The HR director of RBS has denied that the bank’s HR strategy contributed to its collapse. Neil Roden, in an interview with HR Magazine, said that the financial crisis was “not all the fault of bankers’ bonuses or the fault of Fred Goodwin either”.
There is a danger of simplifying the analysis. That is not to say bonuses or Fred were not a problem, but banks not lending and liquidity drying up are not HR issues.
He went on to list lack of capital in the business, a ballooning balance sheet, too much exposure in sectors such as property and the acquisition of ABN Amro as major factors which led to the bank’s collapse.
Which is fair enough. Sort of.
But you can’t help feeling that all these problems were caused by the culture of RBS; the attitudes and behaviours that prevailed at the time. Behaviours are, supposedly, influenced by the HR policies and practices in an organisation. That’s why we have them, isn’t it?
People do what they do in organisations because of the way they are led, managed and rewarded. If people play the money markets, invest in dodgy assets and make unwise acquisitions it is because the corporate culture actively encourages them to do so. At the very least RBS’s HR strategy could not have discouraged people from doing such things. In all probability, it reinforced and rewarded these behaviours.
This does not, of course, mean that RBS’s HR department is to blame for the bank’s collapse. It simply says that, like most people in the City who might have had reservations about casino banking, they were powerless to do anything about it. As I have said before, the vast amounts of money being made in banking over the last few years silenced any criticism. An HR director who did not want to implement an HR strategy that facilitated this money-making would have been out of a job.
As Sir George Quigley, former chairman of RBS subsidiary Ulster Bank, told the Irish Times last year, no financial institution could have “remained a wallflower” watching rival lenders “pirouetting around the dancefloor”. Executives who wanted to be more prudent would simply have been swept aside by shareholders eager for greater profits. The few who expressed doubts were silenced or sent packing.
I had a row with Jon Ingham earlier this year about the extent to which City HR directors could have done anything to prevent the financial crisis. Unlike Jon, I still think that there was very little Neil Roden or any other HR professionals in banking could have done to stop the gambling merry-go-round that resulted in global economic collapse.
Having said all that, it still feels a bit rich for Mr Roden to say that HR was not in any way to blame for the collapse of RBS. OK, HR might not have been able to prevent any of the bank’s catastrophic decisions but they put in place the policies and systems that reinforced and rewarded the behaviours that led to these decisions. That makes HR, at the very least, an accessory after the fact.