A banking nightmare...

For the first comment piece it would be remiss not to talk about a subject that has dominated the news headlines over the last six months or so. The demise of the Royal Bank of Scotland Group and the Lloyds TSB / HBOS merger or should it be .. takeover, have been generating different news headlines every day for the last couple of months. The saga, alas, is unfortunately going to continue for the next few months putting many thousands of innocent people and their families in a position of unrest.

However, The PRologist wants to look at a different angle, which concerns how the new Lloyds Banking Group will move forward in the next months and ironically the parallels that can be learnt from the RBS takeover of NatWest.

Despite RBS’s current standing, the takeover of NatWest is a classic case study of how to merge two banks and reap the benefits. RBS, some would say, was ruthless once the takeover was complete and moved rapidly to reduce the amount of uncertainty among staff. As the victor, RBS swiftly removed the top layers of management within NatWest, with only a couple of exceptions, and the NatWest culture was to all purposes dead and buried.

This was a vital step in the development of RBS, because it quickly established who was in charge. It cleared the decks for a new culture to emerge and while it appeared ruthless to the NatWest staff who lost their jobs and there was undoubtedly talented individuals made to leave the organisation, for the foot soldiers that remained behind it showed that the organisation was moving forward at speed and that the responsibility for the failure of NatWest lay with their senior management team – not them.

If you talk to RBS and NatWest staff about the culture of the new organisation after the takeover, they will both say that it was neither the same as the old RBS or the old NatWest but it evolved from the strong culture of the old RBS, which at that time was an efficiently run and lean business.

The RBS values were good and a great base to start but it had to evolve as it was now a much larger organisation. Some would say that the further expansion of RBS with the takeover of ABN AMRO meant that the business and culture ended up being stretched to the limits and that confidence turned to arrogance but for several years after the NatWest takeover; there was a confidence about the bank bred by that culture.

Now, the only people who were right to take the business forward, were the RBS senior management. If RBS had decided to divi up the senior roles between RBS and NatWest staff, then the signals that it would have sent to the external market and internally to staff would have been confused.

Which culture are we using, RBS or NatWest? What processes will we be using? What values do we hold? What is the vision? You can imagine the boardroom meetings at various senior management levels being divided among the old RBS and old NatWest lines, leading to further division and destroying the business.

Now look at the current state of Lloyds TSB and HBOS. The PRologist deliberately opened with the ambiguous statement “takeover / merger”. If you have read reports over the last few months the words are interchangeable but the reality to most people is that Lloyds TSB took over an ailing and poor performing HBOS.

Lloyds TSB was the strong, well performing bank and by taking over HBOS it was going to turn around the mistakes of the past. So have the Lloyds TSB executive removed the HBOS senior management in a clinical but necessary move to get rid of the poor culture that led to HBOS being on the brink of nationalisation?

The answer is a definite “No”. At the Board level, it is a mainly Lloyds TSB affair with one or two exceptions. But The PRologist’s sources within the organisation say that at the next couple of layers down then the roles are being divided out equally between Lloyds TSB and HBOS – and in some cases the lion’s share are going to HBOS.

What signals does that send to the markets, and to staff about turning around a bank that is 43 per cent - if not more by the time this goes live - owned by the Government and reported a £10bn loss for 2008?

For Lloyds TSB staff, to see your bosses and colleagues lose their jobs to HBOS counterparts must be particularly gutting. Who won the takeover? Which business is meant to be the better run? What will happen to my job if they think HBOS are better than Lloyds TSB? Many of these staff will also be shareholders in the company and as well as seeing their share value diminish by over 80 per cent, they face an uncertain future and a culture from which they were proud and confident to one that looks messy and ill-defined.

Lloyds TSB staff in Scotland have already had a kick-in the teeth with the early announcement that the brand would disappear in favour of the Bank of Scotland brand. Ponderings by The PRologist would surmise that the Lloyds TSB brand was the better liked in Scotland but that the Bank of Scotland has the licence to print money – perhaps more of a draw to the executives

So will the HBOS staff be jumping for joy? Well the senior executives and management who survived most definitely will be. They will start to think they are invincible, surviving what most commentators would assume is certain redundancy, now who will dare to challenge their old ways? Of course they will pay lip-service to their new masters, but for the people that they manage then it is business and old HBOS culture as usual.

Andy Hornby receiving a consultancy role with the new Lloyds Banking Group is hardly a condemnation of failure but continues to give mixed signals about what this organisation is about.

Eric Daniels stated that appointments would be from both teams below his Executive team in an article in The Times in December 2008 but The PRologist feels that his rationale “our colleagues have to feel this is a good place to work” will be as reassuring as his claim at that time that “we are in a position to do this deal because we have a strong balance sheet and strong funding... we came to the conclusion that we can fund it very comfortably. We are taking on additional risk but we think it is very manageable.”


His claim in that same article that “the culture of both banks is pretty similar” has been pretty much blown apart by former HBOS employees talking about the strong, cut-throat sales culture and product advocacy while Lloyds TSB has been a lot more conservative and until now has been about customer relationships – hence the constant promotion about being the “most trusted bank” in the UK.

If anyone thinks that by picking the best people for the best jobs and tapping into the talent of old HBOS is being prudent then they are living in a utopian world not the real, harsh, business world – where there is a winner and a loser. It would appear that some of this talent from HBOS jumped ship and were poached by Benny Higgins at Tesco Personal Finance before the takeover.

Lloyds Banking Group is now a huge super-tanker and as everyone knows stopping them is one hell of a difficult job so turning them around is even harder. The first 100 days are vital for the course that is set in any merger/takeover and it would appear to The PRologist that the Group are going in many different directions but perhaps not the right one and it will take a lot of effort to turn it around.

Ironically, one of the most important people in turning this around is the veteran HBOS communicator, Shane O’Riordain, who is Group Communications Director. It will be interesting to see firstly, whether he has any empathy with his Lloyds TSB colleagues and secondly, on what lines will his senior team be composed of.

If it is a wholly HBOS affair then The PRologist fears that the next few months nay years will see the Group trying to manoeuvre around several icebergs – only to crash into one in the dead of night. But America has always been welcoming to lost souls - another story entirely.