7 Lessons From WaMu's Playbook

Washington Mutual's deals are outright takeovers, with Killinger keeping the CEO job and the top four or five spots going to longtime members of his team. But the company does go out of its way to create great career opportunities for the less senior executives of acquired companies. "If you look at our top 100 managers," Tall says, "easily 60 of them came to us through acquisitions. We want each acquisition to strengthen our overall management team."

4. Get everyone involved in fitting all of the pieces together. When Washington Mutual seriously pursues an acquisition, its formal deal team consists of three people: Tall and two assistants. They're also joined by as many as 100 regular bankers who have day jobs, but who clear out their evening and weekend schedules to help.

That help from the front lines is invaluable in making sure that Washington Mutual buys the right targets for the right reasons -- and pays an intelligent price. "Take something like risk assessments," Tall explains. "One of the bank's senior risk managers, Norm Swick, is fantastically quick and good. We use him every time we can."

What's more, frontline managers who get involved in acquisition screening become much more committed to making the deal work. In other corporate cultures, where a big-deal team does all of the work, there's a much greater risk that the eventual handoff of the acquired business to an operating team will go badly.

5. Close your deals quickly. In banking, acquisitions take time.They need extensive regulatory review and can't proceed until state and federal authorities are satisfied with the terms of the deal. "That can be a huge disadvantage if you're in limbo for a year," Tall says. "You have committed to paying for something, but you don't have effective control."

Washington Mutual also draws on its hard-won knowledge all of the quirks and wiggles that are necessary to get its deals approved. "We know what the regulators are going to ask for," Tall says. "So we might as well give it to them right away."

6. Go all out to win your new employees' trust. In many takeovers, acquirers woo the top few executives at a target company but don't bother getting to know the managers and employees further down the organization. That's not the way Washington Mutual plays the game. After an acquisition spree between 1997 and 1999 quadrupled Washington Mutual's workforce, Killinger vowed to meet 10,000 of his employees during the next 12 months. When the counting period ended, he had pushed that total to more than 11,000.

"We're not talking about conference calls," Killinger says. "These are branch visits, off-site meetings, and company events. At each one, we'll tell our people as much as we tell our board of directors about the strategies that we have in place."

7. Don't ever stop growing internally. "A lot of companies come to a standstill when they're in the midst of an acquisition," Killinger says. "You have to keep most people engaged with their day-to-day responsibilities." That's essential for two reasons, he explains. First, it ensures that the company doesn't become so dependent on acquisitions that its core business might stagnate. Second, it helps investors feel good about the underlying business, bidding up Washington Mutual's stock to the point that the company can acquire other banks in stock swaps that actually help per-share earnings.

Right now, for example, Washington Mutual has put some of its rising stars to work on next-generation Web sites, clever advertising campaigns that promote free checking, and audacious new bank-branch designs that create the relaxed tone of a nice hotel or department store -- internal initiatives to boost growth.

"In the next 5 to 10 years, we want to create one of the great companies in our categories," Killinger says. "We're largely going to measure our progress by earnings-per-share growth. And we'll do it with a combination of internal growth and acquisitions."

Senior editor George Anders (ganders@fastcompany.com) is based in Silicon Valley.