WEDNESDAY 13TH OCTOBER 1999: Reality Hits Home

Richard Delbridge's monthly working lunch for his direct reports is held today. I wasn't going to go, as I am not going to be part of his team for much longer, but I hear Ron is attending so I do. We introduce ourselves, and then Richard explains the new structure. He has taken direct responsibility for GFM (Global Financial Markets, our Treasury business) and Audit, as well as Risk (as previously planned.) Richard is definitely becoming even more powerful, which is fine as far as I'm concerned. Purchasing moves to Bernard now, but his position looks vulnerable to me -Group Property, Purchasing and IT does not look like a big enough job for one of only four executive directors.

I ask Richard if this means I should leave his meeting (just a little joke) and he says no, but he will be cross-charging Bernard for my sandwiches (just his little joke.) This would not be a major issue anyway as the sandwiches served at these lunches are particularly cheap and nasty. No chance of BoS claiming NatWest profligacy here.

Ron talks about costs and the role of finance management. Although controls are apparently good, he thinks investment spend looks high. He wants entrepreneurial behaviour from senior business managers, but within a tight central framework of cost control. Clearly, this is the ideal, but I have real doubts about its achievability. Real entrepreneurs don’t like being told what they can and can't spend "their" budgets on in my experience.

He explains that Bank of Scotland have chosen the battleground to be management competence and cost efficiency. Whatever we put forward has to focus on addressing these issues. His analysis is very crisp, and I am starting to be impressed, not that I suppose Ron is losing sleep over what I think of him.

Ron invites comments, and I say that I have been surprised by how negative NatWest's view of outsourcing is. It can be a very effective cost control mechanism. This wasn’t well received by Richard, who is not a great fan of outsourcing. He certainly thinks things like IT development are core, which I am less sure about. I also suggest we should look at the current IT structure in the Group (severely sub-optimal in my opinion.) Paul Biddle, Finance Head for a group of businesses including Retail, thinks I 'm suggesting reverting to a big central IT Group and attacks this comment. That wasn't what I meant, but as so far everything I have said has been shot down in flames, I decide to shut up before I impress Ron further.

I have to rush off from lunch to another meeting that Bernard has called for the functional heads. This is held in the committee room next door to the boardroom, so about fifteen of us sit round the large round table. Bernard thanks us for coming, and says,

"We have difficult and important business today. I have a brown envelope for each of you."

We laugh nervously, as Bernard gives us a few seconds of tension before adding, "No, not that sort of brown envelope."

He explains that reducing our cost base has to be a central plank of the defence, and that Head Office (GHO) has to take its share of the pain. We have to retain effective controls over the business, but by the end of next week we need to be in a position to announce a major cut in GHO numbers. He acknowledges the difficulty we will have positioning this alongside the mobilisation stuff on staff values, but it has to be done.

We will each be given an envelope containing the maximum budget and maximum staff numbers we are allowed for our function in 2000. We have until next Tuesday to come back to John Paddick, then Bernard, and confirm we can run to these numbers, and outline the implications for our areas. What will we have to stop doing, how will we manage with fewer resources, and so on. We should assume the Group stays as it is but "err on the side of simplicity". I take this to mean that we will be disposing of a couple of businesses but we can't say that officially yet. We can involve close colleagues if essential, but this has to be kept tight.

We are looking overall to take out at least 25% of the GHQ headcount and cost.

That is actually not quite as dramatic as I had feared. But although Bernard handles the meeting very well, I leave feeling more depressed than I have at any stage up to now. I think it is hitting home that this is not a management game, or an exciting diversion from normal work; this is something where people are going to lose their jobs.

I open my envelope as soon as the meeting ends. It is actually not too bad for us, in that we are already planning to close the warehouse in Cheadle, and if we can do that quickly, I can probably avoid further cuts in the London purchasing group. That will be no consolation for the Cheadle staff, but it makes things somewhat more palatable and easier to manage for me, although I have some guilt about Cheadle becoming my sacrifice to the God of the Defence Document.