National Westminster Bank: From philanthropy to strategic donations

October 01, 1994

Despite the upheavals in banking over recent years, NatWest’s £11.6 million programme is still second or third largest in the UK. That constancy hides fundamental shifts internally, changes both in the way the Group is run and in the objectives of the programme itself.

That the programme has survived in cost terms is a tribute to the commitment of senior management to community involvement. They might have been forgiven – along with their counterparts in the other banks – for reflecting that the millions spent in the 1980s on charitable causes had done little to insulate them from the waves of criticism from personal and small business customers alike. Of course CCI professionals will know that improved corporate reputation comes not by accident but from well-managed and directed programmes – and even then only if the business fundamentals are sound.

Focus

NatWest appears to have taken these lessons to heart and restructured accordingly. In the UK, the programme is focused increasingly on the specific themes of promoting financial literacy and enterprise skills and is divided between:

UK sponsorship £4.1 million;

UK donations £1.6 million;

staff involvement £2.9 million;

in-kind donations £200,000.

The overseas costs of £2.8 million, mainly in the US, bring the total community contribution to nearly £12 million.

The distinction between sponsorships and donations is less strong than might appear. Historically, sponsorships had a specific objective while donations were to general charitable causes, but, as discussed below, even the donations are becoming more focused.

Examples of activities supported through sponsorship are:

Face 2 Face with Finance – an education programme in schools for 11 to 18 year olds comprising in-class simulations, enterprise exercises, work experience and teacher placements (see News on page xx above);

money management – a Business Debtline offering advice on the telephone to small businesses and a training module for staff of Citizens Advice Bureaux through the NACB;

sports sponsorship to promote cricket among young people (commercial sponsorship of the NatWest Trophy is not included in the community programme);

measures to strengthen financial and general management in the voluntary sector – for example support to the NCVO for a financial advice service and for a publication on business planning.

Charitable Trust

Donations have historically gone to a wide range of national and local charities; now a NatWest Bank Charitable Trust has just been established and the criteria will be more focused. The number of donations will fall, but larger grants will be made, particular to a short-list of key partners. Full details have yet to be announced, but young people is likely to be a main theme. The trustees are the main board Deputy Chairman, a senior executive from each of the business units, the head of community relations and an external trustee, Julia Cleverdon, Chief Executive of Business in the Community.

Staff involvement

In common with many companies, staff involvement is increasingly an objective. Currently this includes:

25+ mid-term secondees working with enterprise agencies and other small business support organisations;

a further 30+ secondees in a range of voluntary sector organisations;

a staff matched giving scheme;

a new community volunteering award to give credit to staff members who are involved personally, offering £200 directly to their nominated school or voluntary group.

As a result of the first year’s awards, more than 1,000 staff were identified as treasurers and trustees of charities and a further 900 as school governors – roughly one in 35 of UK staff. However a small central community relations unit in a decentralised structure can only offer advice and encouragement – the business units need to make staff involvement happen – so ambitious central targets have not been set.

Organisation

The internal reorganisation has been not unlike other leading companies:

a strong focus on business objectives;

decentralise responsibility into business units;

a central community relations unit, with a role partly as an internal consultancy and partly as a setter of standards.

Community Relations has 14 staff, plus a network of contacts throughout the business, and is headed by Amanda Jordan, who joined NatWest in 1992. Her background was not banking but the voluntary sector, with a strong track record at Age Concern and The Spastics Society, ending at NCVO as head of policy. That appointment might, in the closed world of banking, be viewed as daring, but it has brought a confidence to the reorganisation and to the consequent new relationship with the voluntary sector. In partnerships, the parties want to be treated as equals, not with kid gloves. That means saying No with a clear conscience when policy criteria change, perhaps easier to do if you understand the funding uncertainty that is inherent in the voluntary sector world.

These changes to the community relations programme happened in parallel to a whole culture change in NatWest and indeed in banking as a whole. In the short-term, the uncertainty, as units are restructured and staff numbers reduced, makes it harder to get attention down the line for community issues; but in the longer term, a focus on customers and their needs, and a determination to break down the walls of the banking world, open the way for a growing CCI programme driven by business needs.

Finance

At 1.2% of pre-tax profit (1993 figures), NatWest comfortably exceeds Per Cent Club guidelines. However as discretion is increasingly shifted to line managers, achieving a pre-set spending level becomes harder. So now the level of 0.5% of pre-tax profits is viewed as a minimum or safety net.

Marketing

Cause-related marketing is not an issue in which community relations have got involved to date. Driven by the businesses, it is a matter for marketing departments directly: a major £3 million link-up with WWF was run in 1989, with an affinity card and a young people’s bank account. More recently, the Co-operative Bank’s ‘ethical lending’ stance has not caused NatWest to rethink its positioning in the marketplace. However lending criteria have been reviewed and environmental considerations are now firmly built in to project appraisals.

Challenges

The immediate challenges for the future are largely managerial: the focus needs to be further refined, particularly on charitable donations; it will take time to ensure the quality of major new projects, with careful pilot testing; more critically, the businesses will need to get more firmly in the driving seat, if the business case rationale is to become a reality.

The Group is now expanding again in America, with a recent acquisition by NatWest Bancorp in New Jersey, and this will raise the question of how tight international policy guidelines need to be. It may also lead to cross-fertilisation of ideas. For example, in the US, the Community Re-investment Act makes community programmes mandatory and has encouraged creative thinking about new forms of investment in non-profits in addition to corporate donations. Indeed some banks have made community regeneration the core of their business strategy, the best known being the South Shore Bank in Chicago.

Financial services

While such a radical option is not available to high-street banks like NatWest, several financial institutions are actively looking at other options, in conjunction with organisations like Business in the Community and the Directory of Social Change. Making loans and not just donations to voluntary organisations could become feasible, given low rates of interest, long repayment periods and flexible security terms. Most banks give branch managers direct responsibility for getting involved in the local community. Is the time right to mirror the process and give community relations directors lending powers?

FactFile

National Westminster Bank plc

Year ended 31 December 1993

Chairman: Lord Alexander of Weedon

Main business: financial services, predominantly in the UK but expanding in the US

Operating income: £3.7 billion

Profit before tax: £989 million

Employees: 91,400 world-wide; 69,568 in UK

FT UK Top 500 ranking: 17 (1/1/94)

Charitable donations: £1.6 million (UK only)

Total community contribution: £11.6 million (world-wide); £8.8 million in UK

Total contribution as % of pre tax profits: 1.2%