsimonds to begin negotiating a sale last April.

After Tandon had worked with Firstar, the consultant traveled east to Detroit to work with Comerica Inc. By most accounts, the Comerica restructuring was a success. Comerica met its cost and revenue goals without stumbling. It has met or exceeded earnings estimates ever since.

Before the start of that program, Comerica chairman and CEO Eugene A. Miller said he had talked with Mr. Fitzsimonds and other bank executives who had taken their companies through restructurings. When he asked what they would do differently, "they all focused on keeping up with revenue momentum," Mr. Miller said. "There was a lot of discussion about this company's losing revenue momentum or that company's not hitting numbers on time."

Comerica cut 1,900 employees, or 16% of its payroll, but it avoided revenue declines by appointing a number of bank officials as "revenue guardians," Mr. Miller said. The result was a general culture of cost consciousness, he added.

Though a restructuring needs to be dramatic, it also needs to produce lasting change, said Arthur Andersen's Mr. Pihl. Otherwise, a program can backfire. "If you're not careful how you respond, you can go into a death spiral," he said.

If Firstar's program had been given a full chance to play out, "I don't know if it would have been successful," Mr. Foster said. "But I'd have to say it wasn't successful within the time frame."

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