The up-front message in HBOS‘ inaugural Corporate Responsibility (CR) report could not be clearer. CR – which HBOS defines in terms of marketplace activities, employment practices, environmental impact, and community involvement – will help the company get ahead in the already crowded financial services market. Arguably, at this early stage only a fortune-teller would be brash enough to predict whether HBOS‘ confident assertion will hold true. Instead of investing in crystal balls, however, the company – a result of the merger between Halifax and Bank of Scotland in 2001 – is getting on with the job of putting a “strong corporate responsibility” policy in place. It has the website (http://www.hboscr.com), the governance structure (based around the CR Forum, consisting of senior managers from across the group) and now the public CR report.
The business case for selling responsible products, for cutting down on environmental waste and for principled employment policies is self-explanatory. But how will the fourth pillar of HBOS‘ CR policy – community involvement – help provide a point of competitive difference?
Foundation model
The group’s structured community programme is channelled through the HBOS Foundation. This is an independent charitable trust set up in May 2002 with a £20 million endowment based on income from unclaimed shares in HBOS. Headed up by Joan Hemmery, the Foundation has a staff of five, including one full-time communications officer. Joan reports to Ray McFarlane, head of community relations and sponsorship, which falls within the group communications division of the business.
The Foundation is designed primarily as a grant making body, with a commitment to donating £4 million per year to charitable causes between 2002- 2007. Its approach to contributions is fourfold: sponsoring local initiatives, typically donations of a couple of hundred pounds; funding larger national projects; providing matched funding; and, supporting a Charity of the Year programme. Responsibility for co-ordinating volunteering across the group also falls to the Foundation team.
Strategic positioning
As a separate legal entity from HBOS, Joan points out correctly that the Foundation’s activities cannot be used to derive any direct business benefits for the group. This makes fitting community involvement in with HBOS‘ stated aim of “bringing CR to the heart of all [its] activities across the group” a difficult, but not impossible, challenge. Rising to that challenge will require HBOS to ensure that the Foundation’s objectives focus on social issues congruent with the group’s business activities, and where the skills of employees and other HBOS resources can be leveraged to maximum effect. With this in mind, the twin goals of the Foundation have a natural logic to them:
- (1) money advice and financial literacy
- (2) developing and improving local communities
It is still early days for the Foundation as far as developing a national element to the Foundation’s work goes, but it can already boast one or two impressive success stories.
Last year, HBOS donated £70,000 to Age Concern as part of a three-year scheme to train its advisers on government benefits, which is expected to result in about £1 million in hitherto unclaimed benefits being released. One way in which the Foundation can quickly build its national profile will be through its Charity of the Year scheme – which, for 2003, is Macmillan Cancer Relief. The Foundation has set itself the challenge of raising £1 million for Macmillan, pledging to match staff fund raising efforts up to £500,000.
Business overlap
Interestingly, HBOS‘ commercial services contain a varied range of community elements, many of which complement the twin themes of its community involvement (CCI) strategy.
The group’s community banking division, for example, focuses exclusively on delivering services to housing associations, micro-enterprises, credit unions and a myriad of other community-orientated organisations. As the biggest provider of finance for housing associations, for example, HBOS is well positioned to arrange for the transfer of home swaps to aid regeneration of run-down areas.
Another vital service for community development and economic growth where HBOS – through its business banking division – is actively engaged is the provision of access to credit for SMEs, particularly in low-income areas. The business divisions also recognize that the community agenda presents possible commercial opportunities. Take retail banking, for example, which accounted for over 45% of HBOS‘s profits before tax in 2002. The fact that an estimated eight million people in the UK remain unbanked, however, opens the door for the retail banking industry to devise products that will appeal to low-income individuals. Although the margins may not be significant at present, in a crowded and competitive marketplace HBOS‘ provision of basic bank accounts and other innovative services is already beginning to mark it apart.
The overlap between HBOS’ community priorities and its investment and treasury divisions is not so transparent, however, and it will be interesting to see if any connections can be made here in the future.
Making the link
Despite the parallel in how the Foundation and the business divisions are involved in community issues, joining up these two streams of activity remains a vital determinant in deciding how much CCI will contribute to the overall CR objective of generating competitive advantage. One of the main keys to drawing the Foundation closer to HBOS‘ marketplace performance will be its ability to harness the potential of its nascent volunteering programme. The reason is clear when one considers that some of the most innovative thinking around alternative financial service models – micro-credit facilities, employment bonds, community development finance and other preferential lending mechanisms – are being pioneered in the non-business sector. HBOS volunteers or secondees would be well placed to think how these fringe activities could be scaled up into viable commercial initiatives.
Responsibility for the volunteering programme, which started in January 2003, falls to one dedicated member of the Foundation team. Much of the burden of administering and communicating the programme, however, is filtered through a Cares website on the HBOS intranet. The site enables staff to search for team challenges or volunteering opportunities near to their place of work. Although employees can ask for volunteering opportunities to be pasted on to the site, the majority of openings are with charities that the Foundation already supports, and which consequently meet HBOS‘s priority focus areas. As well as the volunteering database, the site is used to provideupdates, case studies, additional information and a feedback facility.
Already HBOS has one of its senior managers seconded to the UK government to work on urban renewal programmes, and other staff members have been seconded to the Money Advice Trust. The more employees gaining this kind of first-hand exposure to community issues – whether it be an investment analyst helping a charity devise an ethical investment portfolio or a branch manager sitting on a local regeneration committee – the more creativity and innovation is likely to filter through to HBOS‘ core products and services.
The Foundation has a good grasp of what its staff can offer to community groups. The challenge for the future will be in harnessing the flip-side of this knowledge-flow interms of the lessons and ideas volunteers bring back to the business.
The employee piece
The second area where CCI could bring significant value to HBOS is the part it can play in maximising the company’s human capital. Improving employee morale, retention rates, graduate calibre, staff advocacy and overall employee performance all represent potential by-products of a well-managed CCI programme, which feed directly through to bottom-line performance.
The starting point is to engage its employees in the rudiments of CCI. From the outset, HBOS has implemented an impressive staff consultation process, with an initial survey of 4,000 employees concerning the group’s major CR impacts. In terms of CCI in particular, tapping into employees’ existing charitable support by offering £-for-£ matched funding up to £500, and matching any personal time given to a volunteering activity on an hourby- hour basis to a maximum of seven hours or one day, have provided, have proved two simple but effective ways of achieving employee ownership. Ensuring all employees are involved in the selection of the annual Charity of the Year represents another successful means of building staff buy-in. A payroll giving option would be a natural corollary to the Foundation’s present activities, and one that is currently in the process of being set up.
Another important element to HBOS‘ employee engagement strategy is its sustained approach to internal communications. Plans to develop content about CCI for HBOS‘ internal TV system, will complement the information currently being provided through a dedicated CCI intranet site, group-wide email alerts, staff presentations and internal newsletters. A designated volunteering month in October should also raise the profile of CCI internally. HBOS also designed its first group-wide CR report with its workforce primarily in mind. In addition to ongoing awareness raising, the challenge for the CCI team going forward will be to tease out a link between employees’ understanding of, and involvement in, CCI to the HR performance indicators outlined above. Has the opportunity to volunteer increased an employee’s perception of the company, or decreased their likelihood of leaving, for example? What skills have employees picked up through team building, and how does this equate with the costs of other existing training programmes? These, and questions like them, will deliver the kind of tangible evidence that the CCI team requires.
Conclusion
Much has been achieved in a short time at HBOS, but the company admits there is a long-way to go until CR becomes embedded within the business. Stronger performance data and targets remain a priority for all four aspects of the CR policy. As lead sponsor of the new CR Index and one of the leaders on the Corporate Impact Reporting initiative, one would expect HBOS to improve this aspect of its programme. It is particularly difficult to devise appropriate measures that draw out CCI’s link to the business. However, Briefing’s crystal ball suspects that if the CCI team continues to successfully engage HBOS‘ employees, then a clear picture of how its activities are delivering competitive advantage will emerge.
For more info, visit http://www.hboscr.com
HBOS Foundation ~ national programmes
Working to enhance debt counseling services within the community, for instance, or supporting voluntary groups in bringing excluded individuals back into the mainstream, provides manifest social benefits – a knock-on effect of which is to improve the general business environment for HBOS.