American pie - reflections of CIT Group CEO Albert R. Gamper Jr

Chief Executive, The, June, 1997

In celebration of Chief Executive magazine's 20th anniversary, we've been asking CEOs who've held their positions for the better part of that period - or longer - to reflect on the changes they, and their companies, have experienced during that time. In our third installment of "20th Anniversary Reflections," CIT's Al Gamper talks with Chief Executive's Michael Winkleman about changes in the financial services industry, in CIT, and, particularly, in how he sees his job as CIT's CEO. Gamper, a graduate of Rutgers University, joined New York's Manufacturers Hanover Trust in 1962, entered its management training program four years later, and was appointed chief executive of CIT, then owned by Manny Hanny, in 1987. Within 10 years, Manny Hanny had merged with Chemical Bank, Chemical had merged with Chase Manhattan, and 80 percent of CIT had been sold off to the Tokyo-based Dai-Ichi Kangyo Bank Ltd. During that same period, CIT grew from about $9 billion to $19 billion in assets and from five to eight divisions, losing extraneous businesses, an executive hierarchy, a tendency toward closed doors and frequent memos, and the formality of assigned parking spaces in the process.

There have been dramatic changes in the financial services industry over the last 10 years, from the growth of funds transfer to securitization and commoditization. But the fundamental change in that time was that while financial services companies were doing their thing, many of the major banks were short on capital. Today the banks have come roaring back and, in fact, some of them are over-capitalized. Although many foreign institutions have gone home, there's more competition, and growth is harder to come by. It's a borrower's marketplace. There s no credit crunch. The market now has a ravenous appetite for assets.

Will all that change? Not in the short run. We have a better, broader-based economy and better-managed companies. There are fewer excesses in the marketplace. It's more steady as you go. We had a lot of crises in the past - in real estate, energy, etc. - and I don't see any of those types of problems on the horizon.

At the same time, CIT has become a more diversified company. Six years ago, we were more narrowly focused. We didn't have a venture capital company, a credit finance company, a dominant factoring operation, or a consumer finance unit. We had a limited product line and we were heavily skewed toward large-ticket financing.

When I first came to CIT, it was a very numbers-oriented company, and, at first, I fell into that trap, too. Everything became a numbers exercise: what kind of returns could we get on business, numerical analysis, cost analysis of how we made our money. We went through a very systematic exercise. That was the culture of the company. But after several years, I was able to refocus our energies and thinking on business strategy. Where did we want to be relative to size, market position, reputation, product line?

As the focus changed, we got off the numbers and didn't place the same emphasis on return on assets and margins. In the process, we became better business people. We started to think about what the customer wants; how we could provide the right service, the right products; how we could become more efficient in our operations; how we could attract the best employees. We didn't think so much about dollars and ratios, and I found that CIT's performance improved markedly.

As an example of this change in thinking, our strategic analysis indicated that we should explore the development of a venture capital company. We examined whether an operation like this would enhance our business mix, whether it would "fit" in, and whether we had the capacity and patience to build a business in venture capital. We concluded that it was an appropriate business for us. We put together a team to develop the company, an investment strategy, and a plan for how we expected it to grow over a five-year horizon. The numbers came next.

Over the last six years, we've been trying to broaden the base of CIT. We've added product lines and broadened our geographic reach. We established our venture capital company; we made important acquisitions that gave us dominance in the factoring business; and we reestablished ourselves as a consumer finance company.

We have also eliminated some businesses that no longer fit within our overall strategy. For example, we sold off an inventory finance business. Right now, all the businesses we have are doing well or have the potential to do what we want them to do. But if a year from now a specific business has a limited future or deteriorated returns, I won't hesitate to close it down or sell it.

Our strategy focuses on diversity in our markets, product lines, geography. Different businesses have different strengths. Our consumer finance business has good growth prospects; our factoring business has modest growth potential, but it gives us a phenomenal return. You need this type of mix to provide for a healthier, broader company. Not everybody can be a fast runner. In this company, some of our units are sprinters, while others are marathon runners.