Nationwide Building Society: 150 years as a mutual

At the end of last year, the Nationwide Building Society celebrated its 150th anniversary. In December 1848, the Northampton Town & County Freehold Society first opened its doors. Growing through mergers and amalgamations, today Nationwide is the largest building society in the world, achieving the top slot after the Halifax’s conversion in 1997.

The rush to demutualise has transformed the sector, raising fears about the very survival of mutuality in financial service provision, and Nationwide has been under concerted pressure. Conversion to a public limited company was originally presented as conferring greater freedom to trade, as the high street banks had traditionally enjoyed. Latterly it has been overshadowed by ‘carpetbagging’, with hundreds of thousands opening accounts simply to grab a share in the wealth accumulated by society members over many years. Some building societies eagerly embraced demutualisation, while others, at least arguably, bowed to the inevitable pressure. Not Nationwide, which has vigorously defended its status.

Conversion campaign

In a set piece battle at the 1997 AGM, 1.35 million members voted three to one in favour of directors committed to remaining a building society. In the months preceding, the fight was fought initially by stopping all new account openings and then by changing Society rules for new members opening accounts so that any conversion windfall is automatically assigned to charity, through a new Nationwide Foundation. Holders of these new accounts have equally status with long standing members except in the eligibility for a windfall. However the threat is not over: in the 1998 AGM directors campaigning for conversion achieved 40% of the two million votes cast, and wait in the wings should majority sentiment change.

Nationwide refutes that operating as a bank would allow a better product offering to customers. On the contrary, by operating on narrower margins than quoted competitors who must earn profits to pay a dividend, mortgages are cheaper and rates higher for savers. Indeed, this has proved attractive in the market place; net assets rose by nearly a sixth in the last financial year and operating profits by a third.

Community contribution

So putting customers first is central to Nationwide’s mission, but corporate responsibility is one of the underlying policies which sustain this – and a highly visible part of that is the community programme. As the benchmark table shows, its contribution is noticeably bigger related to size than other building societies and incorporated competitors. Indeed the ?3.4 million contributed in the year to April 1998 is probably an underestimate, not yet including staff time and in-kind contributions. (Nationwide is part of the London Benchmarking Group follow-up project and will soon be applying the methodology to value fully its contribution.)

The community programme is focused on four main policy priority headings:

– housing projects;

– initiative-taking, in training, youth projects and education;

– caring, such as counselling, advice, combating discrimination and support for disabled people;

– heritage and environment.

One flagship project is the Nationwide Awards for Voluntary Endeavour, run in association with the Newspaper Society (the publishers’ association for local and regional papers) and NCVO and its sister councils in Scotland, Wales and Northern Ireland. These awards recognise individuals who give up time to help their local communities. With separate awards for young people and adults, working as individuals and in groups, 40 finalists from ten regions go forward to national finals, each wining prizes of £250 for themselves and £500 for a chosen charity or cause. Four national winners gain £500 each plus £2,500 for their charity. Over 1,000 people applied last year, the first year of the scheme.

Nationwide Foundation

The creation of the Nationwide Foundation in October 1997 during the carpetbagging campaign gave the opportunity to review how the Society handles charitable giving and now almost all is channelled through it. Although dependent on the Society for continued funding, a majority of the eight trustees are independent, including up to three elected from the Foundation’s members, being those joining the Society after the rules were changed. In the 1998 financial year, £2.5 million was paid to the Foundation, with smaller donations from staff, members and customers adding to this.

The Foundation’s policy (“to facilitate and enable communities and people to achieve goals and improve the quality of life”) has two themes for donations under the general approach of helping people to help themselves:

– community support, including education, community services, anti-crime initiatives, culture, advice and care;

– realising potential, for example overcoming disadvantage, equal opportunities and life skills.

Donations are usually one-off, between £500 and £10,000. The existence and role of the Foundation will be frequently publicised, for example through mailings and in branches.

Employees

Of Nationwide’s 12,000 staff, more than 6,000 work in branches, with most of the rest concentrated in operational centres at Swindon and Northampton. The big commitment by staff is to fundraising for Macmillan Cancer Relief, the Society’s chosen charity in a three year arrangement after staff were consulted. Since 1991, £1.5 million has been raised in total, including matching, and this year’s target is £150,000, again to be matched. Although a national charity, Macmillan is a popular choice as it is active locally in many communities where there are branches.

However Nationwide has chosen not to promote formal employee involvement as a big feature of the community programme at present. Other than the Macmillan campaign, matching of individual fundraising is ad hoc rather than automatically pound-for-pound, with a small budget. An Employee Community Award does provide recognition to individuals, who show particular commitment to their local community. For example, teams of staff have helped run telephone switchboards for BBC Children in Need and the GMTV Get Up and Give appeal.

Management

The community relations programme is headed by Sally Wrigglesworth, who reports to the communications director. The central team is nine strong, five organising flagship projects and community sponsorships, with four managing the Foundation and processing the many applications which are increasing as it becomes better known.

In addition to central funds, budgets are allocated to Swindon and Northampton and each of the 34 retail area groups have a small automatic allocation. Each has a designated community representative who recommends where the funds should go. They are offered training, a detailed handbook, an intranet site and practical advice from the centre, to act as an effective outreach team.

Future trends

Looking back to earlier years, for mutuals like Nationwide with wide memberships, community commitment was implicit, as the owners’ were the local community. Wider changes in society and defuse membership has required a shift to the actively managed and promoted programme profiled here. Indeed a spin-off from the carpetbagger attack has been to galvanise this more explicit approach. For Nationwide, the process is continuing, for example with improved data collection and more internal communication to staff.

After this, the Society will need to consider how community commitment can be further strengthened to reinforce and demonstrate the benefits of staying mutual. A more overt link with the products offered is one way and indeed the potential of cause-related marketing is already being reviewed.

But arguably the potential is greater still: changes to the welfare state are forcing more personal reliance for retirement and periods of sickness and unemployment; meanwhile the reputation of the financial services industry is suffering, with the pensions mis-selling scandal and, affecting the banks, the OFT investigation and the government’s Cruickshank review. Mutuals have the right sort of brand values to offer trusted products, especially to more disadvantaged sections of the community?

The community programme has a potential role to play in opening up these new markets, by investing in financial literacy, debt counselling and general reputation building. The future of mutuals like Nationwide, carrying on their 150 year tradition of helping ordinary people make prudent provision for financial security, can surely remain bright.

Corporate Citizenship Briefing, issue no: 44 – February, 1999