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 the Merger of ABN AMRO and Fortis will Fail (Part 2 Culture) if They Don’t Apply The Lessons Learned

In the first blog about the merger of ABN AMRO and Fortis I tried to show that the integration of the technical infrastructure of both banks will be very difficult. In this blog I want to talk about a much more important issue called Culture.

When the merger of ABN and AMRO was starting I was part of a management development course. The person behind the course was a very wise person. He told us what would happen the next years and he was right.

What he explained was that ABN was a very old bank that came out of a very long history. ABN was more or less the succeeder of the Dutch Trading Company VOC that was founded in 1602.

ABN was a deal-making bank. The culture of “deal-making” was very visible in everything we were doing. This was the reason why I could talk and “make a deal” with a senior manager at every level without any problem.

AMRO (Amsterdam Rotterdam Bank) has its history in the big harbors of Rotterdam and Amsterdam. It supported the people who were transporting cargo all over the world. The culture of AMRO was dominated by the Amsterdam culture. The culture of Amsterdam is one of the most difficult cultures to handle. People are always “playing games” and some of them are “dirty” or better “clever games” (practical jokes). Let’s call this culture “political” because politics is the game people of Amsterdam play the best. The political game is hidden behind the façade of the hierarchy.

The very wise person told us that the political game of the AMRO would finally kill the deal-making culture of ABN. This is what sadly enough really happened. It was the main reason why I left ABN AMRO. Many people were playing the finite game. They wanted to win and when you win there are always loosers and losses.

So to make it very clear what Fortis is buying is AMRO and not ABN. The ABN-part (deal making) was preserved in the International Network (bought by Santander) and Corporate Finance (bought by Royal Bank of Scotland). In my opinion Santander has  made the best deal!

The merger will only be a success when the Fortis-culture is able to cope with the “political (Amsterdam) culture” of ABN AMRO.

The Fortis culture is a combination of two Insurance Companies (Belgian and Dutch) and a bank VSB (Verenigde Spaarbanken) that originated out of a Cooperation (just like RABO). A insurance culture, a cooperative culture and a Belgian culture fit. At this moment Fortis can be best seen as a “Belgian Bank”.

Before the merger with ABN AMRO tried to merge with a big Belgian bank. This merger failed. The “Amsterdam culture” and the “Belgian” culture are completely opposite cultures. Belgians play the game of socializing. Everything happens behind closed doors and is arranged in restaurants. Belgian people enjoy food and wine. People in Amsterdam are also making fun but they make fun of each other.

Now let us have a look at what Fortis is really buying.

ABN and AMRO started to operate on the Retail market when the Dutch Companies around 1960 decided to pay the salary of their employees by a bank account. Before that time the employees were paid in cash. Both banks were more or less forced to move into the consumer market. Before that time both banks had really nothing to do with consumers. Consumers (Poor people) were served by the Postal Bank (now ING) and Cooperative banks like VSB.

Because “Consumer banking” was not part of the “essence” of ABN and AMRO were never (!) able to serve those customers. This is still the case. The Services of ABN AMRO are constantly valuated by their clients on the lowest level possible.

What Fortis buying is a part of ABN AMRO that is of a very different culture, operating with a very low service-level and supported by a very complicated technical infrastructure. Many customers of ABN AMRO are already very frustrated. They are not stupid and they know that the merger will not help to improve the service-level. The only thing that is stopping them is the burden of moving their accounts and the extreme low service-level of the competitors on the Dutch Market (ING is has moved to the first place in non-performing, ABN AMRO is now second).

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