Talking Internal Communication...

Kicking them while they're down - Northern Rock's crazy bonus decision

I've resisted commenting on the Northern Rock saga since my early posts on the subject, but one recent development has sent such a negative message to staff that I feel compelled to join the chorus of disapproval...

I'm talking about the board's decision to pay fat bonuses to around 80 'key players' - top executives in the troubled business who they want to keep hold of. The story which was scooped by the Mail on Sunday at the weekend and has been covered heavily since. 

Now I can understand them wanting to retain key people during this period of great instability, but surely there was a better way to do it than this?

Paying a fairly large but minority group of managers a quarterly cash bonus equivalent to 25% of their gross annual salary was always going to be a sure-fire way to alienate the rest of Northern Rock's beleaguered staff. Talk about kicking people when they're down.

What makes the move even worse is that it was done in such a cloak and dagger way. In his letter to the lucky bonus recipients, CEO Andy Kuipers said the scheme "must remain absolutely confidential and not be discussed with others", otherwise the recipient would forfeit the entitlement. So much for transparency.

The board obviously recognised what a monster it had created and wanted to keep it under wraps. This nervousness is not surprising when you consider that many middle managers and sales staff - the very people who the bank will rely on if it is to stand any chance of bouncing back - had their bonuses cut just before Christmas (nice timing too).

Of course this latest move has gone down like a lead balloon with front line staff, who have already seen their shareholdings evaporate and had to come to terms with the constant threat of redundancy. 

Many of them feel that the bosses are simply lining their pockets with silver before the ship sinks. Trust in leadership has nose-dived and, quite rightly, some once loyal staff (or rather those who have other options) are now rethinking their careers.

From my perspective this was quite simply a bad business decision. As a piece of employee relations it sucks. It has signalled to the majority of employees that they are little more than expendable resource and that their immense loyalty and support while the bank has been under siege has counted for absolutely nothing. It also means that, in the future, any communication that emanates from the top will be treated with the scepticism it deserves.

That's no way to secure the future of a once thriving business.

Between a rock and a hard place – bank employees under siege

I feel for my brother, I really do. An employee at Northern Rock, the UK bank, he’s now at the centre of a major corporate crisis. Worst still, he’s facing real uncertainty about his future.

Like many of the bank’s 6,500 employees, he woke up on Friday morning to the headline news that his employer had sought emergency funding from the Bank of England. The first obvious UK victim of the global credit squeeze, Northern Rock has been under siege  - by the media and long queues of panicking savers - ever since.

A reassuring email from the bank’s CEO awaited him as he arrived at his desk (he’s the consummate professional so I haven’t seen it) – as did a handful of calls from concerned customers, many of whom had heard the news on News at Ten the previous evening.

Every bit the engaged, committed and loyal employee, he moved quickly to defend the bank and attempt to allay concerns amongst his network of contacts. Unlike some branch staff – who were literally being mobbed by angry savers demanding their cash – his professional contacts were a little more balanced in their response. Despite this, a number of them accused him of a white wash – claiming that he knew more than he claimed to.

Like many frontline employees, he is doing his bit to reinforce the messages being relayed from on high and, just like Northern Rock CEO Adam Applegarth and Chancellor of the Exchequer Alistair Darling, trying hard to explain that the bank remains solvent and that customer’s funds are safe. Unfortunately human nature is such that pleas not to panic often have precisely the opposite effect – and TV images of long queues reinforce this hysteria.

Crises like this provide a stark warning to those of us in the internal communication profession. The PR battle may be more immediately visible, but it is in the thousands of conversations employees are having – with customers, family and friends – that reputations are made and destroyed. It is during times like this that you realise the enormous impact committed, well informed employees can have (and, likewise, how uninformed employees can make a situation worse). During times of crisis, employees are at least as important a stakeholder as the media, yet internal communication is often an afterthought.

I don’t want to cast judgement on Northern Rock, but I do hope that as much effort is going in to communicating internally as it is externally. Frontline staff need to be equipped to answer customer questions; they need to understand the issues and be able to clearly articulate what the bank is doing and why; they need to have confidence that everything that can be done is being done.

My old friend and mentor, Stephen Windsor-Lewis once suggested communicators do seven things during times of crisis (I've paraphrased). It remains sage advice.

1. Find out what employees are really thinking and feeling – listen, listen, listen
2. Establish internal comms credibility – align internal and external timings and, wherever possible, don’t let employees find information out from the external news reports.
3. Put the right channels in place – drive consistency and make use of all available channels
4. Be honest – tell the truth as far as you can and if you can’t say anything, say so. Avoid sugar-coating negative messages.
5. Involve your leadership – the role of the CEO is key, so get him/her out there.
6. Involve your comms team – internal comms should be part of the crisis team and the team should talk regularly.
7. Find something genuinely good for employees to talk about – move things on when the time is right by focusing attention on positive developments and celebrating successes.

Northern Rock’s share price has collapsed (below £3 at the time of writing, down over 40% in a few days) leaving it sitting duck for a takeover. The run on funds shows no signs of slowing - savers have withdrawn over £2bn already and the queues in some branches are no shorter than they were on Saturday. Media coverage continues.

It’s looking pretty grim up north, but for the sake of my brother and his colleagues I really hope Northern Rock finds its way out of this crisis. One of the stars of the UK mortgage lending sector in recent years, it really deserves to continue. Effective internal communication might just help.