Magazine article American Banker

Inventor of Reengineering Says Banks Lag

Magazine article American Banker

Inventor of Reengineering Says Banks Lag

Article excerpt

The undisputed father of reengineering claimed to know why commercial bankers have been slow to adopt one of the most widely discussed management tools in recent years.

"Process is foreign to the leadership of banks," said consultant Michael Hammer, holding court at a conference on the subject last week before dozens of bankers and other financial services professionals. "Senior management at banks are front office guys who hate the back office."

The author of the celebrated "Reengineering the Corporation" argued that insurance companies are much further along in transforming their businesses, because of a greater willingness to systematically address organizational problems. Banks, by contrast, tend to be run by executives who look outward, waiting for the next acquisition to solve problems.

"It's 'let's make a deal,'" he said.

But though the industry may lag in reengineering - defined by Mr. Hammer as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance" several banks have taken giant leaps, he said.

Top executives with several banks, including Citicorp and First Chicago NBD Corp., were on hand to discuss how they transformed them.

Frank Woosley, the director of Deloitte & Touche's financial services consulting practice, argued that reengineering becomes important to banks faced with a pressing need to generate top-line growth without reliance on mergers.

The issue of internally generated growth has become paramount, he said, as shareholders penalize banks with price-to-earnings ratios of less than 15 because they don't "believe that banks can achieve sustained growth."

Mr. Woosley said his company's research shows a high correlation between shareholder value and revenue.

"A financial services company can't cost-reduce its way into long-term profits," he said. …

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