Building the global bank: An interview with Jamie Dimon

Building the global bank: An interview with Jamie Dimon
51
Building the global bank:
An interview with Jamie Dimon
The CEO of one of the largest US banks discusses postmerger integration,
risk, and leadership.
Clayton G. Deutsch
J. P. Morgan Chase (JPMC) ranks among the world’s leading financial-
services businesses, boasting $1.3 trillion in assets, a major US consumer-
banking franchise, and operations in more than 50 countries. Created
from a succession of mergers over recent years, JPMC prides itself on legacy
institutions—Bank One, Chase Manhattan, Chemical, First Chicago,
J. P. Morgan, Manufacturers Hanover, and National Bank of Detroit—that
evoke a colorful history of entrepreneurship and banking innovation going
back more than 200 years, to the founding of its earliest predecessor, in 1799.
With a corporate headquarters in New York City and retail- and commercial-
banking operations run from Chicago, J. P. Morgan Chase covers most of
the main banking segments: investment banking, consumer financial services,
small-business and commercial banking, financial-transaction processing,
asset and wealth management, and private equity.
The $58 billion merger with Bank One, in July 2004, was among JPMC’s
most ambitious deals to date, marking the return to Wall Street of Jamie
Dimon, Bank One’s former president and chief executive officer, who took
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over as president and CEO of J. P. Morgan Chase in early 2006.
n M
a
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Jamie Dimon is well known for his roles at Citigroup, its subsidiary Salomon
e
y
Smith Barney, and its predecessor Travelers Group, where his energy, eye

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52
The McKinsey Quarterly 2006 Number 4
for detail, and firm approach to cost
Article at a glance
cutting first attracted attention.
In this interview, Jamie Dimon, the CEO of J. P. Morgan
In this McKinsey Quarterly
Chase (JPMC), discusses the chal enges of postmerger
integration, dealing with risk, and the traits of
interview he spoke with McKinsey
successful leaders.
director Clay Deutsch about the
Dimon also discusses the $58 bil ion acquisition of
benefits and disadvantages of scale,
Bank One, in 2004, and, more broadly, the advantages
the challenge of integration, the
of very large companies, noting that JPMC’s “size and
difficulty of balancing acquisi-
scale al ow us to find ways to deliver those products
tions and organic growth, and what
better, faster, quicker, and cheaper to the customer.”
he expects from the people who
As for risk, Dimon believes the key is to recognize
run individual business units.
that the market will change and that “the only thing
that is unpredictable is the timing.”
The Quarterly: How would you
On the subject of leadership, Dimon feels that
fostering the exchange of ideas is crucial to getting
describe the business model of JPMC?
the most from employees: “If you don’t create an open
environment you will fail.”
Jamie Dimon: It’s large. It’s global.
It’s diversified. We have six business
Related articles
on mckinseyquarterly.com
lines—investment banking, retail,
“Can banks grow beyond M&A?”
card, commercial banking, treasury,
2004 Number 1
and asset and wealth management—
“Negotiating better cross-border banking
and I remind people that not one of
mergers in Europe,”
those lines of business is worse off by
Web exclusive, November 2005
having the other five. So start from
“What global executives think about
that vantage point. In fact, I’d go the
growth and risk,”
other way around: every single one
2005 Number 2
is better off because of the other five.
The Quarterly: Which business lines tend to collaborate?
Jamie Dimon: Card and retail do a lot of business with each other. And for
all our middle-market clients we have retail branches, which actually
service small businesses and the middle market too—kind of like a back
office for their payroll and cash and collection and things like that.
The commercial bank does a lot of business with the investment bank. In
fact, I think they both give each other a fairly large competitive advantage,
which we’re working on now. If you look at our last quarterly release,
for the second quarter of 2006, you can see they do a lot of business together.
There is a lot of business that the investment bank alone couldn’t do,
because it didn’t have local relationships in places like Indianapolis and Tucson,
which the commercial bank has. And there was a lot of business that the
commercial bank couldn’t do alone, because it didn’t have the products that
the investment bank has.

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Building the global bank: An interview with Jamie Dimon
53
The Quarterly: What is the logic behind this combination of businesses?
Is it a conglomerate?
Jamie Dimon: No. I separate the idea of a conglomerate from what I call
a natural set of related products, which is what we are. Most regional banks
around the world do all of our businesses, so we didn’t artificially put
them together. The business grew up this way, and it grew up for a good
reason. When you’re a consumer, you walk in and you expect a certain
kind of retail product set. When you’re a small or middle-market business,
you walk in and you expect a certain kind of financial-services product
set. It’s the same when you’re a large corporation. And the fact is, the average
regional bank provides cash-management services, private-client services,
small-business services, retail, and middle market. So when we organize
across these six business lines, it’s really for three sets of customers—
consumers, private companies, and large companies and institutions—and
we provide a natural product set that we are always trying to expand.
And the reason this works is that our size and scale allow us to find ways to
deliver those products better, faster, and cheaper to the customer.
Q4 2006
Interview title
This is what Wal-Mart has done. Who would have thought that Wal-Mart,
Bio
which has extended its product line forever, would be selling tomatoes
Exhibit 1 of 1
and lettuce? And it adds more and more because it can do things quicker
Glance: Biography of J. P. Morgan Chase’s Jamie Dimon
Vital statistics
• Born March 13, 1956, in New York City
• Married with 3 daughters
Education
• Graduated in 1978 with degree in economics from Tufts University,
Massachusetts
• Earned MBA from Harvard Business School in 1982
Career highlights
• J. P. Morgan Chase/Bank One (2004–present)
– CEO (2005–present)
– President, chief operating officer (2004–05)
– Chairman and CEO of Bank One prior to merger (2000–04)
• Held various senior-executive positions at Citigroup; its subsidiary Salomon
Smith Barney; its predecessor Travelers Group (1986–2003)
Fast facts
• Serves as vice president of board of directors of United Negro College Fund
• Serves on board of directors of National Center on Addiction and Substance
Abuse and Harvard Business School
• Served on board of trustees of New York University School of Medicine and
University of Chicago
Jamie Dimon
Jamie Dimon

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54
The McKinsey Quarterly 2006 Number 4
and cheaper and because the customer is going there already and can get
more and save a trip and spend less.
The Quarterly: With assets of $1.3 trillion and 170,000 employees, JPMC
is very large. What role does size play in your strategy?
Jamie Dimon: We get many benefits from our size: capital, brand, funding,
cheaper purchasing, better ideas, software development, data centers, utilities.
But there are weaknesses—for example, the bureaucracy that can come
with size. I think bureaucracy is the disease that kills businesses. It slows you
down. It demoralizes people. It drives out good people. It kills innovation.
It can also breed hubris, greed, arrogance, a lack of attention to detail, and
politics. You have all these meetings, and people come and see you privately
afterward and say, “Well, I know what we said there, but here’s what I
really think about it.” And my reaction is, “Hey, am I your messenger? You
couldn’t say it in the meeting?” The response is, “Well, I thought so-and-
so would get upset.” And I say, “I don’t care whether he or she gets upset.
Say it next time.” I have no problem with someone coming in and saying,
“Hey, we met. We don’t agree. Here are the facts on which we agree; here
are the things we disagree on. Can we talk about this now?” That’s what
mature management does.
When I got out of business school, I thought big business was going to be
logistics and linear programming and decision management. Sometimes
it is more like grammar school—all the cliques and the second-guessing. You
can get overwhelmed.
The Quarterly: How much larger do you think JPMC will get? Can you
become too large?
Jamie Dimon: No, I don’t think so. Not yet. It may be true one day, but
you have to look at the size of the businesses and what “large” is. If you have
retail banks that do exactly the same thing, like a McDonald’s, you can
get larger and larger and larger, but you’re not adding that much complexity
to the business, provided you have regional managers who really know
the business.
Some businesses, like retail brokerage or even credit cards, now are fairly
well consolidated. But some have a long way to go—in retail banking there
are still 8,000 banks in this country, and in most other countries it’s not
even remotely like that. We’re just far more fragmented because of interstate
banking. Now those laws have come down, but we still have a way to go
before we’re back at the natural state.

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Building the global bank: An interview with Jamie Dimon
55
The Quarterly: You’ve done a great deal of M&A over the years. How do
you strike a balance between organic growth and growth through M&A?
Jamie Dimon: It is hard. You can certainly do both where acquisitions
are plug-ons. But if you have two big companies and put them together, by
the nature of the acquisition you’ve got to get the overhead out, in addi-
tion to spending time on new products and new services and on growing
sales forces. You’ve got to consolidate the product sets, you’ve got to
consolidate the back offices, and it does distract you. Is it possible not to
drop the ball and continue to grow? Yes. I think at J. P. Morgan Chase we
have not stopped growing. It’s a little more of a struggle—more resources
going into consolidation than into growth, and that’s natural. There
are embedded conflicts between doing acquisitions and trying to grow
organically. You shouldn’t do acquisitions unless you can run your
businesses well. Organic growth earns you the right to do an acquisition.
The Quarterly: Which do you enjoy more?
Jamie Dimon: I enjoy both. The beauty about the conversions that take
place after a merger is that they create such knowledge and such team-
work and such camaraderie and such a “can do” attitude. If you interviewed
people who’ve been through it, wow! They’re so proud of what we
accomplished and what we got done. We were having a call about the big
Texas conversion we did about a year ago, and the woman who runs
the private bank there was on this call and said, “You know what? I know
more about our product, our business, and our services than I ever knew
before. It’s amazing.” And it’s going to make her much better at running
her business. She also knows how to get stuff done in a way she never
knew before.
The Quarterly: What role does cost cutting play in postmerger
conversations and in your overall strategy?
Jamie Dimon: Real cost cutting is just waste cutting, because companies
are wasteful—too many people, too much empty space, too many decisions
that are completely inefficient, data centers in corporate headquarters that
don’t need to be there. We just started to track all our phone lines—50,000
phone lines that are not being used, but we’re paying for them because
people just didn’t track them. That’s waste. That is completely different
from running a lean and efficient operation. And eliminating waste helps
to pay for more salespeople, traders, and bankers who can fuel growth.
The Quarterly: Postmerger integration often involves massive change.
How do you approach that?

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56
The McKinsey Quarterly 2006 Number 4
Jamie Dimon: Even a very good person can become completely overwhelmed.
When I first came to Bank One, the word was, “Don’t touch the board.
Don’t touch Chicago. Don’t touch the charities. Don’t put too much pressure
on the managers. The place is very fragile.” It’s almost as though you can’t
do anything. You know, you have to do stuff, and some people aren’t going
to understand it. You’ve got to have a lot of fortitude to say, “We are going
to do the right thing. And, yes, I know a lot of people aren’t going to like it,
but morale will change when the company’s doing better.”
You also learn from your managers. You learn which managers have real
leadership skills and which ones constantly make a big deal out of everything.
I used to look at these surveys on morale. People come in and say, “Well,
Jamie, the morale in my group’s not particularly good, because the company’s
not communicating clearly and people don’t know what the vision of the
company is and blah, blah, blah.” Well, I’ll tell you a secret about those sur-
veys. When morale’s bad in your unit, whose fault is it? It’s yours! If we
weren’t communicating clearly, you should have come up and said, “Hey,
Jamie, I’ve got to tell my people something better.”
The Quarterly: Given the global nature and breadth of JPMC’s business,
you are exposed to so many types of risk. How do you think about risk?
How do you cope with it?
Jamie Dimon: Go back to 1975, when I had my first job out of high school.
Since then we’ve had multiple wars, multiple terrorist attacks, multiple
countries going bankrupt—three times for Argentina—and multiple reces-
sions. We’ve had interest rates as high as 21 percent and as low as 1 per-
cent. These things happen. So when you’re running a business, you have to
run the business maturely, knowing that things are going to happen.
The only thing that is unpredictable is the timing and, sometimes, where the
punch is coming from. But you know it’s coming, and nobody, in my
opinion, has ever really picked the inflection points.
The Quarterly: How can this affect JPMC’s performance?
Jamie Dimon: If unemployment in this country goes up 3 percent, our credit
card loss is going to go up 150 basis points. That would cost our company,
all things being equal—of course, they’re not—but all things being equal,
$2 billion. Now, I should know that and I should be able to tell my share-
holders, “That might happen, and if that happens, yes, we’d survive. And
here’s how we’re prepared. Here’s how we’d mitigate it. Here’s what we’d
do.” And you’ve got to do that in trading; you’ve got to do it in wholesale
credit; you have to do it in interest rates; you have to do it for all these
various exposures. And part of the answer is the analytics. It’s the really good

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Building the global bank: An interview with Jamie Dimon
57
reporting. And it’s transparency of issues and problems. You know, problems
don’t age well. You’ve got to raise them quickly. People shouldn’t always
be looking at the bright side of stuff but at both sides of stuff. Remember, the
market did fall 25 percent in one day in 1987. If the market falls 50 per-
cent, should you go bankrupt? Well, no, you shouldn’t. It’s one thing to say
to your shareholders, “We had a really, really, really bad day.” But it’s
another thing to say, “We filed for Chapter 11 last night.”
The Quarterly: Can’t you also benefit from these situations?
Jamie Dimon: Earnings will go down in certain environments. That’s
fine. We’re still a healthy company. I think we may be so prepared that we
will benefit from such an environment. We’ll buy other companies cheap.
We’ll continue investing in people and systems and technology that other
companies can’t. And you’ve seen a lot of companies do that. Their stock
goes down, their earnings go down, but they actually pick up ground. They
pick up more ground in the bad times than they pick up in the good times.
The Quarterly: You’ve run a number of companies—Travelers, Salomon
Smith Barney, Bank One, and now JPMC. What do you view as the key to
successful leadership?
Jamie Dimon: I think there are a lot of management style differences—a lot
of ways to manage—but if you don’t create an open environment you will
fail. If you sat through one of my management meetings you wouldn’t know
who was the boss. Sometimes the youngest kids know the most because
they’re actually using the credit cards and systems. It’s an environment where
brains are used to win in the marketplace, to help the customer, to figure
things out, to share, to get to the next level. They’re not used to justify bad
decisions, to politicize an issue, to get yourself promoted.
The Quarterly: How do you create and maintain such an environment?
Jamie Dimon: You know, the environment starts at the top, but if every
business head feels that way, thinks that way, and was taught that way, it
filters right through the company. So we don’t have such an environment
because I say we do; we have it because there are a lot of people working in
this way. And sometimes it’s obvious that you don’t have this kind of
environment, and you’ve got to make management changes or coach and
train. Some people are coachable and trainable. Some people are not—
their attitude about decisions is, “Isn’t it my decision? Doesn’t that person
work for me? Don’t I get to decide?” As I often say, “Well, your job is
to make the best decision, not to decide.” And very often you can’t make
the best decision unless you have the right people in the room.

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The McKinsey Quarterly 2006 Number 4
I think 80 percent of the time the best decision is waiting to be found. You’re
not guessing; you just do your homework, get the right people, and you find it.
It just kind of surfaces out of the work and the analysis and the thought.
The Quarterly: What if the right decision doesn’t emerge?
Jamie Dimon: You come up with a bunch of reasonable options to test and
try and go back again. I always talk about good failures. A good failure is
when you’ve really thought something through and you tried it and you tested
it and it didn’t work. In a bad failure—and you don’t shoot people for a bad
failure, either—but in hindsight, you didn’t have the reporting in place; you
didn’t get the right people involved; you didn’t think it through. It was a little
“shoot, fire, aim,” and you learn from that. But you don’t punish. You learn.
The Quarterly: What do you expect from the people running a business?
Jamie Dimon: If you run a business—I think it’s true on almost any level—
once a month you sit down and go through it. What are the facts? What
are the numbers? What did you say? What happened? What can you learn?
What is the competition doing? What’s working? What’s not working?
You spend a lot of time on people, learning, reading, traveling, getting out to
do the reviews, getting out just to meet clients, constantly coaching and
training people.
The Quarterly: How do you assess performance?
Jamie Dimon: I believe I should pay for performance, but I don’t think
performance is a simple thing. If you’re running a business, you have to do
marketing well, hiring well, training people well. You’ve got to do your
ops well, your systems well. You’ve got to invest in new branches and new
sales and new traders. It’s the whole package. In a lot of businesses you
can get a lot of profit, but you’ve taken on too much risk and you’re not
investing enough for the future. You see that happening all the time.
And I’ll give you another step. What if I ask you to take on my toughest
problem? A problem where I don’t think anyone would look good after four
or five years. Don’t you want your best person to go there? Doesn’t that
person going there have to say, “Jamie, I trust you. I know you understand
what you’re asking me to do and I know that it’s not going to look that
good, but I owe it to the company to do the best I can.” Should I shoot that
person after four years? Should I pay that person more or less for taking on
such a challenge? That’s why I’m saying that performance is a very complex
thing. There has to be that trust and faith in the institution. “Hey, if it
doesn’t work, I’ve got a bridge back; if it doesn’t work but we made a good

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Building the global bank: An interview with Jamie Dimon
59
effort, you’ll treat me fairly anyway.” That’s a real evaluation, and we cannot,
in any way, shape, or form, oversimplify the complexity of human nature.
The Quarterly: Your management style seems to put great emphasis on
people and their development.
Jamie Dimon: Yes. Sometimes, there are people I pluck out—not one of
my direct reports, maybe two or three levels down—and I find a way to
spend time with them because I think they’re great. I think they’re part of
the future. They could be running this company one day, so I hang out
with them.
And there are probably ten kids like that, people I know. I also want to move
them around to have different experiences. I’ll invite them on a trip with
me. I’ll make sure I see them in a lot of situations. We’ll see them when they’re
under stress and strain, and we’ll really get to know them well. And I
want some of our HR people to be thinking that way, and I want my direct
reports to be thinking that way and to say, “Jamie, this is the person
I need you to get to know.” And I’ll take that person to breakfast or lunch.
The Quarterly: Is this outside of the formal HR structure?
Jamie Dimon: We do talent reviews, but this is outside of the structure.
It is also a way for me to know what’s going on. I’ll say, “I think you’re doing
a great job. Will you do me a favor? If something’s going on, call me per-
sonally. I’d love you to describe it to me. Good or bad. We’ll have a cup of
coffee together.” And these people will call me, by the way. Just so I’m
not losing touch with them. These people are real culture carriers. They really
know what’s going on, so you learn from them. But all this is predicated
on the open environment I have been talking about. None of this can happen
without that.
The Quarterly: What would you like your legacy at JPMC to be?
Jamie Dimon: I’d like to leave J. P. Morgan Chase much stronger than
I found it. I didn’t build all this. Sometimes I feel like I’m criticizing
a wonderful institution with all the things we have to fix, which I think is
the CEO’s job, but I also say that I inherited it. It was built by hundreds
of thousands of people before me—some of the best names, best brands,
best products, best services. So I would like to leave it better, to leave it
in the best shape it could possibly be. Q
Clay Deutsch is a director in McKinsey’s Boston office.
Copyright © 2006 McKinsey & Company.
All rights reserved.

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