Wells Fargo & Co. is rew the rules of branch banking.

After more than a year of study and sharp internal debate, the San Francisco-based company is jettisoning the traditional model in which a branch manager rules over a domain of tellers and platform officers.

Instead, the nation's 10th biggest bank company is reassigning the sales staff in its branches to outside product managers. At the same time it is relieving the sales force of customer service responsibilities.

The sales staff is being divided into four product areas, said William F. Aldinger, a vice chairman who heads retail banking. The areas are small business, mortgages, investment products, and upscale consumer banking.

|A Major Shift'

Salespeople will be moved among branches depending on the dictates of their product bosses.

Branch managers will see their authority radically diminished, supervising only tellers and a small staff of in-branch customer service specialists.

"We're reengineering the company," said Mr. Aldinger. "This is a major shift in the way we're doing business."

To be sure, putting product specialists in branches is not new. Wells, like many banks, already has mortgage, small business, and investment products salespeople in its offices.

The fundamental change lies in taking authority for sales away from branch managers and separating sales from customer service.

As the new system is put into effect over the next six months, Wells also will be slashing the branch work force. The bank expects to ax about 700 of 8,300 administrative and officer-level jobs in its 626-branch network.

Wells enjoys a reputation for cutting-edge efficiency, but reducing costs by trimming staff is only part of what the bank hopes to accomplish. Mr. Aldinger predicted that the new system also will boost Wells' revenue and improve service.

Increase in Production Seen

The key is squeezing more volume out of the staff, he said. That should be possible because the sales force will no longer be distracted by customers asking for help reading a statement or tracking down a check.

"Through specialization, we can get more production," Mr. Aldinger contended.

In designing the plan, Wells executives had their eyes not so much on the retail systems of other banks, but on nonbank financial services providers, such as brokerage firms and mortgage companies.

These companies target sharply defined markets, an objective Wells officials say they can achieve through the use of sales specialists.

Fighting Nonbank Invasion

"The competition is nonbanks, which have been picking off our best customers," Mr. Aldinger said. "We can't compete with the old system of being all things to all people."

Wells insiders say vice chairman William F. Zuendt, who is Mr. Aldinger's boss, has been the main champion of the new system.

Mr. Zuendt was trained as a mathematician and engineer, and is said to be fascinated by process-engineering techniques used at industrial companies.

He has been analyzing how work can be performed more efficiently cheaply by breaking down job functions into small parts.

|It's Just Sell, Sell, Sell'

But the plan to reorganize Wells' retail management structure was not embraced unanimously. According to people familiar with internal discussions, some argued that Wells would be severing a branch's ties with its community.

"This is not a relationship strategy - it's just sell, sell, said one person who knew about the debate.

The opposition collapsed, however, when the plan's most vocal critic, vice chairman Robert L. Joss, left early this year to become chief executive of Australia's Westpac Banking Corp.

Industry experts and rival bankers, meanwhile, say they respect Wells' reputation as a savvy cost cutter. And they believe the plan may succeed in boosting product sales.

Competitors See an Opening

But they question whether service will improve, and agree that customer relationships may suffer when sales and service are divorced.

Indeed, some competitors think they can woo customers away from Wells by building relationships and emphasizing service.

"This gives us opportunities," said Daniel R. Eitingon, retail banking chief of First Interstate Bancorp's California unit. "It suggests their orientation is to be a transaction bank."

But Mr. Aldinger insisted that Wells will provide better service to customers because branch managers "will be more focused on it."

Rivals warn, however, that instead of motivating managers, Wells' system could spur a mass exodus of branch chiefs.

The branch managers, who lost most of their lending authority years ago, will not easily accept this latest erosion of power, the competitors predict.

At least one sign of discontent has already emerged. The branch reorganization plan itself was disclosed in the San Francisco Chronicle several weeks ago. The source who leaked the story was a disgruntled branch manager.

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