INDIVIDUAL ASSIGNMENT 1
When First Union Corp. of Charlotte, North Carolina, and Wachovia Corp. of Winston-Salem, North Carolina, merged in 2001, they brought together two divergent approaches to banking. Wachovia had a first-rate reputation in customer service. At Wachovia branches, customers interacted with bank staff for most transactions. Wachovia monitored the quality of its customer service by sending “mystery shoppers” to evaluate the service skills of its employees. The bank rewarded employees that rated well and their branch managers. In a 1999 survey of the 20 largest banks in the United States by Consumer Reports, Wachovia finished fourth in customer service. In the same survey, First Union ranked last in customer service. First Union branches were lean selling machines. Employees encouraged customers to conduct their business at ATMs or telephone kiosks rather than visiting tellers. First Union rewarded its employees with commissions and incentives for bringing in new business, such as credit card accounts or loans. This approach brought each of First Union’s 2,200 branches an average of $2 million in loans per quarter. Each of Wachovia’s 700 branches produced average loan sales of less than half a million dollars per quarter. For all of its selling success, First Union was struggling. Customer satisfaction was so low that the bank experienced a customer attrition rate of 20 percent in the first quarter of 1999. At the same time, employees were dissatisfied, with bank tellers turning over at a rate of 49 percent. The merger presented the new company with the opportunity to combine the winning sales tactics of First Union with the superior customer service of Wachovia. The merged bank shrewdly opted to use the Wachovia name and started restructuring its employee rewards and incentives programs to optimize both product sales and customer service. Prior to the merger, First...
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