Tuesday, June 26, 2012

Stephen Hester, RBS - Should he stay or should he go?

The shambles resulting from a failed computer update at RBS, NatWest and Ulster Bank is now extending to a week, and there are predictions that the knock-on effects and compensation claims may last for months. It's now been revealed that "control" of the failed update was with a support team based in India. RBS has denied that their outsourcing programme has anything to do with the disaster.

Since Mr Hester took the helm at RBS following the interesting stewardship of Fred Goodwin, 30,000 jobs have been shed, and thousands of posts outsourced to cheaper locations. The current debacle seems to have involved the deletion of critical files on two successive nightly "updates". Was no-one watching what was going on? The re-processing in sequence of all the failed transactions is one reason for the slow recovery, but surely there should have been better checks in place?

Hundreds of thousands of people are inconvenienced, out of pocket, and may have their credit ratings damaged by this fiasco. However, the highly-paid executives at the top of the banks will have little problem paying their weekly bills, and are no doubt still looking forward to tidy bonuses as a result of their work. I find it inconceivable that a CEO presiding over one of the worst banking cock-ups in recent memory should even consider holding his hand out for a seven-figure bonus. At least bank robbers have the decency to wear a mask before heading off into the distance with our cash.

But it's not just about bonuses. A CEO is the person with whom responsibility rests when a company fails to serve its customers. If I was in Stephen Hester's shoes, I would be pondering the words of the great Wandsworth philosopher Mick Jones; "Should I stay or should I go?"

3 comments:

Ian R McAllister said...

Much as though I agree with all that you have said, as part of the employers decision making committee (you and I as a tax payers own 80% of RBoS), could we easily find a replacement who would be even cheaper? He's paid about 40% (inc bonus) the level of a typical global banker CEO (£2M versus £5M+), so walking out of the door would be like a bonus to him. He amazingly wants to stay, and the restructuring from the Sir Fred days needs about another 18months to be completed , plus sale of assets time.

The problem is in the IT team, who should be taking a running jump! We have a UK client who outsourced IT to a very competent Indian company, who pays us a considerable amount of money to recruit trained PM's to sit alongside the Indian ones to sort out the inevitable c*ck-ups that a 3000mile distance brings. This is a classA case study in why outsourcing may be "cheap" in the short term, but has hidden iceberg-scale problems and resultant costs

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Alan Stevens said...

Ian,

Thanks for the comment. I agree that the IT team seems to be seriously negligent here. The RBS head of IT, Ron Teerlink, has so far remained silent, at least in public. I suspect he'll be reading the job adverts.

As for Stephen Hester himself, his handling of the crisis has been (in my view) slow, vague and unconvincing. Whether that's a reason to seek a new CEO is a matter for others to decide.

Chris Clark said...

Oddly enough, I think Stephen Hester should stay! The reason is the entire RBS payment tech, along with the other major banks, dates from the '70s, it is in fact so old that RBS strongly push back on introducing new services because they risk breaking it. This was discovered on a new payment systems contract we did last year.

That's why African and Icelandic payment systems are streets ahead of the UK, they truly are! The ex-Sir ex-Fred Goodwyn and their ilk ignored the retail systems after the 1988 Big Bang. Stephen Hester does come over as an altogether more responsible CEO, and he has upped the levels of apologies in recent days though he could have started out better.

Next, responsibility rises to the top of course, but I would lay money that within the Payment IT areas people have been breaking well-documented and honed-in test/rollback procedures on these ancient systems, and on that I agree with Ian.

Whilst Stephen Hester owns responsibility, I feel a general clearout of the procedure-breakers and their managers is the appropriate approach.