Bank Julius Baer, North America
Situation before the arrival of Stuart Adam
Before the arrival and leadership of Stuart Adam (“Adam”), Bank Julius Baer, North America (“BJB-NA” or the “Company”), the largest independently-owned European private bank in the United States, faced financial difficulties. By mid-2001, a worldwide market downturn caused a significant decline in Julius Baer Group’s (“JB” or the “Parent”) performance. In 2001, JB’s stock price was down by over 40% while the Parent experienced a 39% decline in net profits, 9% increase in operating expenses and an increase of 14% in employee headcount. BJB-NA, the “crown jewel” of JB, was barely profitable but no one inside the Company knew its true financial condition. JB had always been led by a member of the Baer family until January 2001. Despite significant family ties at JB, BJB-NA did not have a strong leader to drive the company. There was a lack of clear vision or direction for the Company. BJB-NA did not focus on profitability as a measurement of success. The attitude around BJB-NA was more about “keeping the peace” than creating any conflict or hostility. Even with a passive work environment, employee morale was low. Employees tended to blame other parts of the Company for their problems. The competitive environment in the High Net Individual (“HNI”) private banking sector increased dramatically during the 1990’s. BJB-NA was a boutique private bank in a business where bulge bracket firms dominated the competitive landscape. As such, the key factors for success in the HNI market were now recognized as differentiation (not cost leadership), improved client relationship management, broad product range and strong client-responsiveness. BJB-NA strived to be a partner organization that differentiated itself from the competition by satisfying the needs of its clients. The existing organization structure consisted of BJB-NA organized into four regionally-based “teams.” Poor communication existed throughout the Company as the staff didn’t know what was going on and there was little cohesion among units. BJB-NA operated on a “need to know” basis. Team leaders were not responsible for their own budgets, as it was not known if their teams were profitable or not. To further support the lack of accountability at BJB-NA, the Company did not have a systematic performance evaluation system and lacked a compensation system tied to customer growth and returns. Bonuses were virtually guaranteed and all bonus decisions were made by Bank’s top leadership. Most likely, there were employees who “flew under the radar” if they underperformed since the Company never laid anyone off.
Adam’s Changes and Evaluation
Adam arrived at BJB-NA and immediately laid out an action plan to turn around the Company. One of Adam’s best early moves was his selection of Denise Downey to head the Segmentation Study Team. Downey was well respected by the employees that she led and was able to thoroughly evaluate the organization and deliver results to the Company and Adam. Based on the Segmentation Study, Adam wanted BJB-NA to really stand-behind its promises to be a partner organization. He encouraged full transparency and a strong focus on measurable results and accountability. Specifically, he focused on the following three initiatives:
Refocus the Company strategy: Adam emphasized that BJB-NA shift its focus to Europeans, Asians, Canadians and Latin Americas who live outside the U.S. who had U.S.-based asset management needs. By targeting specific geographic and customer segments, it allowed the Company to specifically focus its strategy and resources rather than spread itself too thin to satisfy a larger, diverse customer base. In addition, he asked some longstanding personal clients who were not profitable to close their accounts. Not only did this change the Company’s customer focus, but also, it signaled to employees that Adam had confidence and...
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