11/16/98 COMMENTARY: SOMEONE HAS TO BE THE BOSS

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COMMENTARY: SOMEONE HAS TO BE THE BOSS

They would succeed where others had failed, promised Sanford I. Weill and John S. Reed, former chairmen of Travelers Group Inc. and Citicorp, and now co-chairmen of the newly merged Citigroup. The insurance-cum-securities company and the global consumer bank would create a financial supermarket and cross-sell to each other's customers. Together, they would employ 160,000 people and serve 100 million customers in 100 countries. On paper, at least, the strategy seemed sound, and Wall Street rang with huzzahs.
But more than one management expert predicted failure, and not because they doubted the giant group's ability to bring superior salesmanship and brand marketing to financial services. Instead, they doubted that Weill and Reed could smoothly rearrange their corporate structures into one. The first hint: when the two leaders pronounced their combo a merger of equals and agreed to share power as co-chairmen and co-chief executive officers. Such arrangements rarely work, management experts say, and cause big problems down the road. ''As soon as I heard that neither company would dominate, I knew they were in trouble,'' says University of Northern Iowa professor David A. Whitsett, an expert on organizational cultures. Adds David A. Nadler, chairman of New York-based management consultants Delta Consulting Group, ''John and Sandy took care of their big emotional issue by agreeing to be co-CEOs. But my concern is whether proxy battles are being fought down the chain over which side is going to take control.''
Now, with the abrupt departure of Jamie Dimon, the well-respected president of Citigroup and former aide-de-camp to Weill, power sharing's flaws are beginning to show. By all accounts, Weill and Reed get along well. But their inability to control their followers has led to turf battles and confusion over which corporate culture will predominate.
At Citigroup, will it be the fast-moving, aggressive dealmaking culture of Travelers--especially the Salomon Smith Barney investment-banking unit that Dimon headed--or the more conservative culture of a large commercial bank characterized by long-term customer relationships?
''OIL AND WATER.'' The question is not academic. Important changes--how compensation will be determined, which business unit will have overall control of an account, which side will bear the brunt of layoffs to cut the company's costs--rest on which culture the group wishes to follow. Says Benton E. Gup, a finance professor at the University of Alabama: ''It's almost impossible to bridge the differences, and just putting the two under the same umbrella doesn't mean it's going to work.'' One or the other's culture eventually will dominate, adds Gup, so it's best to choose a single leader to set the tone from the outset.
And it wasn't just Weill and Reed who were sharing responsibilities. The model was mimickeD down the line, with a triumvirate of Dimon, former Salomon Brothers CEO Deryck C. Maughan, and Victor J. Menezes, former chief financial officer at Citicorp, overseeing the integration of Citicorp's corporate-banking division with Salomon Smith Barney. Here, Dimon took most of the heat for failing to integrate the parts and not resolving the inevitable battles over turf.
Citibankers, who have relationships with large multinational companies, naturally wanted to maintain those contacts and didn't want to be subsumed into the inveStment bank, which also served corporations but had little presence overseas. Salomon's pros, meanwhile, scoffed at the idea that commercial bankers with little bond-underwriting expertise could take the lead in emerging-market fixed-income deals. Meshing the corporate-client businesses was always viewed as one of the most difficult parts of the merger, but it was made doubly so for Dimon, who had to make decisions that both Weill and Reed were unwilling to make. ''The two cultures are like oil and water,'' says Jeffrey C. Hooke, a former investment banker at Lehman Brothers Inc. who has written about the challenges of making mergers work. ''I always thought it was a recipe for disaster.'' Hooke says mergers are more successful when Companies don't pretend to be equals and one has the power to make the tough decisions.
Is power sharing a fatal flaw? That's unlikely for a company the size of Citigroup. But the financial giant may never live up to its potential until it decides who's top dog.
By Paula Dwyer

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