New Man Atop Bankamerica's Pyramid
The message was clear. At an afternoon-long meeting on Jan. 3, just two days after taking over as chief executive of BankAmerica Corp., David A. Coulter laid down the law of his new administration to his top lieutenants: End the turf wars and office politics that long have been a major distraction at the nation's second-largest bank. Recalls Coulter, in his first interview as CEO: "I said, `This is a team environment, and they have to be 100% committed."'
BankAmerica, with $230 billion in assets, is a formidable institution despite the internal feuding. It has one of the best franchises in banking, with a balance of consumer and corporate businesses, and dominance in the fast-growing western U.S. market. Profits are on the rise, too. The bank earned nearly $2 billion in the first nine months of 1995, up almost 24% from the same period the year before.
CHANGE OF STYLE. Yet, partly thanks to the infighting as well as one of the industry's most ponderous bureaucracies, BofA lags more nimble competitors. Over the past four quarters, it earned $1.15 for every $100 of assets, compared with $1.59 and $1.83, respectively, for California rivals First Interstate Bancorp and Wells Fargo & Co. BofA's organizational problems sap the bank of energy and focus, BofA watchers say, handicapping it in the marketplace and damaging its financial results. Competition is becoming increasingly heated, and if BofA fails to deal effectively with those problems, its market position could be seriously eroded.
The announcement last August of Coulter's selection as the next CEO suggests the bank intends to confront its shortcomings. In a move that stunned the industry, the 48-year-old corporate and international banking chief was chosen over several better-known rivals. Coulter represents a dramatic change of style and generation, combining a more systematic approach to management with a willingness to listen and a regard for subordinates. "He has the right kind of ego," says former BofA President Thomas A. Cooper.
The measured, cerebral Coulter wowed board members, who were impressed by his intelligence and business acumen. But what tipped the scales in his favor, they say, were his people skills. "We liked his personality," says a director. "He's very sensitive to people." "Dave is terrific," says Salomon Brothers Inc. investment banker Peter H. Peracca. "The only reason he would not succeed is that Balkan politics beat him."
Ironically, the choice of Coulter was itself bound up in internal politics. Chief Financial Officer Lewis W. Coleman, BofA's second-ranking executive, had been the betting favorite in the race to succeed retiring Chairman and CEO Richard M. Rosenberg, who is 65. But for reasons that remain unclear, Rosenberg turned against his No.2 man, according to company insiders. He and the rest of BofA's board passed over the CFO and turned instead to Coulter, a deputy of Coleman's, as the bank's leader. Insiders say the decision poisoned relations between Rosenberg, who will remain as chairman through May, and Coleman, who has since left the bank.
From his early background, one would not have predicted that Coulter would one day be lauded for his people skills. The Pittsburgh-born Coulter got degrees in math and industrial administration at Carnegie Mellon University. The training gave him a taste for quantitative analysis and a bent for building financial models that has stayed with him throughout his career. "I tend to be pretty analytical," he says.
Coulter joined BofA in 1976 as a financial analyst, but he soon gained a plum job as assistant to then-President Tom Clausen. Later he moved to corporate planning, where he carried out much of the spadework in the purchases of Seattle-based Seafirst Corp. and discount broker Charles Schwab & Co.
Despite these somewhat technical assignments, Coulter was developing political savvy. In 1985, when he was assistant to the head of global banking at BofA, he was asked to help in a delicate assignment: taking authority over worldwide consumer operations from the wholesale managers in his division. That would enable the bank to develop a more coherent consumer strategy. Although BofA's consumer and corporate bankers had nothing but scorn for each other, Coulter took on the task and pulled it off. "Dave's attitude was, `If it's a corporate priority, I'll do anything I can to help you,"' recalls Les Biller, the retail manager who directed the project. After becoming wholesale chief in 1993, Coulter moved BofA away from an emphasis on traditional lending. Instead, he sought to sell customers a range of credit and noncredit services, such as managing corporate flows of cash. He built sophisticated models to measure how much profit BofA extracted from each customer. And he carried out a wrenching reorganization in which responsibility for liaison with customers was taken from BofA's proud cadre of corporate lending officers and assigned to a newly created group of so-called "relationship managers," for whom credit was just one of many products.
If Coulter, as CEO, is to get a grip on BofA, he will have to start by controlling his senior executives. While he calls reports of infighting at BofA "overstated," he does acknowledge the problem. "I don't think we have functioned as well as a team as we could have," Coulter concedes, though he says he plans no immediate changes in his nine-member managing committee.
One of the most debilitating struggles is taking place in an area where Coulter can least afford it--retail banking, where computers, automated tellers, and telephones are revolutionizing the delivery of financial services. Under Rosenberg, retail banking was divided into two separate baronies, each with its own line to the CEO: Vice-Chairman Thomas E. Peterson's product-development division and a 10-state branch network under another vice-chairman, Luke S. Helms. Helms insisted on the separate reporting relationships when he came to headquarters in 1993 after running the bank's Seafirst subsidiary. But BofA insiders say the arrangement hampered cooperation between the product and sales staffs.
In August, Coulter persuaded Rosenberg to end the schism by combining the divisions into a single unit, with Helms reporting to Peterson. Some BofA watchers think the move could prompt Helms to leave, a loss Coulter can ill afford. The charismatic 52-year-old branch chief is a creative marketer who honed his skills at McDonald's Corp.'s Hamburger University. Through a spokesman, Helms says he loves his job and doesn't intend to go. Coulter says he wants both Helms and Peterson, 60, "to be here for the long term."
DAY-TO-DAY. On business issues, Coulter says he is focusing on hammering out a formula for BofA's retail businesses as new technologies come on line. A vital part of his retail strategy is making better use of the bank's database, which traces patterns in more than 15 million households that use financial products and services. Says Coulter: "I haven't heard anybody in the industry who can articulate what is exactly the long-term economic model for making money in the consumer finance business."
Coulter is working to improve the bank's laggard level of customer service, too, which has suffered while BofA more than doubled in size over the past five years. Coulter praises the franchise handed to him, but he says rapid growth has taken the bank's eyes off day-to-day delivery of services. "We need to work on execution," he declares.
Growth is not on Coulter's agenda. Rosenberg spent a fair amount of time plotting deals with an array of giant banks, including NationsBank, Chase Manhattan, Bank of Boston, and First Bank System. But Coulter argues that few deals really pay off for shareholders. "It's my job to talk," he says. "But I come to most mergers with a pessimistic bent."
Coulter will have his hands full simply grappling with BofA's intractable bureaucratic inertia. "I don't want to be looked back on as the person who maintained the bureaucracy of BofA," he declares. But that system has worn down more than a few BofA managers. Coulter will need all his talents to avoid becoming one of them.
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