HAPPY CHRISTMAS

''So this is Christmas, and what have we done? "
Well at The Hanley we've completed another successful year as evidenced at our recent AGM and in our annual report & accounts, both in terms of financial performance and member endorsement. In a tough market we have continued to win business and to do so in a way which is in the long-term interests of our members .
Less parochially, and much as I prefer to look forward rather than glance back the way, 2010 has had some very pronounced peaks and troughs. The low points include;
... the dullest football World Cup in living memory, punctuated by the droning din of the vuvuzela and hectares of discounted merchandise after Englands puny elimination.
... a dreary General Election, followed by the musical chairs of the coalition formation.
....the inexplicable success of the "comedian" Frankie Boyle

High points must be;
...the rescue of the Chilean miners.
...the gold medal performance of Amy Williams at the winter Olympics
...the Swedish film version of The Girl with the Dragon Tattoo
...the Ryder Cup victory at Celtic Manor

No doubt 2011 will unpack it's share of surprises. Meantime may I wish you and yours a happy Christmas and a healthy and prosperous new year.

BIDDULPH WELCOME

The highlight of my week has been the opening of our new branch in Biddulph. The welcome we've received from the local people has been extraodinary and many have already become Hanley members having previously used the premises when occupied by Cheshire building society.Our aim is to be the "go to" place for mortgages , savings and investment advice for everyone in the local Biddulph area , and we've made a fantastic start. Our new branch team is a blend of Hanley experience and new faces, all very determined to shine and to deliver all that is great about a local mutual , with a focus on excellent customer service and tailor-made products.
I've had a fair bit of media reaction, querying why we have bucked a trend of bank branch closures, but reminded commentators that building societies unlike the big banks have sustained a commitment to branch networks, even during the turmoil in our core markets over the past 2 years and in fact several other societies have announced new branches in recent months (eg Newbury BS and Harpenden BS)
The local branch really is our finest demonstration of what we stand for, in terms of service, accessibility and brand values. Of course any branch is only as good as it's staff and on that score,I'd pitch my teams against any other, no matter how big the organisation is or how many TV adverts they use to proclaim their"customer charter".
We are thrilled to be in Biddulph and look forward to many years serving that local community and doing business in the town.

DIVERSITY IS A VIRTUE

The heads of several media groups,including ITV and BBC, have written to Business Secretary Vince Cable urging him to block any attempt by Rupert Murdoch's NewsCorp to take full control of BSkyB on the grounds that such a move "could reduce diversity" in the marketplace. Whatever the merits of their specific case (and I have to admit to being a reader of The Times and avid watcher of SkySports) the importance of a diverse market with genuine consumer choice is compelling.Diversity in business is a contemporary topic and I am struck by the potency of the argument for diversity in our own marketplace .A recent research report by the Oxford Centre for Mutual and Employee-Owned Business makes that case very powerfully, reminding us that a more diverse financial services sector promotes systemic stability and offers benefits to individual customers by increasing competition and choice. The report emphasises that mutuals bring a market dimension based on service and member-engagement with low risk-appetite and high customer endorsement.Such characteristics are worthy of support from decision makers and regulators if only to put competitive pressure on the banks where the current market share of the biggest 6 banks in gross residential lending is excessive . In a thought provoking report the author Jonathan Michie also finds time to advocate a Minister for Mutuals. Now that would go a long way to convince many that the coalition government's promise to " foster diversity in financial services" is a genuine one.

INSPIRATION & PERSPIRATION

Last night we held our annual staff meeting to platform our corporate plan, business targets and ambitions for the coming financial year (which begun on 1st Sept) . It gave me the chance to set out our expectations for the year ahead and to join my team in outlining how we intend to propel The Hanley forward so that we can continue to strive to be "Britains Best Local Building Society".
The theme of the evening was Exponential Change.
We spoke about the challenges in our core markets of savings and mortgages, and about the localised challenges of our city where regeneration progress is likely to be hampered by budget-cuts in the public sector.We also discussed our plans for the new branch in Biddulph and the importance of being distinctive in our distribution and our marketing. I found it really inspiring.....and thankfully I wasn't alone in feeling that way.....as it is so motivational to work alongside people who are sharply focused on being successful and determined to deliver the best we can for our members.
Alongside the inspiration there was perspiration too as I hosted our quiz night, which covered TV & movies (no surpise there) and a lengthy musical round where contestants had to identify the intros to well known pop and rock songs. Sadly for some of our directors and senior managers the tunes proved to be not that "well known" and the winning team was populated with 20 and 30 somethings .
A reminder also that the potent blend of competitive spirit and teamwork is a winning formula.

FORECASTING

Since returning from my family holiday I've been taking a fresh look at our business plans, goals and targets for the coming financial year, which for the Hanley starts on 1st September.( a bit quirky I know but the date is a legacy of our long history and we are wary of changing to a more conventional financial year)
At the core of our thinking on 2010/2011 are a series of assumptions on how markets will perform in the months ahead, what the interest rate and inflation numbers will look like and how we can carve our niche amidst the ever-changing trading conditions. In such circumstances it would be a delight to be able to rely on economic forecasts but my recent reviews of even the most eloquent of "experts" reminds me of the quote attributed to JK Galbraith that " the only function of economic forecasting is to make astrology look respectable".
Even the Monetary Policy Committee has taken some stick in the media for its failure to get much right when predicting the future , but most of us are not hoodwinked into thinking that anyone really knows with assured certainty what will really happen in the UK economy. Best-guessing is about as much as we can expect .That's why it is vital for a business like ours to evaluate, monitor and control risks and not indulge in new ventures which depend on a rose-tinted view of the future. It is also why it is essential for us to keep working on what we are already good at, refine what we do and stay flexible. At least I can forecast that we will enter our new financial year full of optimism in our ability to do precisely that.

SPANISH CAJAS

Normally when a member of staff at The Hanley stops me at the coffee machine to chat about Spain,the conversation focuses on their holidays to the Spanish coast or my annual golf trip to Marbella, but this morning I was quizzed about the plight of the Spanis Cajas. These small local banks are tipped by some market commentators to struggle to pass the current round of "stress-tests" being undertaken for banks across Europe and my colleague wanted to know whether there were any crossover similarities with small UK building societies. Of course some common ground does exist in that cajas and local building societies, like The Hanley, are locally based and are not quoted companies but that's really where the similarity ends.
Cajas are not mutual, customers are not members,and do not own the business. Cajas are heavily influenced by local political control and their lending is heavily influenced by that control.
Cajas are also exposed to the new-build development market in Spain where planning rules and the funding crisis left many sites empty and worth far less than was lent on them at the market peak.
It will be interesting to see the results of the stress-tests on the banks across Europe and indeed to look at the perceived strengths and vulnerabilities of all banks not just the cajas in Spain. But mutuality and resilience remain distinctive features of the UK building society model and if the past 2 years have taught us anything at all it must surely be that large organisational scale is no guarantee of success.

CHAIRMANS LUNCH

Yesterday I had the pleasure of hosting a lunch for the Chairmen of 10 different societies. One of the benefits of being Chairman of the BSA this year is that I get to meet the leadership of other building societies and hear about the successes and challenges that are occupying boardroom time.I am always struck by the energy and insight that exists across the sector and by the optimism that is expressed about the relevance and importance of mutuality in a diversified marketplace. The chairmen are always keen to know more about what the BSA is doing and how we can demonstrate resilience across the sector, despite the clear fractures in our core markets of savings and mortgages. Yesterday I was particularly struck by the appetite for change amongst the group of chairmen;there was no sense of yearning for a "golden era" of the past but rather a desire to get on and thrive in a new world, whatever that world may look like. I don't know if my words to them were at all motivational, but as a group they certainly motivated me!

THE SOFTER STUFF

This week I spent 2 days in Bournemouth with the Chief Execs of 5 other building societies and 14 of our staff on the final session of our Achievers Academy, which was set up to help develop our own business leaders of the future. Over the past 12 months this group has undertaken a range of tasks and heard from various guest speakers on topics which can be broadly grouped under a leadership-development heading. It's been hugely enjoyable spending time with ambitious and dedicated people, so keen to learn more about how our mutual businesses can continue to thrive .The logic behind the Achievers Academy is that small, local building societies are distinguished by the quality of our people and the service they deliver.
Tomorrow I have the privilege of presenting the prizes to the winning runners in the Potters Arf Marathon which the Hanley is sponsoring this year, for the 3rd consecutive year. Some of our staff will be amongst the 1500 runners and several more will be around the course encouraging all the participants. The logic behind this sponsorship is that we want to demonstrate our commitment to our local community and be associated with such a successful, local event.
I guess, at a time when liquidity, capital , regulation, funding and low mortgage demand are the dominant features of everyday business life, these 2 events could be viewed as softer priorities . But they're really important to the Hanley and to our determination to carve a distinctive niche in an overcrowded financial services marketplace. They're also great fun.

INTEREST RATES ON SAVINGS ACCOUNTS

Following my last blog a member reminded me that " a smiling face still needs to be backed up by competitive rates" and pointed to our ISA rates as being currently adrift of the keenest on the market. I'm always grateful for feedback, even when its not entirely complimentary, and of course this topic is invariably a hot one whenever I speak to members at our Forums or in our branches. The truth is that we are in uncharted waters with a bank base rate of 0.5% and a lending market which is at best lukewarm. This means savings rates are under pressure across all banks and building societies. Of course at any given time a firm can offer a market-leading deal as a hook to attract new savers, sometimes with gimmicky "bonuses" or simply because they need to bring in funds virtually at any cost to remodel their balance sheet. But the Hanley in common with many other building societies chooses to strive for competitive interest rates over the longer term and to retain a true balance in our business so that the society is not jeopardised by paying interest rates that are unsustainable. We keep our savings rates under constant review and we will always strive to deliver the very best we can for our members. We aim to be around for many years to come, unlike some banks which offered eye-catching rates in the recent past and who have since folded.

THE MAGIC KINGDOM

I've just returned from a family holiday in Florida and our first exposure to the whole "Disney experience". We stayed at one of the Disney hotels and spent most of our days at one of the theme parks , and although my personal favourite was a park that Disney doesn't own ( Universal Studios) I was really blown away by the customer service excellence that prevails right across this amazing business. The courtesy, humour, and pride in their business shown by every Disney employee we met really added extra zest to our holiday. Critics may question the sincerity of the service - offering, but I never found it fake at all. On the contrary it made me reflect on how crucial it is for our customers to believe WE trust and believe in our building society, before we ask them to do likewise. A culture of service excellence is still elusive in many UK businesses and thats one reason why building societies have a fantastic opportunity to outshine competitor banks. I wont be asking my branch teams to wear Goofy hats but they'll get plenty encouragement to give every customer a warm welcome, a smiling face and a genuine interest in how we can help them.

THE ART OF ENGAGEMENT

Earlier this week it was my privilege to collect The Hanleys award from Britains Best Companies , an accreditation for our overall comitment to staff engagement in our business. This is our 2nd consecutive year of being given a First Class rating and we are very proud to be amongst this elite.
However the customary photo-opportunity was not set up in the usual venue of a London hotel but was instead held at a special day of experiencing The Art of Engagement at a purpose-built centre in Milton Keynes where myself and 3 colleagues were able to participate in a series of development exercises on the 8 factors of workplace engagement; Leadership, Fair Deal, My Manager, My Company, My Team, Wellbeing, Persoanl Growth, and Giving Something Back. The huge warehouse space was split into zones and each had a focus on the very best practices associated with these key topics.
It was a refreshing start to the working week, and a slightly surreal experience. More crucially for me , the chance to be around other business people from different sectors of the economy is always an opportunity to re-establish my perspective on how The Hanley is doing.Too often we get a bit insular and compare ourselves to other building societies or other financial services firms. We should work hard to bear comparison with great customer-service providers in other markets, as that is how we really want to be judged.
The Art of Engagement declares that " Success is determined by the strength of relationships within your organisation. Quality conversations create quality relationships,and great relationships drive effective organisations that deliver results". Sounds very compelling to me.

FUNDING CHALLENGE

I was stunned to read in the weekend press that the BBC is taking 125 staff to cover the World Cup in South Africa in June. This is 5 times the number in Fabio Capello's squad and they're actually trying to win the tournament not just film it! Now I realise the BBC is not reknowned for being frugal but surely even by it's own standards of ostentation this is over the top. The BBC has a source of funding (the licence fee) which is a throwback to the early days of TV where a distinctive public-service channel was pioneering , but in a 21st century media where customer choice prevails it is bizarre that a tax (the licence fee) is paid automatically to the BBC while other channels must seek competitive sources of funding.(eg. subscriptions or advertising revenue).
Having read the article I started to think about sources of funding in our business and our reliance on savers.We see this as a real strength because it means that we fund our mortgages solely from money we attract from savers rather than money we borrow on the wholesale market.This enables us to plan better and to minimise our exposure to external risks. However the way that savers do business with us as a building society hasn't changed in decades. Passbook accounts and fixed term bonds remain very popular because they are simple and tangible, but I can't help but admit that some aspects of our savings offering merit updating. I am not contemplating current accounts or ATM- based banking as that's not where we choose to do business but I do believe that a 21st century mutual has to be alert to the needs and behaviours of emerging markets in our core areas of savings and mortgages. It seems to me that for instance a first time buyer loan linked to a web-based savings plan is a progressive way to attract retail funding in an era of customer choice,but we would want to retain the beneficial characteristics of our passbook acounts,namely simplicity and transparency. Watch this space!

BANKING BANANA SKINS

I was intrigued to read a recent survey by the Centre for the Study of Financial Innovation that "political interference" is regarded by bankers as the No 1 risk facing banking worldwide.The report describes the risk outlook for the banking industry in 2010, and samples the opinions of 400 bankers and regulators across 49 countries. The prevailing view is that whilst government efforts to rescue banks from the financial crisis may have staved off systemic collapse, the industry is now deeply politicised and this "banana skin" is seen as more risky than others such as credit risk, liquidity, and capital strength. As a risk "political interference" has several angles, including the distortion of commercial judgement,the creation of moral hazard, and uncertainty about how financial support will be removed.
Clearly the key factor shaping perceptions is the state of the global economy and most macro-economic trends were viewed pessimistically, with recent signs of recovery regarded as fragile and vulnerable to after-shocks. But implicit within the surveys No 1 banana skin is a fear of regulatory over-reaction ,which could impede an already tentative recovery.However to be fair to the regulatory authorities only 9% of respondents felt that the industry was "well prepared" to handle the risks identified and 11% thought the finance sector was "poorly" prepared to do so. My own No1 banana skin would be the pace of recovery and the absence of any momentum toward a post-recession strategy.In short, a governmental reality-check would be welcome. All businesses, not just in the financial sector, are wrestling with the new recipes for success in an emerging, post-credit crunch environment. What is clear to me is that reinvigourating the financial services sector needs to start with rebuilding the trust of customers and I take great heart from the fact that building societies have retained some powerful credentials to excel in doing just that.

MIDLANDS EXCELLENCE AWARD WINNERS

For the last 4 years our teams at The Hanley have strived to adhere to an "Excellence" model as defined by EFQM, which is a European benchmark for outstanding business performance. This means that in all we do our aim is to achieve standards of "Excellence" through best-practice and continually sharpening how we develop our people, processes and service to customers. We think that Excellence should be in the DNA of The Hanley, because that's what will differentiate us from competitors and help us carve a niche in the over-crowded financial services marketplace.
Some weeks ago we learnt that we were nominated for an award at the prestigious Midlands Excellence annual awards ceremony held at the ICC in Birmingham and attended by over 1200 people from businesses across East and West Midlands, from both private and public sector. Firms such as Carillion, Semens and ESOS were also amongst the nominees and The Hanley was the only building society in the running for an award.
I'm absolutely delighted to say that we attended the event last night and WE WON !!
Our "Excellence" credentials were deemed to have out-shone the others and we are now the proud holders of the Midlands Excellence Award for 2009/10. I am thrilled for all the staff at The Hanley.Their commitment to the society is unrelenting .For all of us it is a privilege to receive such recognition , particularly given the calibre of the other businesses nominated for the award.