Themes for today's Boards

Robin Fieth - CEO, BSA

In the Manchester sunshine at the 2018 BSA Annual Conference, I took the opportunity to set the theme by talking about seven topics for all our Board agendas. We continue a number of those themes here.

A structural shortage in housing

The Beatles played their final gig on the roof of Apple Records in Savile Row (later the BSA’s headquarters) in 1969, the year we last built 300,000 houses in England. Then, local authorities and housing associations contributed over 140,000 homes, compared with just 30,000 last year. The public sector house building record has been poor for decades, whichever party is in government.

We want to see a substantial public investment in housing: funded by central government or local authorities; creative use of public land and different property tenures to create truly affordable homes; wider use of modern construction methods, including modular and precision factory built homes.

We do not prefer one type of housing tenure over another. We’re talking about fulfilling our country’s obligation to provide decent homes for everyone; the economic benefits of people being able to move easily for work; and building societies lending on homes for sale or private rent, whether outright or on a shared- ownership basis.

Ring-fencing and competition

At the 2017 Conference I offered some thoughts about how building societies can sustain comparative advantage in a competitive ring-fenced retail banking world: by making the most of Building Society as a legally protected term; Boards using our ownership model consistently to take a long-term view on investment, product development and growth; and using our social purpose to stand out for how we contribute back into our communities as an integral part of how we do business.

The conventional assumption is that this slower growth model is less value added than the shareholder owned business model with its focus on profit maximisation. Not true. Comparative research into Europe’s shareholder and co-operative banks since 2002 found Co-operative Banking’s lower leverage, lower volatility model produced stronger long term performance and higher long term average profitability.

The future in funding

February saw the final drawdown on the Term Funding Scheme. Attention is now turning to repayment, re-financing and the likely impact on wholesale funding and retail deposit taking. No co-incidence, then, that last year we started exploring alternative funding strategies with members, focusing on resilience or rainy day savings.

Toynbee Hall’s 2017 report “Savings for the Future” said the UK has a severe savings problem. The issue for many people is not that they aren’t saving enough; rather they are not saving at all.

In 1775, Richard Ketley suggested to a bunch of drinkers in his Birmingham pub that they should start saving rather than buy another pint. Those small value savings started the great social movement that is today’s building society sector.

This should be responsible, profitable business – important for sustainability through the economic cycle. It is also the right thing to do in fulfilling our purpose as a force for good UK financial services.

Moore’s Law, AI and digital strategies

Moore’s Law, the observation that the number of transistors in a dense integrated circuit doubles every two years, dates from 1965. Exponential curves top out, don’t they? But where are we on the Moore’s Law curve? What new innovations will continue the exponential trend in processing power and capability? And, critically, what will society choose to do with this power?

There is growing consensus of the competitive challenges artificial intelligence will soon pose in some markets. You may have seen the KPMG EVA clip or have already invited Alexa (other brands available) into your home. These products already have the processing power constantly to seek out the best deal for you – whether managing household utility contracts or personal savings.

People: our most important asset – how do we show we really mean it?

Do we do enough to grow our future leaders? Are we developing properly diverse teams; that bring a wide range of experience, culture and backgrounds to our businesses; that provide us with the skills and perspectives needed for the future, rather than just meeting today’s needs?

If we are to seriously tackle diversity challenges, we must go beyond unconscious bias training and look at how we select, develop and retain a broader workforce than currently characterises our sector.

Our world class Masters in Strategic Leadership currently has 64 students enrolled, from 28 Societies and one credit union. 50% have no first degree. 42% are women. One of our students has already been promoted to chief executive. Are you making the most of the opportunity?

Resilience, security and operational efficiency

How the cybercrime debate has moved on! At our 2014 Manchester Conference, I was dissuaded from warning that the issue was “when” our defences are breached, not “if”.

In April the then-Home Secretary, Amber Rudd, stated 70% of large UK businesses have experienced cybercrime. The average cost of a cyber-incident was £20,000. Some breaches left companies on their knees. I can’t help thinking that both figures quoted by the Home Secretary were under-estimates.

The same month GCHQ Director, Jeremy Flemming, spoke of the wider societal promise in technology, and also of the threat. He referred to hostile states, terrorists and criminals as early adopters of new technology, products and services; of them investing heavily in strategies and tactics to further their causes; and of the attackers not caring about the size or sector of their victim.

Ownership really does matter: radical approaches to member engagement

In May, a group of us travelled to Massachusetts to meet with co-operative and community bankers, regulators and other key stakeholders. We shared experiences and ideas, comparing and contrasting our commercial and regulatory environments from the common viewpoint of customer ownership.

One thing that stood out for me from the trip was how we create a sense of membership and belonging among today’s customers. The challenge is what our common mutual heritage looks like in the 21st century. The question that especially struck me was, “as a customer, why is it in my interest to be part of this?”

How do we continue to convert customers into engaged members when increasingly they come to us through physical and virtual intermediaries? Is their relationship with us or with the broker or intermediary? Perhaps a price comparison website or with Alexa?

Seven themes for today’s Boards: Housing, funding, competition, technology, people, ownership and social purpose (and why it’s as vital to our future success as it was to our foundation and history).

It’s no coincidence all of these themes featured strongly at our Conference.

You can follow Robin on Twitter @bsaceo