This is a story without an ending. It is a story that is halfway through its telling. There are no predictions of when it will conclude. And certainly no claims that the chapters to date have all been successful. There has been untold drama, personal interest stories and hiccups along the way. But now, almost four years after its unprecedented £850 billion government bail out, perhaps it is time to reflect on the Royal Bank of Scotland story to date.
Chief executive Stephen Hester has said, its reputation will only be fully restored once Royal Bank of Scotland returns to profitaility. But with that event still some years off, it is certainly untrue to say that the bank has not made significant progress on its path to redemption. It is easy to forget now that, fleetingly, Royal Bank of Scotland was once the biggest bank in the world. From a small regional bank, predominantly known in England for its investment in Direct Line, the first telephone-based insurance group, the bank grew rapidly after its acquisition of NatWest into the largest in Europe and the fifth largest in the world.
'This was an organisation which went from very small to very large very quickly but didn't change internally,' explains Andrew Wilson, the outgoing head of communications at Royal Bank of Scotland. 'It was about getting the brand known and seen internationally. We paid a heavy price for that strategy.' As Royal Bank of Scotland grew, its communications policy centred on financial results and major announcements. Contact with stakeholders, ranging from the media to analysts, investors and employees, was minimal and, when the bank fell from glory and into government ownership, following its doomed acquisition of ABN Amro, there were minimal reserves of goodwill. 'I think that was critically important to the Royal Bank story,' adds Wilson. 'We never connected with opinion formers. We have certainly remedied that over the past three years. Newspaper journalists have to be our critics. We have respect for the media and respect for our management is high. We have foundations now in place from which to harvest goodwill.'
The new era
But this story of rebuilding reputation really begins after the departure of former chief executive Fred Goodwin, and his board colleagues. It starts with the arrival of Stephen Hester as chief executive and Sir Philip Hampton as chairman, although tentative steps had been taken at Royal Bank of Scotland's extraordinary meeting on 20 November 2008. The then chairman Sir Tom McKillop offered his sincere apologies for the situation. He was, he said, 'profoundly sorry about the position we have reached. I feel this sincerely, on a number of levels and for a variety of reasons'.
Wilson describes it as one of the most 'abject apologies' ever made by a business leader, but it fell on deaf ears. Public opprobrium was such that it crowded out the message. It was a good early initiative but it would take a lot more than a simple apology to restore faith in the institution. It would also take more than one apology. The issue, explains Wilson, is that most companies think We've made our apologies, now let's put that behind us and move forward, but that the reality is that once is never enough.
'The lesson we learned was that, while we thought we had said sorry, people hadn't heard us saying sorry,' he explains. Working with Matt Carter, chief executive of Penn Schoen Berland and Burson-Marsteller, Royal Bank of Scotland adopted a ladder approach to rebuilding its reputation.
Sorry, sorry, sorry
'We learned from the experience of politicians. There is a key lesson around the timing of messages, but politicians also repeat their messages until they are blue in the face,' says Wilson. Carter believes that a message hasn't been heard until it is repeated back by stakeholders. The issue then is to persuade a new management team, who have no connection with the strategies that brought the company to near disaster, to continue to apologise for the past when all they want to talk about is the present and the future. But also, at the same time, the company needs to set out the route for recovery and aspire towards the end point. The four-rung ladder that Royal Bank of Scotland is now following started at the bottom step of 'crisis and recognition', moves to 'setting out the route to recovery', up to 'creating a bank you can believe in' and ultimately to the top rung of 'new RBS defined'.
A new board also brings new opportunities, but the executives and the communications team were adamant that the issue was around fixing the business and was not a matter of rebranding to distance themself from the past, as some advisers had suggested.
'This had to be a turnaround based on substance,' says Wilson. Every team, including the communications department under the guidance of director Andrew McLaughlin, was bolstered with new and robust talent, such as Jason Knauf in media relations who was instrumental in the success of Hester's appearances earlier this year to defend its remuneration.
In the early days, it was not easy. The spectre of past management loomed large. The night before the announcement of the 2009 annual results brought the revelation that Goodwin would receive an annual £650,000 pension. It came after a week in which the bank had tried to communicate We get it by announcing the early exit from its Formula One contract. At another point the share price slumped to a low of 10p, which many in the bank viewed as the nadir of the crisis. It was deemed as a political story and one on which the Government rather than the bank should comment.
Bonus payments and salaries are regular media fodder, as are any perceived 'excesses' such as corporate hospitality.'We have had many war stories,' concedes Wilson. 'We handled them as well we could, but we didn't get to the punch early on in some cases. It is also difficult to run pay policy on the basis of communications. It is a business decision. But pay also sits right at the heart of the public accountability of the company.' The reputational challenges around this issue are singularly impossible, while the backlash against corporate hospitality has to be balanced against the need to maintain business relationships.
But the advent of a new leadership can also herald a new culture and an enlightened way of doing business. 'If we all agree that the management didn't get it right in the boom years, then what you can definitely say today is the new leaders are both intelligent and respectful. They are adept in relationship building,' says Wilson. 'The lines of communication between the board and the communications department are very short. Our past culture of deference was what brought us down. The culture needed to be reformed. The great irony is that, in ending a culture of deference, is that it has to come from the top to give people licence.
Hester is crystal clear - he doesn't want to micro-manage. 'In the past, many companies may have viewed communications as poor cousins or a lightweight discipline. But we should see ourselves as a serious part of the strategic mix. We should be all over every detail of a company's business and its operating environment, and see ourselves as part of corporate governance. We need to take responsibility and not blame the people at the top.
'Hester is as tough a chief executive as there is in the marketplace. He always lets you know when you have performed and when you haven't. But you are able to rescue the situation and move on. In the past, one failure equalled death.'
Testing the public
Rebuilding reputation may start from within, by empowering staff and making them feel engaged, but the external environment is also vital. Royal Bank of Scotland was keen to test public opinion in order to shape its communication strategy. (It is a regular ongoing process.) Surveys in early 2009 revealed trust in financial services as a whole was poor; indeed, it was the least trusted among sectors that included alcoholic drinks and oil and energy. Ironically, the situation has remained relatively static and simply allows politicians to make ongoing attacks against both the sector, and the Royal Bank of Scotland.
Interestingly, however, RBS's surveys reveal that average trust in UK high street banks has remained relatively unchanged since the crisis, while it has declined among the 'broad elites', or opinion formers.The current thrust of RBS' efforts to rebuild trust is thus three-pronged, and sits neatly astride the middle rungs of the ladder approach. It is trying to instil the message that the 'new' Royal Bank of Scotland to emerge from the ashes will adopt a responsible position in society. A well-balanced, sustainable economy is vital, and Hester now regularly speaks about how the goal is for RBS to become a model of how banks can contribute to society.
The role of staff
While the general public may hate financial services, surveys also reveal that most customers trust the people in the branches. More than nine in ten customers trust counter staff while 85 per cent trust their bank manager. RBS now recognises the value in keeping staff up-to-date with events, and regularly communicates on the situation. 'Before every results announcement, we now brief management,' says Wilson. 'We now regularly hold town halls to communicate with employees.'
The bank has seized on its 'trust' finding, and last December created an ambassador programme for employees. More than 4,000 staff have voluntarily signed up, with a target of ten per cent of headcount by next year, to become 'advocates' for RBS. They receive regular briefings on the business, meet Hester and other members of the board, and have their own website. 'They get to know information about the whole company,' says Wilson. 'Employees are a vital driver of trust and our ambassadors will be our best and most influential spokespersons.'
RBS's analysis also revealed that there is a big gap between general perception of the sector and their personal experience, which is the most important influence. While the media may still focus on the issues surrounding financial services and how past actions have fuelled imbalances within the economy, customers still focus on What are you doing for me? Thus improving the customer experience, with the launch of initiatives such as the Customer Charter and new products, is the second prong of the strategy to improve trust.
The message is coming through for NatWest, which represents the bulk of RBS's retail customers base. Surveys show NatWest customers predominantly associate the bank with services, such as 'cards', 'Saturday opening', 'branches' and 'adverts'. 'Bonuses' feature but not strongly, but with RBS' retail customers 'bonuses' dominates the word clouds. Finally, RBS is trying to emphasis its positive value to society with adverts containing messages about, for example, the number of start up businesses it helped last year.
Progress to date
One of the biggest issues for any company in the middle of a reputational crisis, says Wilson, is to know when you have reached the bottom from which recovery is the next step. It was once seen as the 10p share price but 'it was probably the pay fury in January and February this year, we hope'.
'Initially, it was a constant battle with the media to talk about the future not the past. Living through the first 18 months was hard,' he admits. 'We had plenty of false dawns. We became the personification of the industry'sissues.
We became the story. It was understandable but it was unsustainable and destructive. It was very dispiriting; this was a business that we cared about and in which we had invested our lives. But we have a resilient workforce, and the crisis has built our resilience.
'Sometimes we over-communicated, and we learned to turn it down and to get some balance. But no company should fear the lens of scrutiny. Some of it has been unfair, but we lost the right to complain. But most people are reasonable and recognise the efforts we are making.' The huge interest in RBS can also provide opportunities by giving the bank a public platform from which it can shape stories rather than allow them to be based on half truths.
Ironically, the furore surrounding Hester's proposed £1 million bonus earlier this year provided an opportunity for the chief executive to tell the story of RBS's progress. He made appearances on shows, such as Radio Four's Today programme, Andrew Marr and even the One Show, to outline the facts about his remuneration, but also to move the reporting from bonuses to a discussion about the job RBS has to do and is doing. (More than ten per cent of the adult population were aware of his appearance on the Today programme, and 40 per cent were more favourable towards Hester as a result.)
'It was relatively high risk, but we knew that we had lost control of the story and it was very destructive to us,' concedes Wilson, who credits his colleague Knauf with its success. 'But we knew that the quality of our advocate was so high that it was worth the risk. Hester's decision was to be transparent and make his case, and refocus the debate on the company and not on him.'
Hester's apparent 'openness' appears to have marked a shift in journalist sentiment towards the bank. Conservative politicians, such as Chancellor George Osborne, moved from attack mode to one in which they likened their tasks with that of the new management team at RBS - 'cleaning up the mess'.
This relentless engagement is starting to have an impact. Last month, the biggest messages coming back from the question What do you remember seeing about the Royal Bank of Scotland? were 'paying' 'money' 'back'.
Wilson, who is leaving next month to join WPP, describes the two years post the crisis as his most enjoyable time at the bank 'despite the pain of it, because it was so interesting'. But at the beginning, he admits, 'we had to get into a mindset of contrition, acceptance and acknowledgement. If you feel entrenched and attacked unfairly, then you just can't perform. If you are in denial, it is fatal. 'It is mission critical that companies must be prepared to change leaders when a crisis like this happens. You need a fair break. We have a shot at redemption, and we are quick to create opportunities around that. Fairness shines through when we earn it.'
To be continued...