There’s no denying it’s a bad time for financial services, but that hasn’t stopped Nationwide Building Society following through with a five-year, £1bn-plus transformation programme that has completely revamped the company’s IT infrastructure.
But, says Nationwide’s chief operating officer Tony Prestedge, it’s not about the technology: that’s merely a slave to the operating plan, which is a subset of the corporate strategy.
Although Nationwide’s origins are over 150 years old, its headquarters on the outskirts of Swindon is a modern steel and glass campus that provides restaurants, shops and a gymnasium for employees.
From the upper floors, the fields and woods of the surrounding Wiltshire countryside are visible. Outsiders to the financial industry might find it odd, but it’s a place with a human scale.
And Nationwide is a people company, maintains Prestedge, who heads up the operations of an organisation which has 20,000 employees, customers in a quarter of the UK’s households and a balance of £200bn.
His enthusiasm for the job and the transformation agenda he has been given to drive forward is clear to see and surprisingly infectious.
For him, employee engagement equals customer engagement.
Prestedge’s view of the way IT fits in with the rest of the company’s operations is best illustrated by his decision not to appoint a CIO to head up an IT department when he joined in 2008 as a result of the company’s acquisition of Portman Building Society.
He is as closely involved with IT procurement as he is with other operational concerns and his reports share IT-related tasks with each other, alongside non-technical operational duties.
It’s a solid expression of an emerging trend in companies seeking to embed IT more fully within the rest of the business. Nationwide is a mutually-owned company, which means it is officially owned by its customers.
This is an important distinction for Prestedge because the company isn’t driven by shareholder pressures to maximise profits. It has to generate revenues to be capital self-sufficient, to cover growth and to maintain a cash balance.
Nationwide comes under the same scrutiny from the financial regulators as any plc, but otherwise is free to concentrate on long-term investment strategies.
“There’s no doubt it has left us in a stronger position as we emerge from the recession. We can operate the company on a lower rate of return and we are not answerable to the market on a quarterly basis,” Prestedge explains.
This freedom from the pressures felt by other financial institutions to grow profitability on a short-term basis and, in the process, expose it to the risks inherent in buying-in debt (like Northern Rock, for instance), coupled with the mutualised ownership model, means Nationwide is free to create value from long-term customers, rather than concentrating on winning new customers to sustain growth.
“In terms of consumer engagement, we are focused on being number one for service delivery in the UK,” he says.
At a time when debate over banking bosses’ huge bonuses is boiling over, Nationwide is less exposed to criticism as a third of each executive’s bonus package is tied to service execution metrics.
“There is a real sense here that when we talk about employee engagement what we actually mean is employee integrity,” says Prestedge.
“There is a sense that employees participate in strategy creation rather than them being dictated to. Strategy is less hierarchically imposed and less driven by market forces.”
Employee engagement is an important issue when considering the scale of transformation that the business is going through.
Without this level of employee buy-in it would have been difficult to achieve so much fundamental business process and infrastructure change.
The Nationwide board embarked on a transformation programme in 2008, driven by a perceived need to react to customer demand for service delivery through new channels such as online and to simplify business operations as it integrated a number of recent acquisitions.
Prestedge notes that the simplicity of the business model meant that the task of communicating the transformation strategy to staff was easier than it would have been at a big high-street bank.
“It’s a domestic business, focused on a UK consumer base, owned by its membership. It means your ability to define the strategy to 20,000 people in a way that is meaningful to them is going to be easier,” he explains.
At the base of the strategy is a replacement of core legacy systems to support a streamlining of the company’s physical business units acquired over time.
Alongside this, the company is revamping its channels with upgraded call centre capability, new internet banking facilities, exploration into mobile banking services and improvements to existing ATM services.
At the top is a movement to extend the company’s core products in current accounts, insurance products and mortgages. The transformation has been guided by a set of core cultural characteristics around customer-service delivery and the driver behind the investment was creating a commonality of customer experience.
It can’t be stressed how important this is as a business goal by Prestedge.
“It doesn’t mean that I don’t want the technology operation to innovate, but I am clear that there is only one dog here and it’s the business that wags the tail in the context of what we are trying to achieve.