How Washington Mutual Smooths Acquisitions

Banks are notorious for poorly integrating the companies they acquire. The problems go beyond charging new transaction fees or startling customers with redesigned monthly statements. Customers get mad when they’re forced to change the way they make deposits or when familiar options on the automated teller machines are switched around. Often, a political squabble about technology underlies the problems.

With each acquisition, many banks pick and choose which software and hardware to discard and which to meld into their own operations. This best-of-breed tactic often complicates the integration because technicians must build interfaces and middleware to bridge the systems. Battles develop as technology managers from both sides fight for their own fiefs. Work slows and gets expensive. The merged banks simply don’t work as one. Bad banking integrations can drag out for years. Bank One, which has $270 billion in assets and bought First Chicago in 1998 for $29 billion, still runs seven separate deposit systems.

It doesn’t have to be that way.

Washington Mutual in Seattle is widely regarded as one bank that does integration right. It has grown to $275 billion in assets mainly by buying other companies—32 mortgage houses, full-service banks and savings-and-loans since 1983. And it has a consistent framework for dealing with the information-systems part of the acquisitions—it deconstructs them into three elements: technology, processes and people. To control two of those variables, the bank moves all acquirees to Washington Mutual’s technology and processes. Doing so means typical integrations take nine months or less, avoiding long debate on which systems will stay or go.

Then Washington Mutual concentrates on the people. How an acquiring company treats the people it’s firing, hiring and, most importantly, asking to stay until the merger is done can make or break the critical technology conversion.

Employees on both sides of any Washington Mutual deal know that an entire suite of applications is going to die—which could leave the staff who had managed them pretty anxious. Creeping doubt about the future of career and paycheck doesn’t inspire you to do your best work. But Washington Mutual tries to address that early on.