Wachovia: Best IncentivesBy Mel Duvall | Posted 2005-01-13 Email Print
First Union was a star at sales, but not customer service. Wachovia excelled at service, but sales lagged. Could technology make the merged bank better at both?
The two banks couldn't have differed more before their merger.
First Union Corp. of Charlotte, N.C., had embraced self-service banking, and under its Future Bank initiative went to extreme lengths to make its branches lean. Customers were greeted at the door and, when possible, shuttled off to ATMs or telephone kiosks rather than tellers to complete business. The kiosks were plugged into 10 regional call centers and could be used to open accounts, apply for mortgages, request money transfers or stop payments. And the company used software to help it keep track of the fuel for those initiativesthe commissions or incentives rewarded to workers who brought in new business such as credit cards and loans, though that system would later be replaced after the merger of First Union and Wachovia Corp.
At Wachovia, based in Winston-Salem, N.C., tellers handled most customer service transactions, such as account openings and inquiries. Specialists such as loan, mortgage and investment officersnot tellerssold higher value products.
To ensure customer satisfaction, Wachovia employed "mystery shoppers" to rate the customer service skills of its employees, and rewarded tellers and branch managers based on the ratings.
The business results were just as contrary. First Union excelled at selling, with each of its 2,200 branches producing an average of $2 million of new consumer and small-business loans each quarter. Wachovia, with about 700 branches, generated less than $500,000 in new loans per branch per quarter.
Wachovia, however, kept customers happy. The 100-year-old bank ranked fourth among the nation's 20 largest banks in customer satisfaction, according to a 1999 Consumer Reports study. First Union came in dead last.
Then came the merger. First Union agreed in April 2001 to pay $13 billion in stock for Wachovia. The merged operation assumed the name Wachovia, a nod to the bank's superior reputation. Chief executive Ken Thompson's goal: systematically capture the best of both banksthe sales savvy of First Union and Wachovia's top-shelf customer service.
To do that, the new Wachovia would have to become smarter about how it structured incentives and rewarded employees for their efforts to sell products or provide superior customer service.
At First Union, says Thompson: "We were watching the front door to capture new business, but we were hemorrhaging customers out the back door.''
That's where Terry Gilbert entered the picture. As vice president of compensation infrastructure and incentive management, Gilbert was charged with implementing a more accurate and reliable way to compensate employees so the company could better meet its strategic goals. It was just one of 969 systems the bank evaluated after the merger, ranging from teller computer terminals to back-end account transaction applications, but in terms of meeting Thompson's vision, it was critical.