Sunday 17th Jan, 2010
Well, I thought I did rather well in my interview by the Treasury select committee. And that little joke about my parents thinking I’m paid to much seemed to take the heat of a little (for now).
But I’ve been thinking further about what I described to the MPs as my "biggest single business problem", ie recruiting people who are concerned about the criticism they might encounter if they work for RBS. And I’ve got to do something about this.
Problem is – how? I’m going to get it in the neck if I go ahead and pay out £1.5 bn of bonuses next month. But if I don’t, my 22,000 investment bankers are going to walk.
I’ve been deliberating over this and I’m starting to realise two things.
1. We are paying out an obscene amount of money. Particularly because RBS is owned by the public, and particularly because the profit we’ve been making is solely down to the bailout funding the government and therefore the public has pumped in.
It’s taken me a while to see this - it’s difficult to be too concerned about the odd million quid bonus here and there when I’m on £9.7m myself.
And I’ve come to realise that this is part of the problem. It’s down to a mistake that I made before I even joined the company – when I asked to be paid the going rate for a private sector job.
Well RBS is in the public sector now, and in a very special situation too, and we need to start behaving like we understand that. And I need to take the lead.
So tomorrow morning, I’m going to announce that I’m going to start working for £1 per year. It’s not going to be easy for me, but after all, with my years of working in investment banking, it’s a cut I can afford. And it’s going to be important to do if we’re going to make the changes that we need.
I’m then going to ask the Board to do the same. And somehow, we as a team, are going to start encouraging our investment bankers to take some type of cut as well.
I know I’m going to have to be careful on this, but there’s got to be a way to do it. We’ve just got to be a bit braver than we have been so far. Even if we only save 10% this year, then 20% the next, and even if it all goes to charity rather than remaining in the bank. I ‘m not sure how we’re going to do it yet, but that chap Roden will be able to sort it out (even if he needs a few good consultants to help).
2. This is even more important. I’ve realised that we’ve got ourselves into this mess. We’ve assumed for too long that the only way to motivate our people is to pay them big bucks. OK, to some extent, that’s true. After all, we’ve deliberately set out to recruit people who are only interested in money. And by treating the rest of our people the same, we’ve progressively made them more money motivated too.
But it’s not sustainable. We pay up more and more, then more and more, as other banks do the same. It’s time to turn that around and reverse the trend.
So we’ve got to re-educate our people that there’s more to working for RBS than a big cheque. We’ve got to show them that there’s something special about working here, something unique about this organisation, that gives them a good, non-financial reason to stay.
I wonder what it is?
I think we probably missed a trick when we set out our new group-wide strategy themes: 15% return on equity, top-tier competitive positioning, proportionate use of balance sheet risk, organic growth, and customer support. I’ve got to admit there’s not much in here that makes us look different or is going to get anyone excited.
We need something new. Something that’s going to unite our people, and get them passionate again. Something that’s going to get them to stay with us, even if we’re not paying them so much. Something that deals with my "biggest single business problem". Something that helps the public understand that this is a “new RBS” and makes people proud of what we’re doing again.
So I’m going to need to do more work on this, but I think it’s got to be something about innovating banking. Finding a new way of doing things, probably with different people doing them.
We still need to focus on profit – and helping the public recoup its huge investment in the bank. But we need to achieve this in a different way. A way that has a bit of social conscienceness, a bit of soul.
Perhaps we need to ask our people about this – get their ideas about what would make them proud.
Perhaps you’ve got some suggestions too?
- Stephen Hester – CEO – Royal Bank of Scotland (RBS)