Banking & Finance
Compound returns
How Bank of the West Chairman and CEO Don McGrath knocks out the challenges to growth with solid communication
By Kristy J. O’Hara
Smart Business Northern California | October 2007
Don J. McGrath has seen Bank of the West grow from just 40
branches to more than 700 in recent years, and while that kind of
growth can put a lot of stress on an organization, McGrath has
taken it all in stride.
As chairman and CEO, McGrath uses clear principles and strategies to ensure that the company doesn’t get too far ahead of itself
and fall to pieces. But it’s not just about maintaining the company,
he also wants to see it thrive, and he’s done just that.
He’s overseen 15 acquisitions in the last two decades, he’s
increased the bank’s customer base by thousands, and he’s led the
formation of a plan that ensures that as the bank grows, it doesn’t
lose its high-service, community-bank feel.
When McGrath became CEO in 1996, the bank had a net income
of $44 million and a little more than $5 billion in total assets. Today,
Bank of the West has $572 million in net income and $55.6 billion
in total assets.
Growth, both organic and through acquisitions, has been a constant theme for McGrath and Bank of the West as it has become
the second largest bank headquartered in California.
Here’s how McGrath has conquered some of his biggest challenges as he’s guided Bank of the West and its 11,000 employees to
new levels of success.
Work the plan
With a rapidly growing company, McGrath knew he needed to lay
down some guidelines, but he also knew any plan he came up with
wouldn’t work unless he got input from his executive team.
“It’s always easier to accept a decision if you’ve had a say in that
decision, even if all your suggestions have not been used,”
McGrath says.
For six months, he led an open dialogue with his senior managers and solicited everyone’s input.
“We didn’t accept everyone’s input, but we certainly considered
it,” McGrath says. “When I was a young officer, I used to be really
frustrated if I thought I had the right decision and nobody would
listen. If somebody would listen, and they still didn’t agree with
me, at least they listened.”
Being patient enough to spend a lot of time gathering input from
his managers allowed the team to create a better plan, and it
allowed the implementation to go smoother because people
bought in to it.
“Any successful organization, the first thing you have to have is
you have to have hearts and minds behind the strategies of the
companies,” McGrath says, adding that inclusiveness and taking a
bottom-up approach is key to achieving that.
The team ended up identifying three initiatives that would help
the bank grow without becoming bogged down in bureaucracy:
localize decision-making, create a networkwide framework for
managers and ensure all products are rolled out in every geographic area.
Creating the plan with the management team was the first step,
but it also needed to be rolled out across the organization. The
team started with the obvious forms of communication — e-mail,
its Web site and presentations — but McGrath didn’t overlook the
most important form of communication.
“People communicate better face to face,” he says. “We use video conferencing and all the efficient ways you communicate today,
but there’s still no substitute for face-to-face communication if you
can do it.”
McGrath and his team visited with divisional- and regional-level
people and had question-and-answer sessions with them, and that
process continued for about two months.
While getting managers to buy in to the plan is important, you
can’t stop there. All of the employees, even down to the lowest levels, need to be on board in order to make any plan successful.
“No. 1, try to make sure that everybody understood how the plan
had been developed, and that was with best practices, a lot of communication and using best solutions because it was done in the
context of a fairly large expansion by acquisition immediately
before the roll out,” McGrath says. “Then just keep reinforcing that
with communication and a presentation of the rationale and the
roll out. In other words, don’t just present something, but also try
to explain why a specific choice was made.”
Encourage people to ask questions so they understand the plan,
but make sure you actually hear them. He says you have to actively seek out their feedback and concerns. He brings together his
first-level managers in an in-the-round session to open up conversation and generate questions in an intimate environment.
“I think people are always more willing to accept something if
you take the mystery out of it,” McGrath says. “They understand
the reasoning and rationale.”
And always be willing to make changes as the market and customers demand.
“What you’re trying to do is test back and forth your concepts,”
McGrath says. “There’s a great story of what works in concept
doesn’t always work in practice, so it’s important to not be stuck
in concrete on a plan during implementation if things need to
change or be adjusted. You have to make sure the process is back
and forth.”
Set management guidelines
When McGrath led Bank of the West through its last two acquisitions, he wasn’t simply adding small pieces to the corporate
structure. He was taking the bank network from five mainland
states to 19.
More than tripling in scale in just two deals can cause chaos and
create confusion among the leadership ranks. While the temptation might be to step in with hard-and-fast rules about how every
situation should be handled to create consistency, McGrath knew
he wouldn’t have the time to try to micromanage every aspect of
the operation and doing so would be a detriment to customers
used to a bank that catered to their area. What was the best way to
do things for customers in California may not be the best way to
do them for customers in Minnesota.
“What became clear was we needed to find a way, if we were
going to live up to our brand promise — which is a higher-touch
service than our competitors — to push down some responsibility
and organizational decision-making closer to the customer in divisions in the field,” McGrath says. “On the other hand, I didn’t want
the place to turn into the Balkans, where everybody started to run
a little bit different organization because you can’t do that and be
efficient from a systems and processing perspective.”
He created a framework of broad policies and standards in place
to guide local leaders in their decision-making, giving the bank
consistency but also flexibility.
“I liken it to a frame,” McGrath says. “You can paint your picture,
but you have to stay within the frame, so there’s a rule set that’s
consistent across the network. Candidly, that’s the only way we
can design and develop efficient computer systems and operating
delivery systems. You can’t design a different one for every organization. There’s always a balance between decision-making and
local approach and efficiency of a broad-based network.”
Delegating to and empowering people at the local levels ensures
that Bank of the West stays close to its customers and recognizes
the things most important to them. For example, the company
helps sponsor Frontier Days Rodeo in Wyoming each year, but it
also sponsors a tennis tournament in California. It participates in
these events because they’re important to customers in those
regions, and the reality is you can’t decide what’s important to your
communities by sitting in your office. You have to give those decisions to the managers in those areas who have a better understanding of the people and their values.
“It’s about trying to push down the engagement in management
to our divisions, so they’re closer to communities and can identify
better what’s needed in those communities,” McGrath says.
Unify your culture
If your company is going to grow, it’s going to need a unified culture where everyone works together.
“Whether you’re doing a merger or you’re just creating the right
kind of environment in a company, I’m a big believer that corporate culture is extremely important,” McGrath says. “People obviously work for lots of reasons from career to necessity, but I think
that good or well-managed companies have a culture where people believe they have shared values with the organization.”
Growing through acquisitions means lots of new faces who probably haven’t been doing business the same way you have. For
Bank of the West, the acquisition of Commercial Federal Bank at
the end of 2005 added more than 200 branches and the personnel
to run them.
With so many new people coming in through acquisitions,
McGrath took a best practices approach to combining cultures
and management teams.
“You have to create a sense of combined benefit and a sense of
shared opportunity,” McGrath says. “That starts by making sure
that people aren’t still wearing different jerseys and creating a
sense of one company.”
McGrath used Bank of the West’s symbol, a bear, as a unifying factor for the employees entering his company. He says it’s also important to not do something just because that’s the way one company
or the other does it and to take an even-handed, fair approach to
deciding which parts of each culture will make up the new culture.
“I think most people can understand and accept change that’s driven around that kind of rule, whereas they sometimes can resent
doing it another way just because that’s the way the other company
did it,” he says.
Whenever possible, tell employees why decisions were made and
why certain practices were kept while others were eliminated.
“To the extent you can, you try to make the message clearly understandable and straightforward,” McGrath says. “You certainly don’t
want to dumb it down, but you don’t want to, on the other hand, be
obscure. It has to be pretty straightforward.”
McGrath says you have to be open and honest throughout the
process, and doing that means not tolerating anything less. He says
focus on communicating — and to err on the side of overcommunicating — to show people you truly want to be open with them.
“In any human endeavor, openness and honesty are values that
most people can get behind and feel comfortable with,” he says. “If
that is a standard that’s set in the company, the company will perform better.”
HOW TO REACH: Bank of the West, (925) 942-8300 or www.bankofthewest.com
