When a bank merger is consummated, the boardroom rejoices while the back office winces.
Bank chief executives receive most of the accolades in the mergers game, but it is the operations managers who usually get the nitty-gritty job of making the marriage work.
As a result, the industry is turning to a new breed of techno-banker, dubbed "consolidators," who specialize in squeezing operational costs out of acquired institutions.
These executives include professionals such as Jay Ward, executive vice president of operations at KeyCorp, in Albany, N.Y.; Robert Condon, executive vice president of operations at Comerica Inc.; and Adrian Horton, vice president of the conversion merger group at First of America Corp., Kalamazoo, Mich.
While they don't hold the most glamorous jobs in a bank, consolidators are certainly appreciated by their bosses.
"I'd trust him with my life," said Eugene A. Miller, Comerica's current chairman, referring to Mr. Condon. "I've probably trusted him with my job."
In order to succeed, consolidators need to be part politician, part computer
expert, and, at times, a cold-blooded executor of a painful procedure.
|Top of the Mountain'
Their success or failure can dramatically affect a bank's stock price, and its status as an acquiring institution, said Ladd Willis, managing vice president of First Manhattan Consulting Group in New York.
"You can only acquire if you can deliver on the expected operational costs savings," Mr. Willis said. "What these people do is absolutely critical."
For consolidators on the hot seat, managing mergers can be the biggest challenge of their professional lives.
"I've been through a lot of change in my career, and I guess I look at this as the top of the mountain," said Comerica's Mr. Condon. "Its a huge job."
Detroit-based Comerica is scheduled to embark Thursday upon one of the biggest consolidations ever executed in the banking industry, when it buys neighboring Manufacturers National Corp. for about $1.2 billion in stock.
The so-called merger of equals is expected to create the country's 25th-largest bank holding company, with assets of $27 billion.
Bank officials anticipate the merger will reduce combined noninterest expense 15%, or $145 million annually, by 1994. Mr. Condon will be responsible for delivering about $40 million of those savings by paring down duplicate computer systems and eliminating the jobs of about 600 of the two banks 2,400 back-office staff.
For Mr. Condon, the merger represents a deja vu experience, and an opportunity to rectify past mistakes. In 1983, Mr. Condon said, Comerica had embarked on a project to replace outdated computers with completely new equipment.
Too-Much; Too-Fast Syndrome
The conversion is similar to the challenge Comerica currently faces: Several new computer systems must be brought on-line very quickly.
But, in the previous project, Comerica suffered what Mr. Condon called a "major hiccup," in its item-processing system, largely by trying to do too much too quickly.
"We were out of balance, out of control," Mr. Condon said.
The debacle cost Comerica millions, and constituted a large portion of a $4.5 million write-off in 1985 attributed to "conversion to new systems," Mr. Condon said. He added that the incident affected his management style, and that of his employees.
Mr. Condon said he now makes sure the two banks are overmanaging the conversion process by developing multiple contingency plans. But even though he's suffered hits in the past, Mr. Condon doesn't describe himself as an overbearing, hands-on manager.
Instead, he said he leaves most of the daily decisions up to his underlings. Stephen J. Hugley, Manufacturers' senior vice president and manager of information systems, agreed with that description.
As proof, Mr. Hugley cited Mr. Condon's management style during two weeks of critical meetings that preceded the merger announcement last October.
Mr. Hugley and Mr. Condon were among a half-dozen top bank officials taking part in the meetings. Their job was to craft the master plan for streamlining operations that was to be used to justify the merger to stockholders.
"We would review everything that had happened during the day, and the things to work on in the following day," Mr. Hugley said. Mr. Condon "would ask questions, but not as much as you would think."
Focus on Goals
But Mr. Condon's associates credited the executive with a keen understanding of the merger issues, helping the group stay focused on its goals.
The resulting consolidation plan, in most instances, called for both banks to use computer systems that Comerica had already installed.
For First of America's lead consolidator, Adrian Horton, and his boss, John Brecht, president of the bank's operations unit, mergers aren't just a job, they're a way of life.
"I think systems conversions are a religious experience," said Mr. Horton. "That's why we call them conversions."
First of America has acquired 90 banks since 1982. The bank's strategy, called super community banking, is to assemble a chain of community banks, and achieve costs efficiencies by consolidating back-office operations. But lending and other business decisions are made at the local level.
Mr. Brecht said that First of America can cut operations expenses and back-office staffing levels at acquired banks by more than a third, on average.
The unit responsible for achieving these savings is a hightech SWAT team of 50 systems staffers led by Mr. Horton. His job is to streamline an acquired bank's operations as quickly as possible.
Mr. Brecht figures that First of America spends $5 million a year on the conversion merger group, but reaps $50 million in annual savings from its activities.
But Mr. Brecht, who has a master's degree in Greek and Latin from Villanova University, admitted that he can be concerned at times by the cruelties of consolidation.
"I used to lose some sleep over employees that were laid off," he said. "I don't do that anymore," he added. |But it still concerns me. There is some ruthlessness in standardization."
But Mr. Brecht said that First of America tries to ease the transition through extensive counseling for dismissed employees and by moving as many as possible into other jobs at the bank.
Fist of America also tries to motivate the employees who remain through so-called bus tours, where employees of the parent and acquired banks gather in a hotel to get acquainted.
It was at such a meeting that Mr. Horton first met Paul Stahr, senior operations officer for First of America Bank of Northeastern Illinois, which was acquired by First of America in the mid-1980s. Mr. Horton, with glasses and receding hairline, did not look like someone who would be a charismatic leader, Mr. Stahr said.
Communication Is Key
But at the bus-tour meeting, Mr. Horton gave a rousing speech, filled with jokes and anecdotes, that pumped up employees for the impending merger.
"He gave the darndest speech," Mr. Stahr said. "I was frankly surprised I didn't think he could deliver a speech like that."
For Jay Ward, KeyCorp's executive vice president for operations, communication is also the key to a successful back-office consolidation. Mr. Ward, who started his career in 1955 as a marketing manager for International Business Machines Corp., took over control of KeyCorp's back-office operations in 1982.
Since then, he's been involved in a series of consolidations starting in the early 1980s, when KeyCorp banks in New York State replaced aging, disparate systems with modern, corporatewide computing facilities.
Since then, KeyCorp has made several high-profile acquisitions, including $5.7 billion-asset Goldome Savings bank in 1991. Pending are acquisitions of $4.9 billion-asset Puget Sound Bancorp of Tacoma, Wash., and 48 Security Pacific Corp. branches in Washington State.
Mr. Ward said that when KeyCorp acquires a bank, it can typically convert its computer systems and back-office operations to corporatewide systems within 6 to 8 months, with cost reductions of 25% to 35%.
But doing so requires a series of sensitive negotiations between KeyCorp's back-office staff and marketing staffers at the acquired bank.
"Its amazing to see the number of people who think they are the best marketeers in the world," Mr. Ward said.
Mr. Ward said he deals with these problems by sitting in on meetings with top managers and patiently explaining the complexity and costs of maintaining unique products or features.
"The most important skill, if anything, is the skill of listening," Mr. Ward said.
But even though egos can be bruised, and bankers lose their jobs, Mr. Ward said he believes the process is worthwhile.
"You feel sorry for these people losing their jobs, because it shakes them up," Mr. Ward said. "But, in the end, this is something that's got to happen in the industry."