Hearts and minds


22 November 2010


Incorporating new acquisitions into one’s existing business model can be an arduous and expensive process. Santander’s Mark Selby tells Phin Foster how only banks with total visibility across the enterprise can fully capitalise on a changing market and why the role of talent management must never be overlooked as an essential component of integration.


The level of M&A and restructuring activity across the banking sector over the past few years has presented great opportunities for those in a position of strength. The prospects of consuming competitors, entering new markets, consolidating existing interests or simply restructuring the value chain have all proven motivating factors for institutions looking to capitalise amid the crisis.
But with expansion through acquisition there also comes great risk. Integrating legacy technology platforms, customer bases, products and people can threaten the performance of both acquirer and acquired, undermining service quality and creating a far more cumbersome, fragmented whole.

This danger is particularly significant now customer behaviour is changing post-downturn. Account holders have become increasingly clear in what one should expect from one's bank. When this is not delivered, their propensity to move has never been higher. If accelerated expansion and integration undermines service delivery, even in the short-term, recovery can take a long time.

"It's a fair charge that banks have a particularly fragile relationship with customers given the events of the past few years," acknowledges Mark Selby. "People are looking around a lot more and are far clearer on their requirements. Products are important and rates make a difference to some, but service and convenience are critical. Fail on that score and they'll soon be moving somewhere else."

In order to achieve this consistently, Santander UK's director of retail banking integration believes that having a clear, single view of the customer across the organisation is paramount. He is not alone in this regard, although Selby believes that much of the banking industry is better at recognising the requirement than it is at acting upon it.

"Having a single view of the customer is something everyone is talking about but not many are delivering," he says. "Look at Tesco: they are incredibly good at understanding what their customers like, enjoy and spend their money on because of the Club Card. Banks need to have that ability and very few are realising it."

New arrivals steal a march

Selby says new arrivals on the market such as Metro Bank, Britain's first new High Street bank in over a century, are leading the more-hesitant established players in this regard, building models that put the consumer experience at the very heart of their business. Starting from scratch without any legacy system in place certainly makes this process easier and the fear of cost and costly mis-steps is seeing many financial institutions shy away from the scale of change required.

"The large established clearing banks will struggle to deliver because their IT is already so complicated and has been developed over several decades," Selby explains. "It doesn't lend itself to fast change - if anything, it's more conducive to stagnation - and being able to do something as fundamental as join up multiple data bases is beyond them.

"Also, the risk involved in moving data around if that's not a core competence of your IT team can expose you to a lot of dangers. Traditionally, when banks have weighed up the cost and operational and commercial risk, they've tended to shy away from the changes necessary. As they expand, the problem is only reinforced. With each new bank or brand the level of complexity grows."
Fortunately for Santander, this was an issue that was spotted prior to its embarking upon an unprecedented level of acquisition activity. In 2002, the bank began the Partenon project, consolidating its banking systems and migrating its core IT solutions onto a single platform. Partenon now covers the entire company's banking model, allowing integrated, multi-channel customer management, accelerated product development and time to market, and consistent management information.

"It gives you complete visibility," Selby explains. "The system will provide a series of prompts, directing you towards customers who will potentially be interested in particular products. Even more powerful than that, however, is that banking and risk systems are integrated, effectively allowing for people to be pre-qualified. It makes for a very straightforward process with little or no downtime."

Partenon project

Selby, who was at Abbey when Santander acquired the company in 2004 and targeted annual growth in sales of £150 million within three years and cost savings of £300 million, has seen the benefits of this system's implementation from the other side. Now he is responsible for the back office integration of newly-acquired banks and branches in the UK. The Partenon project was completed at Abbey over two years ago, replacing 30-year-old legacy systems. Selby's focus of late has been completing the same job with Bradford & Bingley's £20 billion savings business and Alliance & Leicester, both purchased in 2008. As this process comes to an end, with all three brands now operating under the Santander banner, he believes previous experience has been invaluable.

"It's what's enabled the company to grow so quickly," Selby explains. "We have strong competence in acquisitions, not just from the point of view of making the deal but also in being able to go in, inherit existing IT systems and bring the data into our organisation.
It's a tested and proven migration model which gives confidence to consumers and personnel alike."

And all this talk of technology platforms can easily blind one to the importance of people within the integration process. M&A activity can have a seriously destabilising effect upon one's workforce and a focus on speed and savings means inherited talent can feel unrecognised or undervalued. Also, getting the IT infrastructure in place is only the beginning; a huge amount of training is involved as well as a clear outline of the principles underpinning the change.

From a technical training standpoint, this involves getting personnel au fait with the new operating system from as early a stage as possible. Alliance & Leicester staff have been receiving tutorials in Partenon since June 2009, 18 months before full integration was scheduled to go live, and those with prior experience of going through the process have been brought onboard to help.

"Everyone does their e-learning and there's a lot of online support and guidance," Selby explains. "We've also organised workshops and installed several help lines dedicated to particular issues. We also have experts on the ground as branches go live, pitching in and making sure that everything runs smoothly. We wrap people in layers of support.

"It's also essential that from as early a point as possible you explain what you are doing and why and where the benefits will lie. Acquisition by its very nature involves change and people react to that in different ways. Alliance & Leicester's in-branch system was actually pretty good and staff were used to and liked it. To move somebody off something like that can actually be harder than bringing in somebody new who has no benchmark or comparator. You must continually articulate things are being changed and where we see these changes taking us."

Staff buy-in

The speed at which Santander seeks to implement its systems demands staff buy-in from the off - at Alliance & Leicester, some 7.5 million customer accounts were migrated in a matter of weeks - but this can never be guaranteed among a workforce schooled in a certain way of doing things and suspicious of the transformational process. Integration must therefore go beyond mere training and look towards winning people over emotionally. The marketing strap line "Together we are Santander" started life as an internal campaign before being put to use commercially and neatly captures the emphasis invested in bringing people along on the journey.
"We do a lot of work on hearts and minds," says Selby. "That places a lot of emphasis upon us defining ourselves as a brand and finding the right ways to articulate the benefits of being part of a truly global group. You need to give people a lot of face time, making sure they feel engaged and involved, and that all the channels of communication are open in order to make that happen. Divisional directors and regional managers have to help drive that process, as do executives at the very top of the organisation."

This also applies to the twin issues of talent management and development. While brand integration can sometimes feel like rather a depersonalised experience, Selby is insistent that on the subject of talent an individually-tailored approach is essential. "On the surface, a lot of what we do might not appear that groundbreaking," he begins. "People have performance reviews on a quarterly basis and there are annual performance goals set. It's pretty simple stuff, but the focus has to be upon quality and consistency.

"On top of that, however, every six months people are assessed against their potential. There's quite a strict methodology for doing this, a competence framework that maps you against your job expectations. That way, people of high potential are very quickly identified and various circuits of training become available, tailor-made to fit where we see them progressing and helping accelerate performance. This can range from being put on an 18-month programme that involves going to Spain or South America on secondment with another part of the business to a mini-MBA at London Business School to something more localised and directly related to the job in hand. It's very transparent, but also quite process-driven and mechanical, so that it doesn't rely on subjective judgments that people are applying through some sort of halo effect."

This is a programme that exists across the Santander organisation, demonstrating the emphasis upon consistency in all aspects of operations. "A single view" is a message Selby returns to time and again and it would appear to be equally applicable internally as it is to the consumer.

The simplicity of the message dovetails quite nicely with the way in which he views banking as a whole.

"Banks are really only IT, products and people," he believes. "The way in which we acquire and integrate is certainly very IT-led and having a market-leading platform gives us a critical competitive advantage, but it all counts for nothing if we don't bring people with us. You can't have one without the other." As the Alliance & Leicester project is completed, one starts to wonder what lies next for a director with exclusive focus on integration. It is a question that Selby laughs off good naturedly: he is clearly not worrying that the role will become redundant any time soon.

"We've bought 380 branches from RBS and that will involve a lot of work," he exclaims. "Who knows what happens after that, but Santander has real ambition for further growth in the UK and I'm pretty sure that integration will remain on the agenda for some time to come."