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