kiosks that would connect customers with service people in remote places.
But on the way to the future, First Union has stumbled badly in its efforts to overhaul 2,000-plus branches.
Revenues are far short of original targets. Customers are angry about service. The bank has had to spend heavily to train and retrain employees. Turnover is high among branch employees who can't make the leap from order-taker to sales pro.
Wall Street still isn't clear on why First Union is so far off its overall earnings target this year -- which it announced in a stunning profit warning May 25. But a number of analysts say the newly revamped branch system -- the third largest among U.S. banks and the very backbone of First Union -- is a key culprit.
Just as importantly, service is suffering -- so much that the company's president, John Georgius, addressed the issue in a recent memo.
``We have allowed our external service to customers to slip below the top levels expected from a national financial services leader,'' Georgius wrote to employees in May. ``As we look across our company today, there are a number of areas where our customers are not receiving the kind of service they desire or deserve.''
It is unclear whether First Union's service is any worse than other large banks. But Georgius' memo makes it clear that service is not meeting management's expectations.
Anecdotes from customers and analysts who follow First Union suggest that the bank has alienated some of its best customers by pushing them to use the phones when they arrive at the branch for help. Some 70 ``quick fixes'' are under way in First Union's consumer division to tackle everything from how a customer is handled in the branch to how customer calls are routed through the telephone bank at First Union's sprawling customer information center in Charlotte.
No one is saying Future Bank is a failure.
Still, many analysts and investors are wondering: Is it a good idea that hasn't worked yet, or is the problem with the business model itself? Still unclear is whether Future Bank is the New Coke of banking, one that may ultimately force a return to the classic model.
Analyst Lawrence Cohn of Ryan, Beck & Co., says management may be guilty of a touch of hubris in pushing Future Bank so aggressively. ``What they've done is require people to act differently,'' he says, continuing, ``We know you got a lot of dissatisfied customers... . We don't know if that's because you've blown what you're doing, or if they just don't like it.''
In a telephone interview Tuesday, Georgius said that in launching Future Bank, First Union vaulted three years ahead of its competitors in ``migrating'' customers from the teller line to telephones and other banking avenues -- an expensive gamble. Still, he says he is confident that the bank has the right model and that with the fixes under way and the appropriate amount of tweaking, it will work.
``We're probably better positioned to deal with the future than we've ever been, certainly since I've been at the bank,'' he says.
If anything, Future Bank represents one of the big experiments under way in banking today as companies, convinced that branches are increasingly outmoded, seek to offer customers new ways to bank over the phone and Internet. ``Our biggest fear is customers are moving faster than banking institutions,'' Georgius says.
So First Union pushed fast for the branch overhaul: Bank officials initially planned to roll out Future Bank over two years, then decided to complete it in only one.
It was a huge undertaking: In short, it required 25,000 branch employees to change their jobs, Georgius says. Order-takers would have to become salespeople -- a far-reaching culture change that executives knew would cause large turnover.
``This was like 100 mergers all done at one time,'' Georgius says.
Turnover has been high. Indeed, the bank just sent out a memo asking for employees' help in providing referrals for the 500 to 1,000 new financial specialists -- people who sell everything from loans to mutual funds -- it needs to resupply its 5,000-member branch sales force.
Compensation is largely incentive-based; the bank promises salespeople can make $50,000 to $70,000 a year.
Those salespeople are key to boosting revenue from Future Bank. Branch sales revenues were supposed to be up 65 percent by year-end 1999 from the first quarter but will fall short, Georgius says. In its profit warning last month, the bank said revenue shortfalls from Future Bank will cost 10 cents a share this year.
Of all the lessons from Future Bank, one that Georgius is emphasizing today: ``Let customers move at their own pace.''
Many customers resented being prodded to use the telephones once they arrived at the branch. To tackle that, Georgius said First Union has spent a lot of time retraining its customer service reps -- the ``greeter'' -- who steered customers to the phones and teller lines. The bank has sought to put more responsibility on the reps to solve customers service requests at the branch, rather than redirecting customers to phones.
FUTURE BANK: ``Future Bank'' is First Union's sweeping branch makeover, touching 2,000-plus branches. The idea behind it is to strip administrative and everyday service chores -- reordering checks, handling account-balance questions -- out of the branches, freeing employees to sell mutual funds, loans, investment services. In the branch, glass offices gave way to an indoor ATM, phone desks and a video kiosk that allows customers to talk face-to-face with a banker at a remote location. Calls to branches would be rerouted to the bank's giant telephone banking center in Charlotte. In effect, it seeks to change the way customers bank. But were customers ready?
