Phyllis J. Campbell Discusses the Future of Banking

Phyllis J. Campbell is president of US Bank, Washington, headquartered in Seattle, Washington. Campbell was elected to her current position in January 1993, and has led the bank through its growth.

Campbell began her banking career in 1973 as a management trainee for Old National Bank in Spokane. Upon completing her training, she became a branch manager and, by 1981, was promoted to senior vice president and manager of all Spokane branches. After US Bank acquired Old National Bank in 1987, Campbell was promoted to senior vice president and area manager for Eastern Washington. In 1989, she was named executive vice president and manager of the retail branch system for U. S. Bank of Washington, at which time she moved to the Seattle area.

Campbell holds an M.B.A. from the University of Washington’s Executive M.B.A. program. She received her B.A. in business administration from Washington State University, and is a graduate of the Pacific Coast Banking School at the University of Washington, as well as Stanford University’s 1997 Executive Management program. Campbell also holds an honorary doctorate from Whitworth College.

Campbell is also involved in a number of civic activities and company boards. She led the 1998 United Way of King County Campaign, which raised a record-setting $68.7 million. She serves as the 1999-2000 chair of the Washington Business Roundtable. Campbell has most recently chaired the boards of the Greater Seattle Chamber of Commerce and the Association of Washington Business. She is currently a member of the Board of Regents for Washington State University and serves on the boards of SAFECO, Puget Sound Energy, Pacific Science Center, Seattle Foundation, Washington Athletic Club, and the National Center for Nonprofit Boards. In 1996, the American Jewish Committee honored Campbell by presenting her with its Human Relations Award for her civic contributions.

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Ethix: What is it like to be a bank president with so much constant change in your industry these days?

Phyllis Campbell: I now sit back and laugh that I went into banking so that I could have a stable and predictable career! The reason I’m still here, twenty-five years later, is because this change and challenge have kept me interested and engaged. What I find most interesting is the strategic challenge not just to survive but to thrive. When I was appointed president of US Bank of Washington in January 1993, the challenge was to figure out how to position the bank for the future in a fast-changing and highly competitive market.

A major part of my responsibility is to make sure that we are listening to our customer base and being responsive. I also need to make sure that we hire good people and deploy them and our other resources effectively. How do we hire the best people and make sure they are empowered to do their jobs well? How do we manage change so that everyone is running in the same direction, with all these shifts and mergers?

How much of this change is due to bank deregulation — and how much to technology? How do these two factors interplay?

In the 80s the changes were due to deregulation and competition. Merrill Lynch’s introduction of the cash management account was certainly one of the seminal events that re-shaped banking in the 80s. It began the dis-intermediation of funds out of the banking system and into mutual funds. Non-bank financial vehicles began to proliferate and forced us to re-think what banking was and was not.

In the 90s, technology has driven a lot of the changes in banking. Partly, this has been bank-driven technology: our core systems and internal technology. But, especially in the last five years, it has been customer demands for speed, convenience and value that have resulted in technology changes. Automatic teller machines, of course, date from the late 70s and early 80s. Probably the key change in the last five years has been the demand by our clients for “anytime, anywhere” access — just as they can access, literally 24 hour/7 days, at their fingertips, information on their cash management accounts and money market mutual funds with Fidelity, Merrill Lynch and others.

The 24-hour, 7-day call center we launched in the early 90s has a tremendous volume round the clock, every day of the week. We also started placing branches in grocery stores, not usually 24/7 but certainly with longer hours than the traditional branch. Last, but not least, we developed on-line banking which is accessible 24 hours, 7 days a week. We were one of the first banks on the West Coast (and probably in the whole country) to get into on-line banking about seven years ago when were co-developers of Microsoft Money with Microsoft. Although it’s still a relatively small part of our whole customer base (maybe two percent), this has become very popular and is growing exponentially. We are working diligently on Internet-based banking systems as we speak.

What is your strategic assessment of how banking and banking technology will change in the next ten years?

Whenever I ask audiences about whether they still use the traditional bank branch office, you can almost divide the audience by age. Those a little bit older than the Baby Boomers will probably say they regularly use bank branches. Also, our rural customers tend to see the branch not just as a place for banking transactions but as a center for social interaction as well. Small businesses also still use the bank branch because of their day-to-day needs to get cash and make deposits. But the other half or two-thirds, the under-fifty crowd, the working professionals, and the twenty- and thirty-somethings, certainly don’t see the branch as having much relevance to them. They would rather have a root canal than go to the bank.

We’re in the middle of a shift where we need both the traditional bank branches and all the alternative delivery channels. The dilemma for banking is that it is very expensive to maintain all these channels. I don’t think the bank branch will ever completely go away but five years from now I think it will only be there as a sales center and maybe as a transaction center for small business. For most consumers, time has become such a premium that they don’t want to have to stand in line at a branch, and they won’t have to because of ATMs and internet technologies.

Another interesting challenge for the next few years concerns how many sales people we will need for direct interface with clients. How much value will be added for the client by a face-to-face interaction (or even a phone interaction) in comparison to transactions using just the internet? Consumers are becoming much more savvy because of the availability of information on the internet. How much value will be added by a banker or broker? Are people willing to pay for it?

We are having to look at all of our strategic positioning on the client relationship side and ask how we can continue to add value. What is the bank’s role? How can we help our clients achieve more wealth, more quickly, with our advice and intermediation?

What about banking services for non-professionals, for people without decent computer access and without very good banking or credit records? Some people accuse the banks of exploiting the poor by requiring fees for even the simplest teller services. Is this issue important to bank people?

It absolutely is an important issue. This is something that affects more than just banks: access to technology creates a system of haves and have-nots. On the Washington State University Board of Regents, where I serve, we think about it in terms of education: who has access to technology or can afford to buy that laptop for their high school kid to help them get into college? What about those who can’t afford such access? This is an issue that cuts across all parts of society as well as all industries.

In terms of the bank, we still need to maintain a wide menu of services, including low cost checking. We have a duty to serve — and the Community Reinvestment Act mandates that we go into communities that are underserved in terms of lending, low-cost checking services, and so on.

Actually this is a smart business strategy. We lend aggressively in inner city areas. Many people have asked us if we would do the same thing if we were not required by the Community Reinvestment Act. The answer is “Yes” — over time it has become good business for us. We’ve developed a very loyal customer base in lower income areas. These customers probably aren’t going to access on-line banking at this point, and they may never do so. And that’s fine. That’s the reason we maintain a whole range of alternatives. On the fees, every bank has a different strategy. Our bank doesn’t charge people for walking into a bank branch, but some banks do and I guess that’s what makes for interesting competition.

Every business has to have “profit” as one of its primary goals. Does your bank have any ethical values, such as “service to the community” or “justice,” as an explicit part of its mission?

We have a very strong set of core values; they are much more than just words on a sheet of paper. “Integrity” is right at the top. In banking, integrity is absolutely everything. Our employees must maintain absolute honesty and integrity with all our clients, living up at all times to what we promise to them, and ensuring the confidentiality of their data and records. This is absolutely paramount and we let people go who do not measure up to that core value, whether in dealing with other employees, with clients, or with any outside public.
Technology is increasing productivity primarily because it increases the speed of communication.
Along with integrity, service to the community undergirds what we do. What we give back to the community is very important. We must make sure that we have a vibrant community, healthy in all of its parts. Every employee must understand that we not only get our profit from our clients, that’s also where we get our charter to operate.

The New York Times recently reported on the huge salaries paid to Citigroup co-CEOs, Sanford Weil and John Reed, and noted that these salaries did not correspond at all to Citigroup’s disappointing performance in the past year. How do you and your Board of Directors think about such compensation issues, about fairness and relative justice up and down the line from the bank president to the tellers? Is this a moral issue or strictly a market issue?

I think it’s a market issue. I don’t see it as a moral issue. You have to look at what the market will bear. I sit on two compensation committees for two corporate boards. Look at what star athletes like Ken Griffey, Jr., are making. Is that fair? Is it moral? Is it just relative to what the groundskeeper is making? I don’t think you can put it in a moral context.

Can you ever justify the variation in pay between the top person and the bottom person in any corporation? I’m not sure, but I think the data would suggest that CEO compensation levels are necessary to attract the best and brightest. It’s a very, very tough thing to attract good people and that means compensation has to be set according to prevailing practices and market realities.

Well, throughout history most people have thought that it was a moral issue. Just wages, fair prices, and usury have been major issues about which people have debated. They haven’t always agreed — but they did consider such topics as of deep moral concern.

I think it’s a healthy discussion but if we shift it to that ground we could all sit here for seven days and not reach a conclusion. Compensation is market driven and that’s the way in business we have to look at it. Some CEO compensation is definitely on the outrageous side. There’s probably no way to sit there and morally justify the CEO’s compensation versus the teller’s compensation. The important thing is to ask whether compensation is fair according to market standards.
Customer demands for speed, convenience, and value have resulted in technology changes.
We do ask ourselves all the time, especially when we are in a downsizing mode, whether we are treating our employees fairly. What does “fairly” mean, in terms of health benefits, severance packages, and employee family situations? We ask our managers to be guided fundamentally and always by a commitment to “do the right thing” by our employees.

Privacy and security are also important ethical issues. In our electronic age what does privacy mean? If people do all their banking electronically, you have a record of their spending patterns which could be valuable information for you to exploit.

Privacy is the hot issue going into the next millennium, not just among clients themselves, but within our bank, and even in the halls of Congress. The fundamental question is “who controls personal information?” There are no easy answers.

Data warehousing and mining will transform banking in the next ten years. Many of the technology systems that we’re developing internally are designed to look at client data and try to predict their possible buying interests. Based on such profiles, sales people call and say, for example, “I see that you have some children who will be going to college in the next five years. Could we begin to look at some sort of savings or loan program that will help you educate your children?”

Such questions might make you feel a bit uncomfortable, wondering how much the bank knows about your private, personal life. And yet this is the direction we are heading. A recent article in Financial Services On-Line was entitled “The On-Line Fight for Wallet Share.” The author says that the data most banks need for important business and marketing decisions is often buried somewhere in their system, and describes Fleet Financial’s aggressive efforts to capture this information through data warehousing.

Should banks act like other marketing and retail organizations in the United States by mining their data to figure out your buying propensities and patterns as a basis to sell you their products? Some clients don’t mind the bank using this data internally, but don’t want it sold to an insurance subsidiary, brokerage, or travel agency. Who has the right to control that information and decide whether it goes out to other subsidiaries or affiliates of the bank? Still further, who controls the sharing of the information with a third-party vendor? This is a huge issue that will occupy a lot of boardroom discussion in the next ten years.

Our bank has a very strong and definitive privacy security policy right now, which says that our clients have the right to control their data. If they send us a statement asking us not to share their information with other bank subsidiaries or third-party vendors, we comply. We do not, as a matter of policy, sell any client data nor do we share it for the purpose of selling non-financial products.

Maybe it is good if I can get someone offering me only something I’m interested in instead of inundating me with all sorts of stuff!

Is data mining a value or a threat to our clients? Probably both. I think that people value information that’s relevant to their interests. If you are thinking about sending a child to college in the next four years then information on potential student lending programs might be great. But the threat side is reached when people start wondering how much “big brother” knows about them and how much control they have over all that data about themselves. It has to be managed very carefully. I hope we don’t get into a situation where Congress sits down to determine what’s best for us and we get a whole book, weighing about thirty pounds, legislating all the privacy issues! That’s exactly what we don’t need.

We have to ask ourselves what kind of world we want to live in. If three-fourths of my telephone calls are from unwanted telemarketers, if businesses have free rein to have their autodial machines assault me with advertising, I just might be driven to call up my congressman and beg for some regulatory help! is a good example of a company that has used technological data mining well. After you have bought several books, a message on your screen will say “based on your reading pattern you might be interested in the following new release.” That’s intriguing and helpful to me because I don’t have time to read book reviews. It’s an example where technology can work to our benefit. It certainly helps a company’s retailing and financial services to be a little bit smarter and better-targeted rather than sending you information you do not want. You may still feel a little bit assaulted, but it will be a more targeted assault!

Earlier you said that an important part of your role as president of US Bank is to find and train good people. Has information technology helped you get better information and hire better people? And has it improved your internal communication with your staff?

In the hiring process, technology will never be a substitute for the old fashioned, face-to-face interview. I would never hire someone based only on a resume, a phone conversation, and a check on their references. There is no substitute for really eye balling people, understanding what drives them, and if they’re fit for the business. I don’t see technology ever replacing good solid human judgment about the kind of people that we need for our business.

Where information technology has changed things is in management information and
communication among our employees. It has flattened our organization and reduced the need for middle managers. It has changed the nature of all our jobs. We are hiring people who are much more action-oriented, client-oriented, marketing-oriented and less managerially-oriented. We look for the type of people who can get out there and do the job — not just tell everybody else how to do the job. Less and less are we needing people as traditional middle managers, sitting at their desks, regurgitating reports, and telling other people how to do things!

So information technology has not helped us in the actual hiring process, but it has changed the kind of people we hire in banking, compared to ten or fifteen years ago. The traditional “banker” we used to hire is long dead and gone.

As technology changes so rapidly, do you replace people — or do you try to help people keep up?

Continuous training and retooling of skills is the watchword of the day. I myself don’t exactly take to technology like a duck to water! I’d rather be out talking to people than looking at my computer screen. I’ve really had to force myself to sit down and learn how to use my computer programs. But, that’s just the way we do business today.

We help our employees to retool our skills with training classes and continuous education. It is a big part of what we do, day-to-day, week-to-week, and it’s going to be increasingly important in the future. In some cases, of course, we have had employees who simply do not want to retool and prefer to leave and do something else.

You are a very successful Asia-American woman. From where you sit, does it look to you like there is now an open, even playing field in the banking industry — or do we still have the proverbial “glass ceiling” and other forms of discrimination to struggle with?

Women and people of color have not made a lot of progress in getting the top jobs, or even jobs at the next level down, in any “Fortune 1000” company, banking or otherwise. The raw data suggest that women and people of color have not made the kind of progress over the last twenty years that many of us would like to have seen. However, if we look one more level down, a different story is beginning, a story of educated, bright and motivated women and people of color who are on a track up the corporate ladder if that is something they wish to pursue.

Our bank sees diversity as both a corporate value and a smart business strategy. It is important to have a management team that looks like, and thinks like, our client base. Education is really the great equalizer and we have begun to look at how to grow our own talent, helping folks get educated with the underpinnings for success. Ten years ago we began a scholarship program for minority students in Washington universities and colleges. We have now hired some of these folks after finishing college or business school and they are doing remarkably well, climbing the ladder, wanting to succeed.
In banking, integrity is absolutely everything.
So, as I look out there another ten years, I’m real hopeful that we are going to see the upper management ranks of banks, as well as other businesses, change as a result of having such people well prepared to take the top jobs. Did I hope we would have more progress by the year 2000? Absolutely. From a personal point of view I’m very disappointed not to see more women and people of color in positions like and above mine. But, at least for my part, and our bank’s part, we have taken concrete steps to assist, mentor, and encourage people toward success. Hopefully, the outcome will be a changed board room and executive suite ten years from now. That’s my hope. I’m an optimist by nature, but only time will tell.