Takeover Case Study: Chase and WaMu, Part I

By Scot Herrick | Job Performance

Oct 09

One of the most difficult activities for a Cubicle Warrior to do is understand the dynamics within a company, especially where the company is being bought by another. When a company is purchased, everything that employees believe about the company is now up for examination. This creates uncertainty, even fear, about their job, job security, and future work with the company.

Yet, the ability to make critical decisions about what will happen with a company purchased by another gives the Cubicle Warrior an advantage to others. Should you stick it out with the company? Is my job lost and it is just a matter of time? Are there more opportunities if I stay? All of these are critical questions.

With banks and investment companies being purchased left and right, I’d like to take the example of Chase and Washington Mutual and use this case study as a model to show how you can evaluate your career after a company is purchased. Though I once worked for Washington Mutual, I’m only going to use publicly available records for the events that happen there in the evaluation. This case is also a good one to use because Chase had done some preliminary investigative work to offer a purchase, but then abandoned the effort – until the Office of Thrift Supervision took over and brokered the sale to Chase.

Let’s get into this case study.

When your company is bought by another, you know that there will be duplicate functions and people will be laid off as a result of the duplication (layoffs, in Europe, are called “redundancies” for this very reason…).

Since Chase didn’t prepare to buy Washington Mutual, many of their plans are public. Reporters are asking the questions and the new management is providing the answers. This makes sense, of course, because Chase is attempting to be transparent in what they are doing, both with employees and customers.

Your first question: how safe is my job?

For any company being purchased by another, the first area where layoffs occur are where there are corporate functions that are duplicated by the buying company. And, sure enough, Chase quickly determined which senior managers will stay and which will go. Here’s the list of who is leaving and what it means:

CEO

This is no surprise. One doesn’t need a CEO for a company that already has one. The fact that he had only been there three weeks means there was no value in keeping him (although he still earned his $7 million signing bonus and is eligible for an $11 million severance bonus…).

If a CEO would have stayed on, it means the purchasing company would want the CEO to help with transition duties. But CEO’s rarely stay in their new company for more than a year.

President and Chief Operating Officer

If you ran your company into the ground, why keep the person? In addition, in the Chase/WaMu case, Steve Rotella came to WaMu from…JPMorgan Chase.

Personal relationships in upper management matters. There are relatively few corporate executives and the degrees of separation are few. If there is bad blood between a manager and another, that tends to follow along. Look for previous relationships between executives – they are almost always there.

Executive VP of Corporate Strategy and Development

Who needs a person to handle strategy? Not in the purchased company.

Now, here is the first area where someone has managers and knowledge workers reporting to them in the hierarchy. If you were working in this chain of command, you know your job is lost sooner rather than later.

Chief Human Resources Officer

Who needs one in this company? And the people reporting through this chain of command will be gone sooner rather than later. There is simply no reason to keep these people when the current department can do the work.

Chief Legal Officer

Have that department already. If you were an attorney in this organization and had current cases, you might get to stay for a while, but that’s it.

Chief Financial Officer

Here, the person is staying through the end of the year. This is due to regulatory requirements that this person would be uniquely qualified to know plus the closing of the year-end books. But this is more about accounting periods than anything else. If you worked in this chain of command, you’d have until the year end books were closed and that will be the end.

Others who are staying

Now, other top executives are staying – presidents of the divisions of the company plus the Chief Information Officer and Chief Enterprise Risk Officer.

These people are, essentially, the line officers – the people running the actual customer oriented business. The CIO stays because there is an entire technology infrastructure that needs maintenance and understanding. The Risk position is unique to banks; this person stays so Chase can figure out what the tools were for analyzing risk for the bank. Since they failed, one could learn something…

Does this mean the people in these departments are going to be able to stay? No, it means there is a business running and until Chase can figure out what can be incorporated into their people, processes and technology, they will keep these people because they keep the lights on and service customers.

There is a date

For those inside WaMu, Chase has already published that employees will know of their fate – and options – by December 1st, a short period of time given the circumstances.

Conclusion

By watching what happens to executives – and understanding the departments they supervise – you can tell if you have any options or not. Here you can see Chase is eliminating immediately the corporate duplicate staff and are now moving into the divisions to determine where there are unneeded functions. By studying these announcements and not listening to gossip, you can determine with a fair amount of accuracy how much time you would have with a takeover.

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About the Author

Scot Herrick is the author of “I’ve Landed My Dream Job–Now What???” and owner of Cube Rules, LLC. Scot has a long history of management and individual contribution in multiple Fortune 100 corporations.