WaMu’s No-Nonsense Style Tames the Great Western

The cowboys and bucking broncos are gone, replaced by kinder, gentler images of celebrity bank tellers who cut their own lawns and organize pep rallies outside their workplace.

In many ways, the image make-over undertaken by Washington Mutual Inc. since it purchased Great Western Bank almost two years ago is reflected at the former Great Western campus in Chatsworth.

To be sure, some say the just-plain-folks, nose-to-the-grindstone style of Washington Mutual Chief Executive Kerry Killinger lacks the bounce and glitz associated with the old institution, as demonstrated by the company’s decision to get rid of the Great Western corporate jet, in one of its first acts after the takeover in June 1997.

But many who have made the transition say the change in tenor has been noticeably upbeat, as Killinger and company have taken the former Great Western from a bank struggling for its very existence to one now in strong-growth mode, with employee incentives at nearly every level of the bank.

In the summer and fall of 1997, Washington Mutual dismissed more than 400 senior executives and managers at the Chatsworth campus. Since then, however, the company has turned the campus into a regional headquarters and has steadily increased staffing to the point where employment is now at the pre-takeover level of about 2,500.

Also, the planned expansion of certain divisions at the campus, coupled with the addition of recently acquired H.F. Ahmanson & Co. (parent of Home Savings of America) employees from Irwindale, is expected to push the number of jobs at the Chatsworth campus to 4,000 by the end of the third quarter, Washington Mutual spokesman Tim McGarry said.

Washington Mutual--or WaMu--also took Great Western’s poorly performing $43-billion asset base at the time of the merger and combined it with its own assets, boosting overall performance significantly, said Charlotte Chamberlain, an analyst with Jefferies Group Inc.

Before the merger, Great Western posted an almost 10% return on equity, which is the ratio of its earnings to the value of its assets. Washington Mutual’s return on equity was about 20%.

In combining the institutions to create the nation’s largest thrift, WaMu has managed to maintain return on equity of about 18%. Chamberlain said WaMu’s main thrusts are good old-fashioned hard work and a fixation on the bottom line.

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By comparison, Great Western’s culture was largely shaped in an earlier age when savings and loans ruled the Southern California landscape as home mortgage lenders in a booming housing market.

“Great Western had a huge edifice complex,” Chamberlain said. “They had the marble mausoleum in Chatsworth, the Remington-like bronzes, including a collection of Western-style horses going at full gallop.”

“Nothing could be more different at WaMu,” she said. “It’s mean, it’s lean, it’s to the point. Form is function at WaMu. They sold the [corporate jet] before the ink was dry on the contract. There’s none of the cost excesses at WaMu.”

The one vestige still left of Great Western is the Great Western Forum in Inglewood, whose name will remain unchanged until the naming agreement expires in two years.

Killinger says there is little room for ostentation in the new corporate culture.

“We work very hard, but we don’t like the trappings that sometimes come with the executives,” Killinger said. “We try to keep perks to a minimum. We don’t have the corporate jet. We try to set an example for the employees to work hard.”

Indeed, WaMu employees who made the transition say the change from embattled thrift struggling to stay afloat to thriving financial institution has been a major boost for morale at the Chatsworth campus.

One change emblematic of the situation just before Ahmanson’s hostile bid for Great Western in February 1997 was the cancellation of coffee service on the Chatsworth campus, said Julia Fordham, who joined Great Western in 1981 and now works as manager of WaMu’s financial center operations.

“Great Western was in survival mode,” she said in a recent interview. “Our goal was not, ‘How can we do things better?’ It was, ‘How can we keep costs down?’ The [cancellation of] coffee service was a terrible blow to morale in late 1996.”

Since the WaMu purchase, she added, the coffee service has been restored. Killinger has also added a host of incentive plans as part of a no-nonsense style that rewards all employees at all levels for hard work.

In a sweeping move, he introduced a companywide stock-option plan in 1997, and repeated it this year. Under the latest deal announced in January, each full-time employee below first vice president got 100 options, exercisable between Jan. 4, 2001, and Jan. 5, 2004, to buy company shares at the Dec. 14, 1998, closing price of $32.88.

Part-time employees were granted 50 options at the same price. Other incentives are more tailored to individuals and their departments.

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For example, the company’s telephone-banking center in Chatsworth has adopted WaMu’s program of “quality-assurance shops,” said Richard Chavez, who joined the center as a telephone banker a few months before the takeover.

“A manager will randomly come up and listen to the next 10 calls, then give feedback,” he said. “If they’re happy, there’s an incentive that ranges from 1% to 5%. That keeps us happy. Great Western had yearly reviews, and went over [performance] with us monthly.”

In Chavez’s department, telephone bankers are also randomly monitored on 10 of the calls they field each month. They are awarded four hours of extra vacation time for a good review.

“I think it’s very important to let people know exactly what you’re trying to accomplish and what’s expected, and to have appropriate measures in place to let people know how they’re doing,” Killinger said. “Then you reward people when they’re doing a great job.”

But incentives aren’t the only thing Killinger has brought to the masses at the Chatsworth campus. He has also gained a reputation among managers at all levels as someone who is highly visible and values feedback from employees, said Gail Shelly, who oversees WaMu’s quality-service management program and also made the transition from Great Western.

“Here the service ethic and the carry-through to making it a reality starts with the top down,” she said. “I think the executive team at this company is a little more touchable, a little more visible with the folks. It’s very common to be at [headquarters in] Seattle and see Kerry walking down the hall.”

While employees and outsiders agree that WaMu has turned Great Western around, some still contend the place has lost a little of its luster in the process, and that Killinger’s practice of promoting people from within sometimes puts people in high positions before they’re really qualified.

“When someone comes in and starts changing things, change by definition isn’t very popular,” said a former Great Western executive who worked with WaMu executives during the merger but declined to stay on.

“I’m not persuaded that what WaMu is doing is bad. But it’s different. You have some people who think it’s bad because it’s different. But I wanted no part of it. It seemed very nose-to-the-grindstone, very much a couple of guys doing the thinking, but saying, ‘We’re egalitarian,’ out there. WaMu, much, much more so than Great Western, was more, ‘It’s our way or the highway.’ ”

The executive still works in financial services and spoke on condition of anonymity. He was also critical of Killinger’s policy of internally promoting people, saying it can lead to people getting jobs beyond their skills.

“WaMu has the philosophy of, ‘You grow your talent from within, don’t hire from without,’ ” he said. “We were maybe at the other end. We didn’t like what we’d home-grown, so we hired all ours. That didn’t always produce great results either. But [WaMu’s approach] tended to highlight our impression that they had some real lightweights doing what they were doing.”

Killinger pointed out that, while the company tends to promote from within, its 24 acquisitions in the last 10 years means it has effectively imported talent from the acquired companies. In fact, Killinger himself came to WaMu in 1982 when that institution acquired his former employer, the securities brokerage Murphey Favre.

“The company has gone through a very significant expansion, so I have been giving the people opportunities internally to take on quickly broadening responsibilities,” Killinger said. “They’ve done a terrific job rising up to those challenges.

“Certainly, many of our people have stepped up to the challenge of a company that has grown about eightfold in size in three years, and they’ve done a great job.”

Some Valley leaders were critical of WaMu’s apparent lack of involvement in the local community, both from a business and community development perspective.

WaMu has memberships in the Valley Industry & Commerce Assn. and the Northridge Chamber of Commerce, but has not been extremely active in the area, said Martin Cooper, a VICA board member and head of Woodland Hills-based Cooper Communications Inc.

“WaMu has been here a little while now, and I just got a letter addressed to me saying, ‘We’ve appointed a gentleman in charge of community relations to this area,’ ” Cooper said. “That was a bit late in coming. In a perfect world, I should have gotten a letter like that within weeks of their coming, as a community relations thing. It was a long time before that letter came.”

Another Valley business leader pointed out that WaMu’s contact person for VICA is based out of the company’s Seattle headquarters.

“I don’t recall Great Western participating in the community to any great extent, and it appears Washington Mutual is following in their footsteps,” Cooper said.

WaMu has recently begun talks with the Economic Alliance of the San Fernando Valley about getting involved in some of its efforts to improve basic education and work-force development in the area, said Bill Allen, the organization’s chief executive.

Allen noted it was the alliance that first approached WaMu, but added that it’s difficult for large corporations to know who to approach when they acquire out-of-state companies and want to get involved in those companies’ communities.

“The more that happens, the harder it is for L.A.’s community organizations to receive that support,” Allen said. I think they’re taking their time to understand our regional economy and regional education needs. I think they’re also trying to seek out who are the responsible community organizations they should be pairing up with.”

Killinger pointed out that WaMu has been more active in other parts of Los Angeles since buying Great Western, but acknowledged that efforts haven’t been as strong in the San Fernando Valley. He added that the company recently moved an executive, Bob Flowers, from Seattle to Los Angeles as president of the company’s community investment and development.

“We have a long-standing part of our corporate culture which has been to be very active in the communities we serve, especially with K-through-12 education and affordable housing,” Killinger said. “Putting all that together has taken us a little while, but it’s certainly a key part of what our culture is, and I think it’ll be growing. It takes a while to sort things out.”