The Only Thing that Counts is the Customer

Today the Dutch Government decided to take over the Dutch Activities of Fortis including ABN AMRO. The decision of the Government creates a very Different Position. The integration of Fortis (Netherlands) and ABN AMRO has turned into a takeover of Fortis by a state owned ABN AMRO. The history of Government intervention in Big Companies always shows the same pattern. It fails. The Customer is in Control and the Customer wants Security, Service and Cooperation.

 The Government is paying 16.8 billion Euros which is about 1000 Euros per inhabitant. I am sure they will never recover this amount. The enormous rise of the State Debt will create Inflation. This will speed up the Recession. When the Customers of the Government, The Voters, find out what is really happening they will be furious. The big problem is that they don’t know how to show their anger. The old-fashioned party system in the Netherlands is still in control. The new parties are playing the old card of racism, religiouss fanatism and nationalism. They will find a way to put the blame of the economic crisis on the Islam.

The action of the Government was triggered by a gigantic move of customers of ABN AMRO and Fortis to other banks. The RABO-bank, the most customer-friendly bank in the Netherlands, was unable to help all the people who wanted to move from ABN AMRO and Fortis to the RABO-Bank. There is a long waiting-list.

Many people have moved their savings to accounts outside Fortis and ABN AMRO. ABN AMRO and Fortis encountered a “Run on the Bank” but in a sophisticated way. People just moved their money to a secure place.

The Government wanted to restore the Confidence in Fortis. Confidence is not the only issue in Banking. A much more important issue is Service.

The first question you have to answer is will these people come back? I don’t think so.

Many people wanted to move from ABN AMRO to another bank for a long time. They did not do this because moving to another bank is not easy. They hesitated and accepted what was happening because “the other banks are not really different from the other banks“.

When people start to move it will be almost impossible to stop them moving! If this happens, and I am sure this will happen, the market share of Fortis/ABN AMRO will decrease. I have decided to move to RABO-Bank and I will proceed. I am sure I am not the only one.

According to Nout Wellink, President of the DNB, the Dutch Regulator, the integration of Fortis Netherlands and ABN AMRO has to speed up. I don’t think he has any experience with what is means to integrate two Banks under Pressure.

Again we have to question the two issues Culture and Technical Infrastructure.

The integration of the Technical Infrastructure will be a major burden. This problem remains independent of any solution that is chosen.

The Cultural Issue has changed a lot. Now we have to look at the effect of the mix of the Culture of the Dutch Government (the Owner), the ABN AMRO-culture and the Fortis Culture. The first thing that will be very clear is that the Fortis Culture will be the big loser. They are simply small in comparison to ABN AMRO. The next thing you have to know that the Management of ABN AMRO (especially ABN) has a “lot of friends” in the Dutch Government. The “old management” of ABN AMRO (or better ABN) will take over control. At the End of the Line the Merger of Fortis and ABN AMRO will not have any effect on the culture of ABN AMRO. If this is correct ABN AMRO will not become a “customer-friendly” bank at all. It will just go on the way it was! If this is true there will be no reason to move back.

So if my analysis is right the investment of 16.8 billion Euros (remember the Dutch Government already invested already a lot of money) will generate a gigantic loss.

What is the only solution?

The lessons that has been learnt a long time ago is that when the Market is restructuring the Government has to stay out of this process.

The Market is dominated by Customers and Customers simply move to the place where they are able find Service. They are constantly searching for a place to find Rest (Balance, Harmony). They want somebody who Takes Care of Them. Nothing More.

The Dutch Government has a long history of not-listening to the Customer. Many people have lost faith in Government and the Old Parties are losing their Voters for a long Time. The old parties block the entrance of the new parties (SP, the Socialistic Party!) in Government.

I am sure someday somebody will create the Bank of the Heart. I am sure the SP and many others want to reform the old banking system and move back to the “old cooparative structures”. The RABO is one of the last cooperative structures that are left in the Netherlands! I know how to recreate a Cooperative Bank. The Nice thing is that the Current Cooperative Technology is simply made to do this. I know how do this and many others know how to do this. It is time to Act.

Why I have Decided to Leave ABN AMRO

I am a customer of ABN AMRO for more than 40 years. Last Friday I received a letter from ABN AMRO. They told me that the local branch office of ABN AMRO will be closed and integrated into a local branch office of Fortis.

 One day later negotiations started to save Fortis from bankruptcy. Today I read that ABN AMRO has to be sold to another bank. This will not solve the problem at all. It will speed up the Process of Desintegration of the Banking Industry that has started ten years ago.

 Just one year ago I wrote three blogs about the Merger of Fortis and ABN AMRO. Based on my own experience with the Merger of ABN and AMRO I predicted a possible failure of this merger. I predicted a possible failure because I did not believe the Technical Infrastructure and the Culture of both banks could be easily matched. I was Right. The Credit Crunch was the Cause of the Downfall but the Culture and the IT-Systems were the real reason. The Aim of Management was to make Big Deals (to get Big Bonusses) and the Systems were unable to provide the Right Data.

I have been working in the Money Market for a long time. In my opinion the biggest problem in the Banking Industry is the relationship between the Accountable, Bookkeeping, Systems and the Activities of Dealers. A small part of the Dealers are and were taking Enormous Risks by creating very complicated financial constructions (Derivatives). The Auditors (and the Management) of Banks have lost Oversight a very long time ago. This problem increases in severity when banks are merged.

Every time when a New Technology is implemented the Quality of the ICT-systems deteriorates. This has happened so many times that nobody really understands what the IT-Systems are really doing. Every time when a merger is accomplished the financial data of a bank (or other company) deteriorate. Two of more deteriorated systems are connected creating a bigger mess. Every time when a merger is accomplished the people who have an understanding of the ICT-systems know less about the Systems.

When a Merger takes place the motivated and skillful employees leave the “sinking ship”. The people that remain become “apathic”. They perform their duty in a “nine to five”-mode. Innovation stops. External advisory companies (or worse) outside outsourcing companies take over the maintenance and the development of the software. The quality of the software deteriorates again. The problem increases when packages or software layers are implemented. This happened in every bank around the world.

When I worked with ABN AMRO the biggest mess in IT was always created in the US. The main reason was the “opportunistic” attitude of the Management or the entrepeneurs attitude of the Management. They experimented with everything they could find but never finished anything. The US Financial System was far behind the Dutch Financial System in terms of Products and Supervision. Everybody believed the US was the most innovative in everything but they were certainly not the most advanced in Banking and IT.

 ABN AMRO was one of the bad performers in the Consumer Banking Industry in the Netherlands. The personnel of the Bank were not motivated for a long time. The main reason was the Management. Everything was decided at the top in big Staff Departments. The Branches were forced to implement what they had designed.

 The Management of the Bank loved to do Big Deals with Big Companies. ABN and AMRO were Deal-Making companies and were forced to move into the Consumer Market when the employees of all the companies in the Netherlands were forced to open bank-accounts. The Customer was never priority number one.

The decision structure of the Bank was highly complex and changed all the time. Employees at the branches were not allowed to take initiative. When they had taken initiative it took a long time before the decision was made. Most of the time the answer was negative.

The forced merger with Fortis decreased the motivation of the employees. It increased the complexity of the IT-Systems and the decision structure.

Fortis needed money and many parts were sold to other banks. Every time the Organization and the ICT-systems of the bank had to be divided in many parts. Before this process was even settled a new split was announced. This process was repeated until today.

The Consumer Banking Division of ABN AMRO, the “beautiful pearl” Fortis was after, was carefully protected. The integration of this part with Fortis proceeded. Many people moved to Brussels to create and implement a plan. Many outside advisors earned a lot of money again. Nobody had any oversight. A few weeks ago somebody finally decided to merge the branch-offices. They created new organization structures, appointed new managers, talked with the employees and send an announcement to their customers. This announcement was received last Friday! Two days later all the projects have been stopped and the employees of Fortis are leaving ABN AMRO. Nobody knows what to do!

The financial people were constantly trying to understand what the Risks were. Everytime a new problem arose and the Board had to take action. The message to the outside world changed all the time and the investors lost their faith in Fortis. The End of the (Credit) Line was reached last Friday!

A few days ago somebody decided ABN AMRO had to be sold to another bank to create enough cash to pay the current debts. The process of integration has to be reversed and a new process of integration has to be started with another Bank.You don’t have to be an expert to understand what will happen. The end of this process will be Total Chaos.

I am not afraid I will lose my Savings. The Government will take care.

I am not afraid to lose my shares. I have sold them a long time ago.

I am not afraid the bookkeeping systems of the Bank will finally break down and ABN AMRO will deny I am a Customer or present completely different data about my savings-account.

I am sure many things will go wrong. During my time as a customer of ABN AMRO the amount of mistakes that were made increased. Most of the mistakes were small but some of them really cost me a lot of time and money.

I am afraid  nobody will be able to help me when things go wrong. I just want a little bit of Service. Nothing More. I have decided to leave ABN AMRO. I am moving to RABO-bank.

I hope they will not buy ABN AMRO or merge with another bank. If this happens I have to find another Bank but I really don’t know where to go. At that time I probably have to buy Gold or another Object that keeps its value a long time ago. I really don’t know what will be valuable in the future.

Perhaps I have to start a farm and grow my own food at a place that will not be affected by the rising of the sea-level or big tornado’s or big earthquakes or heavy rain or intense drought or intense cold when the Ice-Age starts.

LINKS

 About the Merger of Fortis and ABN AMRO (Culture)

About the Merger of Fortis and ABN AMRO (Software)

About the Merger of Fortis and ABN AMRO (The Bank of the Heart)

About the Crisis in IT (About Software Layers)

About the Crisis in IT (About Outsourcing)

 About the Crisis in IT (About ERP Packages)

About the Crisis in the Banking Industry (Avalanches)

About the Crisis in the Banking Industry (Fraud)

 

 

 

 

 

 

Why the Merger of ABN AMRO and Fortis will Fail (Part 1 Technical Infrastructure) if They Don’t Apply The Lessons Learned

Today it is almost sure that Fortys will buy ABN AMRO. I was involved in the merger between ABN and AMRO in 1991.

AMRO was the most important competitor of ABN. It was a strange idea that we (ABN) were combined to become a “Global Bank”.

Soon I found out that we were in many fields completely different. My part of ABN was not hierarchical. We were a network. The manager at the top and the manager at the bottom were freely talking to each other. We were highly efficient and cost oriented. AMRO was completely different.

They were strictly hierarchical and were (in our eyes) extremely wasting money. The effect was visible. ABN was doing the same work with 1/3 of the amount of people.

The information I give you was not known to us. We did not know anything about them and “they” knew anything about us. Nobody informed us or could inform us. Because we (ABN) came from a very open culture we trusted our colleagues and our colleagues were telling something completely different. In their eyes AMRO was the best. They were telling their way of the truth.

In the culture of AMRO everything was a plan. They were “selling expectations”. A better system meant “We have a plan to improve our system and when we have finished the plan we will be the best”. In the culture of ABN a System was not a plan but a Working System and we were always very hesitant to over-sell. So what we were telling our colleagues was really there. It was operational and it was doing more than we told them. Both of us “believed the other”. We were operating out of our own Worldview.

ABN was a “Sensory-Bank” (Based on Facts). AMRO was “Unity-Bank” (Based on Models). At that time I did not know anything about World-Views.

After some time the big DECISION was made. The Dutch Homemarket would be supported by a combination of the AMRO-Batch Systems and the ABN Branch Systems. The International Systems would be supported by ABN-systems. The last decision was simple. ABN was an International Bank.

The big problem was that the International System proved to be a big problem. Almost nobody knew this because the International System was “almost finished”. Many of us knew that this system was a software-mess.

When you find out something in the FUTURE You always think people knew in the PAST what you know now. This is very big mistake that causes a lot of trouble.

What also caused a big problem was the difference in NUMBERS. We were 1/3 of the whole. There were much more AMRO managers and employees and everybody was give a “position”.

An example will give you an idea what NUMBERS do to you. The Educational Department of ABN aimed at IT consisted of 2 people. Everything was outsourced. The AMRO department consisted of many people. The level of a Educational Manager at ABN was low. Education was a staff activity and Staff was “not important”. What happened was that the two people of ABN just were put in a team and all their knowlegde of doing things “cheap and efficient” disappeared. The “old way of working”, “we do everyhing ourselves” just went on.

Much later we found out that “the DECISION was wrong”. The realization of “the Facts” started a new process. We started to distrust each other. Nobody was aware of the differences in culture. People started to believed “they” had plotted and “they” had given “false information”.

The “distrust” was also caused by the way we worked. The managers of ABN and AMRO kept on working in the old way. The ABN-managers quickly restored the “old boys” network. The managers of the AMRO found out that we were talking with important managers everywhere in the company. They did not like that. They wanted managers to behave like hierarchical managers.

The effect of two very different cultures created a very instable new culture. This instability started to emerge when the great work, the integration, was finished. Until that time we were very busy solving very complex puzzles nobody ever was able to solve. We did not know about these puzzles until they appeared out of the blue.

The next step THE CONVERSION was much more complicated than we thought. When we started the process of conversion we soon found out that we had to support three systems, The ABN SYSTEMS, THE AMRO SYSTEMS and the slowly growing ABN AMRO SYSTEMS.

The first problem was COMPUTER CAPACITY. The mainframes we needed were NOT AVAILABLE on the market!!! Finally IBM helped us out.

The next step was the MAPPING OF DATA. We had to compare every field to find out what ABN field could be mapped on what AMRO-field. Soon we found out that the programmers never took any time to describe the data.

The last step was CONVERTING SOFTWARE (2.300.000 Software Programs!). This time we found out we were really in trouble. Many programs were not documented and worse (!!) many load-modules were without a compile-deck and a source. We could not find out what many programs were doing. When I left the bank in 1997 many of the problems were still not solved. The Year-2000 problem was very helpfull because many software-programs had to be checked and changed.

I don’t know what the current situation is but am convinced the quality of the IT-infrastructure has not improved but has gone down. The main reason is the Outsourcing and the Low Quality of the Current Generation of Programmers. I have written about this earlier.

My advice would be to abandon one of the IT-infrastructures and only convert the Data. This wan’t be easy.

My most important advice. Don’t touch the software! I feel this will open up a box of PANDORA. I have to tell you that this is not only a problem with ABN AMRO. Every company that has developed software from the Beginning of IT History or has Merged will encounter this problem.

LINKS

Part 2 Culture

Part 3 Cash Management