Two months after completing his biggest deal yet, Jerry A. Grundhofer has commenced work on what may be the deals toughest challenge: integrating his populist style of salesmanship into the 50,000-strong work force of the new U.S. Bancorp.
The company, formed by Firstar Corp. of Milwaukees $21 billion purchase of U.S. Bancorp of Minneapolis, has installed a compensation program that rewards sales and profit growth. In February it announced that all employees, including part-timers, would get stock options. Now it is setting up financial perks that reward customer service.
David Moffett, vice chairman and chief financial officer at the $160 billion-asset company, said the biggest goal since the merger has been the retention of customers and employees. U.S. Bancorp has sent surveys to customers asking about the service that they have been receiving. Customers will continue to be surveyed until the integration is completed next year, Mr. Moffett said.
In addition, employee recognition programs have been started to reward service. For example, up to 24% of senior managers annual bonuses is tied to service, he said.
We are going to start paying people based on the service they provide and how much they sell, Mr. Moffett said. This is to make sure service does not become an issue. That is your biggest risk in these larger mergers.
The incentive programs come as no surprise to many. Mr. Grundhofer has made his reputation in banking by successfully turning around two flailing retail banking franchises first Cincinnatis Star Banc Corp. and then Firstar with unconventional sales motivation tactics.
He is famous for walking around his company in shirtsleeves and quizzing employees about their latest sales coups. He demands that employees use every opportunity to make a sales pitch, including giving their business cards to people standing in line at the supermarket. He instigates rivalries by sponsoring contests that pit the performance of one group of employees against another. Trips to Las Vegas for the winners are not uncommon.
Analysts have given Mr. Grundhofer and his management team kudos for the concept.
David George, an analyst at A.G. Edwards & Sons, said the company is covering all the bases with the integration.
In a merger this size, retaining customers is critically important, Mr. George said. Customer service perks make it likelier that employees will be more focused on retaining customers, he said. This is the way it should be, performance-based.
Jennifer Thompson, an analyst at Putnam Lovell Securities, said one way they compete in retail space is by providing top customer service. There will be revenue synergies. One of the biggest areas that can be impacted is customer service.
Now, Mr. Grundhofer gets a third chance to prove that his sales incentives can reinvigorate a sleepy retail sales force. The new U.S. Bancorp has more than 10 million customers in 24 states from the Midwest to the Pacific Ocean. The new sales territory stretches to high-growth markets on the West Coast.
But this time Mr. Grundhofer is taking on more than just a traditional commercial banking company. He inherits U.S. Bancorps strengths in processing as well as its investment banking subsidiary, Piper Jaffray. As chairman of Firstar, he expressed an interest in building the corporate banking side, but he reserved his first passion for retail banking.
Consumer banking is where we get the juice for our shareholders, Mr. Grundhofer told American Banker in an interview last year. We have a very well thought-out and well-oiled machine.
Since the merger U.S. Bancorp has rolled out auto leasing and student lending units, and Mr. Moffett said a mortgage unit has been launched at a time when refinancings have increased.
For now the company is making sure it is up to speed as the integration proceeds, Mr. Moffett said. The emphasis is now on execution. It is about putting one foot in front of the other. We are trying to make the company very simple to understand, very simple to operate, and very simple to communicate.