The surprising thing from reading the news about the misbehaviour of RBS is that a structure where RBS have their own property business was not seen to be a recipe for trouble if not disaster.
If you have a business, or a department or a division, they need objectives and targets. You can guess that in this case the property business had a set of targets to maximise returns from the properties in their portfolio.
If that’s the case, you have the bank’s internal property company competing with the property companies who are borrowers from the same bank. It’s not that much of a stretch to see that the internal company, incentivised only to maximise returns, would influence the lending teams to turn over any business that even began to struggle. Someone undoubtedly misbehaved, but the system was setup to encourage that bad behaviour.
One of my clients had a problem with their collections; very long days outstanding, and it wasn’t getting any better. When we drilled into it, the credit control team were doing their best but sometimes had to go back to the customer service team.
The customer service team’s incentives were all around speed of customer response and satisfaction and had nothing to do with credit control, so of course the requests for help from the credit controllers were very low priority.
We made the credit control team a “customer” for the objectives of the customer service team; many of the problems were cleared up and the debtor days were greatly reduced.
When you set your departmental objectives, do you make sure they align with the overall business objectives?