View from the Top:John B. McCoy, MBA'67
by Peter D. Franklin
John B. McCoy admits that his experience at business school was, to be frank, somewhat frustrating. But what buffaloed the Stanford MBA student 27 years ago stood the chairman and chief executive officer of Banc One Corporation in good stead as the Columbus, Ohio, financial institution blossomed into one of the financial industry's regional giants. "What I learned was that there wasn't one set of answers," McCoy says. "It was a frustrating concept because you always wanted to know the right answer, and there isn't necessarily a right answer."
Although that is a concept McCoy learned to apply successfully to more than 80 banking affiliates in 13 states, each with a corporate flavor of its own, he says it was difficult to accept initially. Stanford thrust it upon him following his four years at Williams College. Early on in his Stanford experience, McCoy was told to write a three-page paper with four other people. "When I was at Williams, I could rip off a 20-page paper in no time, but to be told you had to make it three pages and there had to be five people agreeing with what was said -- that was different. It taught you a lot about teamwork. It was very enlightening."
Room to Experiment
Just as Stanford frustrated McCoy at first, his entrepreneurial Banc One organization can be frustrating for some new hires not yet wise to McCoy's management approach. "They'll tell me, 'I have a great idea, John; tell everybody to follow what I say.'" That doesn't work well at Banc One, especially with its decentralized structure. "Our people are not merely taking orders. They can develop their own game plans in their own markets," McCoy says.His approach fosters strong management, McCoy believes, and allows room for experimentation. It also is one of the key ingredients of the institution's success: Hundreds of incubators of people throughout the organization are working on different things. Some eggs hatch; others don't.
Banc One's electronic tax-filing product is a case in point. A few years ago a vice president at Bank One, Columbus, received a telephone call from a representative of H&R Block in Kansas City. "We have this idea," the caller said, "but we've tried it on several banks in New York and they tell us they don't have time to fool with it. Would Bank One be interested?" It was worth a try, the Columbus banker conceded.
After two years of experimentation in Columbus, the product had not produced a nickel. In fact, it lost about $150,000 and "that got my attention," says McCoy, with considerable understatement. More minds went to work on putting it right, and this year Banc One filed about 3.5 million 1993 tax returns, improving the holding company's margin about 30 basis points in the first quarter. For an $80 billion company, that's a multimillion-dollar leg up on the competition.
"So, it wasn't, 'Well, gee, can we try this?'" McCoy says of his Columbus bank's management. "It was a case of some vice president who gets a call and attempts to do the job on his own." McCoy applauds that approach and encourages it at every opportunity. Bank One, Dayton, less than a two-hour drive from the home office, hatched another innovation. In searching for a way to improve its income, the Dayton affiliate decided to establish credit card accounts with local merchants. "As often happens, on the first one they lost their shirts," says Chairman McCoy. "That's how I found out about it. But I've always felt that you don't learn from your successes; you learn from your failures. They took what they learned and built one of the nation's largest programs for processing third-party credit cards."
Measurement Matters
If a large, decentralized organizational structure invites innovation, it also demands that a strong measurement system be in place. At Banc One it's called the Management Information and Control System."MICS is one of the reasons I think we are a superior-performing company," declares McCoy, leaning back in his office chair and lightly pulling at his pair of bright kelly green suspenders. "It absolutely focuses us on the bottom line, creates accountability for individuals in those departments, and for the bank. It lets us know where we are at any given time in the month."
McCoy confesses that it mystifies him how one banking company can report its financials one way while another takes a completely different route. With more than 80 companies in the game, such uneven reporting procedures could create chaos for Banc One, but MICS levels the playing field. Everyone in every company must account for everything in the same way on the same computer system. At any time, day or night, all levels of management can call up the numbers on all the banks and compare them in any one of a thousand ways. In McCoy's opinion, MICS goes a long way toward keeping everyone honest.
He cites the following example of how well the tool works. "We will have a list of retail automobile loans by delinquency, and we'll show the highest delinquency rate at the top of the page and the lowest at the bottom of the page, and the average is 2 percent. If we compare that 2 percent to everybody else in the country, you may say, 'You're doing great. You're in the top quartile.' But while the average among our 82 banks is 2 percent, there's somebody at 5 percent and another at 4 percent, and it's like a flashing light. As a matter of fact, everybody in this company knows you don't want to be at the top of the page!
"So, you call up the guy who has the highest delinquency rate and say, 'Hey, I see you have a problem here.' 'Well, you just don't understand our market,' comes the reply from a MICS neophyte. 'You just don't understand how we work.' 'We know we don't,' we say, 'but it seems as though I've got 81 other banks here that are doing it better. Why don't you visit a couple of those and find out what they are doing?'" Now, that's what you call peer pressure.
McCoy's modest sixteenth-floor office in Banc One's headquarters, overlooking the state capitol in downtown Columbus, is filled with an eclectic collection of industry and sports memorabilia, mostly relating to golf. (An avid golfer, he maintains a respectable 11 handicap at Muirfield Village Golf Club, the challenging course hometown great Jack Nicklaus designed in the Columbus suburb of Dublin.) Within these friendly confines McCoy spends most of his time on "personnel stuff -- taking the round peg and making sure it gets in the round hole." His father, John G. McCoy, MBA '37, who led the bank for 25 years before turning the reins over to his son in 1984, believed the best policy for a CEO is to hire smart people -- smarter than even the CEO. "Better people will make you look better," he told his son.
Banc One's aggressive acquisitions program -- 112 banking institutions in the past 10 years -- has put the pressure on getting the right round peg. Some managers of acquired banks blossom within Banc One's decentralized and entrepreneurial environment; others just wither and die. However, there's no guarantee that the hole will be filled from within. Increasingly, McCoy says, senior hires are selected from outside the banking industry, "just to get a different thought process." As the organization's chief strategic personnel officer, he tries to prevent Banc One becoming inbred, a la IBM or General Motors, both of which provided for many years a cradle-to-grave corporate existence.
Personnel problems -- and solutions -- are not restricted to the corporate hierarchy. History shows that banks often have a layer of not-very-well-trained clerical staff. About five years ago this message was brought home to McCoy by the American Association of Retired Persons, for whom Banc One processes credit cards. "AARP insisted everyone who responded to customer inquiries be a college graduate," McCoy says. "We thought, 'Boy, is this a waste of time.' What we found out is that the better educated the person, the better the job they do. Today, we basically have adopted this thinking in our card services."
In his recently published book, BottomLine Banking (Probus, $29.95), which he coauthored with Larry A. Frieder and Robert B. Hedges, Jr., McCoy predicts that "by the end of the decade, almost all bank customer-contact people will be college graduates who will be required to have significant general training as well as sales training."
As the Banc One family continues to grow, it becomes easier and more cost-effective to do much of the training in-house, says McCoy. For instance, there's a Banc One College in Columbus, which offers an intense, two-week program annually for senior management. ("It always seems that middle-management managers get to go to school, or have to go to school, but senior-level managers don't," observes the chief executive.) Furthermore, there are numerous leadership training programs for those on the vice presidential level and for employees coming into supervisory positions for the first time.
Even with these and other educational programs in place, "Banc One is going to have to work even harder to get good people into this industry," McCoy says, "and we are constantly going to require more sophistication.
"I doubt that we will ever have it exactly right," he says, "but if you really believe in what you are doing, you can make it work."
Perhaps John McCoy has finally found the right answer.
About the author: Peter D. Franklin
Peter D. Franklin was for many years the business editor of the Columbus Post-Dispatch.
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