FRIDAY 28TH JANUARY 2000; Show Me the Money!
The press generally seems to think that the revised BoS offer puts them slightly ahead again, but they also believe that both BoS and RBS will announce final, better offers on Monday, which is the final day for any new details to be announced - unless of course another bidder enters the fray. That doesn't look likely, but does raise the prospect of the ultimate nightmare; a new bidder coming along every couple of months and the process reverting to square one again, and again, and again... Although this all seems unlikely, you wonder whether the takeover rules shouldn’t be changed to stop that even being a possibility.
If there are going to be further developments on Monday, then it is likely that the bidders will both want to see the other's move before they respond, so we expect a game of financial "chicken" with both trying to leave it to the last minute.
I have a communication session for my team first thing up in the lecture theatre. I talk for 40 minutes non-stop, which is quite tough at 9a.m. Getting up in the morning has never been a problem- I usually have the alarm clock switched off by its second ring -but I am not particularly communicative for a few hours! The occasional times Jane also gets up early (I'm up at 5.45 am on work mornings) she accuses me of grumpiness, which isn't really fair. It just takes a while for my brain and mouth to get the network connections established.
I update my team on Redgrave progress to date and answer as far as I can the questions that I have had directly from them, or picked up indirectly through the grapevine. The main concerns quite rightly are around their terms and conditions, with some very specific worries from the longer serving staff. They are currently protected by generous redundancy terms given their long service and are worried that if they go back to zero service in the new entity then they lose out big time if anything did go wrong. They also want pension protection in terms of ability to take early retirement as well as the overall level of pension provision.
I can't as yet respond to much of this, but what I can say is that I will personally not go into the venture if I feel NW or Andersens are trying to rip off the staff - although that doesn’t mean it might not go ahead without me off course. I just would not feel comfortable with myself, point one, and I would not see much hope of a successful business if we start with a disillusioned bunch of staff. However, I stress that we are not intending to offer a voluntary redundancy package to those who don't want to be part of the new venture. We have vacancies and are very short of staff, so there is no logic at all in letting people go. They can choose to resign, but I'm not giving away shareholders’ money to people when there is plenty of work that needs doing!
I spend the afternoon with Jim and IT colleagues at ICL's offices having a general review and chat. We are looking to outsource desktop PC support and management to them, and there are various other possibilities in terms of what we might be able to do together. Keith and his team are quite impressive, and by the sound of it, 3 of his 5 top managers who are present in the meeting are fellow Geordies. Must be a good company.
I drop back into Lothbury at 5 p.m. rather than going straight to Waterloo because of severe stomachache. I take the opportunity to pop in to see my HR colleagues, and find that our senior HR person is about to go and see Richard Delbridge to get the bonus pools signed off.
NatWest has a system whereby each Executive Director is given a "pool" of money for bonuses; he subdivides that and gives each of his direct reports a pool; those people then give an amount to each of their staff and so on down to individual level. (In practice, I personally do my Department down to individual allocation, rather than passing responsibility down to Ingrid and Brian, so I can get some consistency across the team.) The process has some obvious disadvantages; for instance, if Richard decides I have had a poor year, the whole department will get a lower pot and even my top-performers will not do well. And if you want to reward one person more highly, you have to find another to take money away from.
I hang around, and eventually get a few minutes with Richard - my "pot" is £365,000 to distribute amongst my team of 170 people, including the warehouse staff at Cheadle who have all been made redundant. From the back of an envelope calculation I have done in advance, this sounds disappointing and lower than last year. Richard explains that he knows this will be tough to sell to staff given our record profits of £2.3 Billion.
"Yes. It might just be a tiny bit tricky," I respond, but luckily he is not very sensitive to sarcasm. He looks very tired and somehow physically smaller than I have ever noticed him appear before.
Apparently, Head Office bonus allocation is the average of the Businesses (not unreasonable) and only Greenwich did exceptionally well, so the overall amounts are down... which I'm afraid does not stack up with what I know (e.g. Cards and Corporates both made record profits.) Also, he says, the economy was strong in 1999 so our achievement was actually less impressive given that background. I am so astonished by this I don't give the response I should; does this mean that we will get big bonuses the years when profits are crap as long as the economy is poor?
I will have real problems explaining this to the team. Later at home I realise I didn't ask the big question; is that pot to include the annual salary increase amount or just the one-off annual bonuses? If it is pure bonus and the pay rise will be separate, then I have a tricky situation to handle. If the amount he mentioned has to cover both salary increase and bonus, it is disastrous in terms of staff morale and we can probably kiss goodbye to any positive views of Redgrave. There will be deep cynicism about NW's motives and how staff are likely to be treated in the new venture.
My theory is this. We gave cost commitments to the City in previous years - I think it was that the '99 costs would be lower than 98's. The defence document says we have achieved this, as long as you exclude restructuring costs, Greenwich bonuses (which are huge because they have made mega-profits in '99, like all the investment banks) and so on.
So I think the Board had to work backwards from the cost figure needed to hit this target, and this defined the amount of money they could afford to give as bonus. Unfortunately, this was below last year's. I would rather be honest with staff and tell them this (if it is true) then give them bullshit about relative economic conditions in different years, but I am probably conditioned by my formative experiences at Mars, a company that really believed in telling staff the truth. In my experience, life is usually simpler if you follow this policy.