Jerry A. Grundhofer

Chairman, chief executive officer, and president, U.S. Bancorp

Nationality: American.

Born: 1945, in Glendale, California.

Education: Loyola Marymount University, BA, 1967.

Family: Son of a bartender and a house cleaner; married (wife's name unknown).

Career: Union Bank, 1967–1981, various positions; Alliance Bank, 1981–1983, president; Wells Fargo Bank, 1983–1985, senior vice president; 1985–1987, executive vice president; Security Pacific National Bank, 1987–1990, vice chairman; 1990–1993, president and COO; Star Banc Corporation, 1993–1998, chairman, CEO, and president; Firstar, 1998–2001, CEO and president; U.S. Bancorp, 2001–2003, CEO and president; 2003–, chairman, CEO, and president.

Awards: Honoree, 15th Annual Tribute Dinner of the Jewish Institute of Religion, Hebrew Union College, 1997; Banker of the Year, Forbes , 1998; Banker of the Year, American Banker , 2000.

Address: U.S. Bancorp, U.S. Bank Plaza, 601 2nd Avenue South, Minneapolis, Minnesota 55402;

■ Jerry A. Grundhofer worked his way up through the banking world to become the president, CEO, and chairman of U.S. Bancorp (USB), the nation's eighth-largest bank-holding company. Over his career Grundhofer turned around several faltering banks by adhering to his basic business principles: maintaining a sales-oriented culture, offering high-quality customer service, and instituting major cost-cutting measures. Through acquisitions and mergers he turned Star Banc Corporation of Cincinnati first into Firstar Corporation of Milwaukee and then into U.S. Bancorp of Minneapolis. Firstar made big news when in February 2001 the company bought USB—run by Grundhofer's brother John, well known as "Jack"—for $21 billion and took its name. Although family control of large American banks had become very rare, the relationship

Jerry A. Grundhofer. AP/Wide World Photos.
Jerry A. Grundhofer.
AP/Wide World Photos

between and complementary skills of the Grundhofer brothers smoothed the complex integration of these two large corporations.


Jerry Grundhofer, his older brother Jack, and a sister were raised in a modest home in the Los Angeles suburb of Glendale. Grundhofer's father, a bartender, and mother, who worked as a caterer and maid, struggled to put their sons through Jesuit schools. Jerry's first job was parking cars at church. Jack coached Jerry in baseball. Jerry eventually followed his brother through Loyola High School and Loyola Marymount University and into the world of banking. As a management trainee at Union Bank in Los Angeles, Jack found Jerry a summer job in the mailroom.

Following his graduation from college Jerry Grundhofer continued to work at Union Bank; in 1981 he became president of the struggling Alliance Bank. Two years later Jack Grundhofer convinced his employer, Wells Fargo Bank, to hire his brother. As the Grundhofer brothers rose through the ranks at Wells Fargo, they adopted the "Wells way"—the cost-management principles of the company's CEO Carl Reichardt. However, whereas Jack Grundhofer cut costs through layoffs and other draconian measures—earning him the nickname "Jack the Ripper"—Jerry emphasized the cutting of costs through aggressive salesmanship and employee incentives.

In 1987 Robert Smith, the chairman and CEO of Security Pacific Corporation in Los Angeles, recruited Jerry Grundhofer to head the company's retail-banking business. Over the next three years Grundhofer increased the business's net income from $125 million to $425 million, and in 1990 he was promoted to president and chief operating officer. As Security Pacific ran into serious problems, Smith credited Grundhofer with keeping earnings up and saving the company from complete disaster. In an article in Institutional Investor Jack Milligan quoted Smith as saying, "It's hard not to follow Jerry because he believes so much in what he's doing" (November 2000). In April 1992 BankAmerica Corporation announced that it would acquire Security Pacific. Grundhofer stayed on until May of 1993, when he was named president, CEO, and board chairman of Star Banc Corporation of Cincinnati.


Grundhofer's reputation grew as he turned Star Banc around with his charismatic optimism. Richard Davis told John Engen of USBanker that when Grundhofer called to recruit him to Star Banc, "He said, 'You know how we always talked about building something from scratch and doing things right? This is it—a once-in-a-lifetime chance to put all those best practices in place.'… There's no better salesperson than Jerry" (February 2004). His first address to the senior managers was both a pep talk and a sharing of his vision for the troubled company.

Grundhofer walked through the building in his shirt-sleeves, quizzing employees about their latest sales coups and their sales "pipelines." He became famous for his unorthodox selling strategies, telling employees to hand out their business cards in grocery-store lines and sponsoring sales contests between groups of workers—the winners earned Las Vegas vacations. Grundhofer transformed Star Banc into one of the nation's most profitable and efficient banks; he topped the record per-share operating earnings for 28 successive quarters, and Star Banc's stock valuation soared.

Grundhofer's success enabled him to acquire the struggling Firstar Corporation of Milwaukee in late 1998. With assets of $15 billion Star Banc paid $7.5 billion in stock for Firstar and its $23 billion in assets. Grundhofer took the Firstar name and moved his company's headquarters to Milwaukee. Known for his effective communication with Wall Street, Grundhofer convinced analysts that the move was an inspired one.


Under Grundhofer the "Wells way" became the "Firstar way." He continued to follow his philosophy of efficiency and cost cutting while making strategic investments and providing employee incentives. He told Milligan, "Being a low-cost provider gives one a tremendous strategic advantage. It allows you to deal with challenges, be competitive on the asset and liability sides of the balance sheet, and take care of customers" (November 2000).

Whereas many banks were notorious for their high worker-turnover rates and low-quality service, at Firstar Grundhofer created an employee-motivating meritocracy. Bonuses and stock options were based on revenues and customer service. Grundhofer gave branch managers more authority; they became responsible for their own profit-and-loss statements and were instructed to reward performance by augmenting base salaries by up to 40 to 50 percent. Underperforming managers were fired.

Analysts were stunned when in early 1999, just months after the Star Banc–Firstar merger, Firstar paid $10 billion for Mercantile Bancorp of St. Louis, a regional holding company with $33 billion in assets. Grundhofer admitted that he would have liked to have moved more slowly but, as with his later acquisitions, believed that he couldn't afford to wait.

Firstar's earnings continued to rise. Over Grundhofer's three years of leadership Firstar increased in size eightfold. He emphasized low-cost retail products and taught his employees how to sell. At his monthly meetings with the heads of the 23 major business lines Grundhofer stressed the principle of "operating leverage"—the constant pushing of costs below 50 percent of revenue. Each Firstar business unit was committed to a "Five-Star Service Guarantee." Retail customers would receive $5 each for an inaccurate statement, a teller-line wait of more than five minutes, failure to receive a same-day answer to a query, lack of access to a telephone representative, or a closed or malfunctioning ATM.

Grundhofer summed up his approach to management for the Business Journal–Milwaukee : "Our philosophy is to give customers what they want, when they want it, and on their own terms. Also, we put the highest priority on increasing the value of our shareholders' investment in Firstar Corporation. It is the reason that we come to work each day" (May 5, 2000).


In 2001 Grundhofer made his boldest move yet in acquiring U.S. Bancorp—run by Jack Grundhofer—for $86 billion. Investors worried that Grundhofer was moving too fast, particularly in light of other recent—and sometimes disastrous—large bank mergers, but USB was attractive and affordable. Jack believed that USB had not been growing fast enough and needed a larger base; Jerry believed that Firstar had to move immediately so as not to lose USB to a competitor.

After the acquisition Firstar took the USB name and moved its headquarters to Minneapolis. Jerry Grundhofer became president and CEO of the country's eighth-largest commercial bank, while Jack was chairman of the combined board of directors. The brothers saw the two companies as a perfect match, with Firstar providing high-quality, low-cost retail banking and customer loyalty and USB providing investmentbanking services, primarily through its Piper Jaffray subsidiary. In addition USB had access to western consumer markets that were growing at an average of 7.5 percent a year—twice the rate of midwestern metropolitan markets. USB also had transaction-processing and commercial-payments businesses, offering ATM services and corporate credit cards, that were growing by 20 percent annually. Milligan quoted Grundhofer as commenting, "We know how to compete if we have a distribution system, and U.S. Bancorp gives us that. We'll combine the values of the heartland with the growth markets of the West. This is a story made for fairy tales and history books" (November 2000).

The reunion of the Grundhofer brothers made headlines. Milligan quoted Jerry Grundhofer as having once said, "Jack and I are pretty similar. We think about things the same way. We run our companies pretty much the same way" (November 2000). However, although both brothers believed in drastic cost cutting, Jack acknowledged that Jerry not only had more experience with large retail-branch operations but worked within a different model; Jack decided that Jerry's model would be the ideal one for USB. The brothers had offices down the hall from each other and made decisions together on a daily basis.


Milligan quoted Jerry Grundhofer as saying, "We have the mental toughness to win. There's no acceptance around here for not making it" (November 2000). Analysts and employees seemed to agree that not only was Grundhofer tough but his infectious enthusiasm enabled him to sell his vision effectively while maintaining a long-term perspective.

Grundhofer chose to integrate the two companies over a relatively long period of time, so as to minimize disruptions to employees and customers. In an address to an American Banker conference Grundhofer stressed the importance of retail-branch banking: "Brick and mortar is not dead, and it's not going away. The branch office remains the center of the customer relationship" (February 26, 2002).

While cutting costs and eliminating USB's many-layered bureaucracy, Grundhofer expanded retail services, especially in California, where, just as analysts had predicted, USB began buying up retail banks. The company opened student-loan, auto-leasing and home-mortgage units; it introduced investment and insurance products. By the summer of 2003 USB had 220 branches in California alone and had become the nation's largest real-estate lender. That summer U.S. Bank, a USB subsidiary, undertook a major push into corporate banking in downtown Los Angeles. Grundhofer made other acquisitions, including Leading Mortgage Company of Defiance, Ohio, and Nova Corporation of Atlanta, the country's third-largest payment processor. Grundhofer also spun off Piper Jaffray.


Following Jack's retirement at the end of 2002 Jerry Grundhofer became USB's chairman as well as its president and CEO. As of 2004 U.S. Bancorp had assets of more than $189 billion, operating nearly 2,300 bank offices and 4,500 ATMs in 24 states. The company continued to offer Firstar's "Five-Star Service Guarantee." In May 2004 Grundhofer announced that he had no plans to make further major acquisitions.

In addition to bringing Firstar's branch strategies to USB, Grundhofer brought its meritocracy. Annual bonuses for senior managers were tied to performance; analysts credited Grundhofer with developing one of the best bank-management teams in the country. In February 2002 Grundhofer announced that all employees would be eligible for stock options, including part-timers.

USB's former chief financial officer Andy Cecere told Engen of USBanker , "Jerry runs this very large company like a small company, with a lot of focus and engagement, and he works hard to keep things simple"; the acting CFO David Moffett noted, "There are a lot of CEOs who love being CEO more than they love the business. That's not the case with Jerry. He loves to sell, and he cares" (February 2004).

See also entries on Firstar Corporation, Security Pacific Corporation, Star Banc Corporation, and U.S. Bancorp in International Directory of Company Histories .

sources for further information

Bach, Deborah, "Grundhofer Asserts Faith in Bricks," American Banker , February 26, 2002, p. 13.

Engen, John, "U.S. Bancorp's Smooth Operator," USBanker , February 2004, pp. 34–37.

"Jerry Grundhofer, 55," Business Journal–Milwaukee , May 5, 2000, p. 27.

Milligan, Jack, "A Deal Too Far?" Institutional Investor , November 2000, pp. 53–64.

Reilly, Patrick, "U.S. Bancorp Chief Puts Motivation Plan to Test," American Banker , April 26, 2001, p. 1.

—Margaret Alic

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