Martin G. McGuinn is starting to show his softer side.

The chief executive officer of Mellon Bank Corp., Pittsburgh, said his priority is to make the bank "the employer of choice."

"That might sound somewhat trite, but it really is intended to convey a message that we're investing in people," Mr. McGuinn said.

That is not the message many people received in January when Mr. McGuinn took Mellon's reins from Frank V. Cahouet.

David R. Lovejoy, a vice chairman and close ally of Mr. Cahouet, left Mellon as Mr. McGuinn moved quickly to put his stamp on the bank.

Several days later, Mellon put three noncore businesses on the auction block: credit cards, mortgage banking, and teller machine processing.

But in an interview, the 56-year-old Mr. McGuinn sounded more like a human resources director than a cutthroat cost-cutter.

He pledged to set Mellon apart from competitors by pumping up the work force.

"If we take care of people, our people will take care of customers," Mr. McGuinn said. "We're in a very tight labor market, and we're in a growth mode. Attracting and retaining the best people is a real challenge."

Mr. McGuinn recently finished a series of meetings at Mellon's major locations-Boston, Los Angeles, New York, Pittsburgh, Philadelphia, and San Francisco.

In all, he spoke to 2,800 company executives, encouraging them to make Mellon the type of place where people want to work.

Mellon, which employs 28,000, has distinguished itself from traditional banks by buying the mutual fund company Dreyfus Corp. in 1994. Acquisitions of other asset management and specialty businesses followed. Only 34% of Mellon's 1998 revenues came from interest income.

Because the acquisitions have fragmented the old banking culture, morale is an especially important issue for Mellon.

"Even though we have a great mix of businesses, we want to keep everyone focused on the fact that when all is said and done we work for one company: Mellon Bank Corp.," the CEO said.

Mr. McGuinn downplayed the cultural differences: "It's not a rift, or a problem at all. The question is: Just how can we do better?"

Mellon is considering a companywide stock option plan as part of a larger review of employee incentives. Mr. McGuinn also wants to tie employee bonuses to stock performance. Moreover, sales incentives are being reviewed.

"What can we do to make the incentive and reward-and-recognition system more in line with customers and not just product sales?" Mr. McGuinn said.

He wants to sell more profitable products to current customers. Commercial lenders, for instance, will be focused on selling lucrative fee services such as cash management, more than on loan volume.

"People used to be paid for making loans," Mr. McGuinn said, "Now what we've done is reorganize around relationship profitability."

The people-friendly strategy coincides with an attempt to become more efficient. Mellon may be cutting staff in some areas while trying to motivate employees in others.

"We cannot afford to increase our expenses," he said. "This is going to be just spending dollars better."

Banks in recent years have largely been viewed as job cutters, not adders. The challenge for many is to trim costs through layoffs and attract talent at the same time.

"It is a rather dichotomous period here," said Waino Pihl, a partner with Arthur Andersen in Chicago. "You have to deal with layoffs, but you also have to maintain high spirits of people who stay with you."

The notion of addressing employee issues clearly differentiates Mr. McGuinn from his predecessor, Mr. Cahouet.

Brought in to turn Mellon around in 1987, the hard-charging Mr. Cahouet ceded little to his top managers. Mr. McGuinn appears more apt to share power.

President and chief operating officer Christopher Condron, for instance, lost a close race with Mr. McGuinn for CEO, yet is considered an important part of the new senior team. Both were vice chairmen under Mr. Cahouet.

"There is more team-building consensus," said Joseph Duwan, an analyst with Keefe, Bruyette & Woods Inc. "Marty is clearly in charge as CEO, but I think he is also using some of the senior executives to a larger degree than Frank did."

"It is very clear morale at Mellon is better than it has been for a long time," said James Schutz, an analyst with ABN Amro in Chicago. "A lot of people at Mellon were delighted to see Marty get that job."

Mr. McGuinn, at Mellon since 1981, is "one of them-not one of the people that Cahouet brought in," said Mr. Schutz, who formerly worked at Mellon.

Mr. Pihl said pushing "the softer side" can discourage conflict within a company and keep it focused on a mission.

The attention to personnel issues "can be interpreted as being soft," said Mr. McGuinn, "but we really want to heighten focus on people, because they're the key to our success."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.