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ABSTRACT This assignment is the analysis of change

management at the Royal Bank of Scotland and includes the change initiative of previous acquisition of Natwest in the first section. The second section is in relation to the emergent approach taken after the crisis of 2008 and

current strategies on change management at the Royal Bank of Scotland.

Analysis of RBS Change Strategies

Acquisition of Natwest & Customer and Stakeholder Engagement Focus after 2008 Crisis at RBS

Tulin Dzhengiz|Francesca Clotilde Scialdone|Diana Zharovskikh|Yuan Zonjian

Strategic ChangeC11SH_2015-2016

Table of Contents

A. RBS with the success of Natwest acquisition and integration.....................................................3

1. Summary of the changes that RBS dealt with after the acquisition of Natwest........................3

2. Critical Evaluation of RBS-Natwest Integration.......................................................................5

2.1. Analysis of Different Frameworks & Concepts.................................................................5

2.2. 7 S Model...........................................................................................................................6

Conclusion...................................................................................................................................12

B. RBS’s current strategic focus and future outlook......................................................................13

1. Reasons for change.................................................................................................................13

2. Stakeholder Analysis & Customers as Stakeholder.............................................................14

2.1. Defining the Change and Environment............................................................................14

2.2. Identifying the Stakeholders & Mapping.........................................................................15

2.3. Changes of Stakeholder Relationships with Customers...................................................16

2.4. Engagement with Customers & Overcoming Resistance.................................................16

3. Managing the Cultural Change & Creation of Shared Values................................................16

4. HR Strategies: Employee Relationship...................................................................................18

5. Communication of Change & Leadership...............................................................................18

6. Changing Structure..................................................................................................................19

Conclusions.................................................................................................................................19

References.......................................................................................................................................20

1

Table of Figures

Figure 1: Enquiry Action Framework for RBS & Natwest Integration (Beech and MacIntosh, 2012).........4

Figure 2: Position of Natwest & RBS on Van de Vena and Poole’s Framework of Change.........................5

Figure 3: WXYZ Framework in the RBS & Natwest Integration Case.........................................................6

Figure 4: The relationship of HR policies and success of integration..........................................................11

Figure 5: Reasons for RBS failure................................................................................................................13

Figure 6: Stakeholder Mapping with Descriptive Techniques implemented to RBS Case..........................15

Figure 7: Shared Corporate Values at RBS..................................................................................................17

Figure 8: Summary of Managing Culture using Johnson’s Culture Web....................................................17

Table of Tables

Table 1: Core Competencies& Distinctive Capabilities of RBS & Natwest..................................................9

Table 2: PEST Analysis for RBS after 2008................................................................................................14

Table 3: Stakeholder Scores Before & After the Change.............................................................................15

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A. RBS with the success of Natwest acquisition and integration  

1. Summary of the changes that RBS dealt with after the acquisition of Natwest Enquiry Action Framework can be used to summarise the changes with the acquisition of RBS

with Natwest, Figure 1 presents major steps, taken into account during the integration(Beech &

MacIntosh 2012).

First, RBS planned these changes in advance, however kept the plan flexible at the same time.

Setting clear change targets and preparing a detailed initial plan to have a closed problem framing

were how they started. RBS needed to engage all stakeholders and create mutual benefits and

communicate effectively. The integration needed an unlearning process for Natwest, and double

loop learning was required.

Second, RBS made a careful structural choice of “Manufacturing”. They created a divisionalised

hierarchical structure of network which was introduced radically and top down. The executives

were motivated in the change initiative and internalized it with their personal credibility, which

eased the implementation. Leadership was crucial and they used the power of narratives in

communicating the importance of integration as well as creating a reward system of incentives.

Third, continuously the key performance indicators (KPIs) were measured and communicated,

the targets were clearly defined allowing flexibility in “how to do it to” encourage creativity.

They also used interviews to develop evidence regarding the integration.

3

Figure 1: Enquiry Action Framework for RBS & Natwest Integration (Beech & MacIntosh, 2012)

4

Diagnosing Clear problem framing by WXYZ approachHigh vitality through engagament of all stakeholdersUnderstanding the positions of stakeholdersChanging culture and unlearning especially in the Natwest

Enacting Creation of Manufacturing dept. Creating a common identity for both companiesTransforming relationships by developing a new offering and reaching out new customersCreating and communicating new business processes due to the change of structureEstablishing a psychological contract for all employees and management teamTrainings for the technical changes involvedUsing stories to communicate the change and power of narrative

Explaining Using KPIs to measure where they are and where they should be Making sure that the change is understood and all stakeholders are in line and involved

Evolution Dialectic

LifeNatwest on the other

hand was an old and big bank which struggled to

grow, innovate and differentiate, therefore

their change can be identified as a life cycle

change

TeleologyRBS can be classified in teleological change

as it is internally driven aimed at a specific outcome defined by an end

point.

Figure 2: Position of Natwest & RBS on Van de Vena and Poole’s Framework of Change

2. Critical Evaluation of RBS-Natwest Integration 2.1. Analysis of Different Frameworks & Concepts

RBS’s acquisition of NatWest can be considered as a planned/prescriptive approach to change.

RBS prepared an initial acquisition plan for the integration of Natwest and RBS which required

154 rapid initiatives to be implemented with low level of resistance by all stakeholders in 3 years

(Nohria & Weber, 2005; Kennedy et al., 2006).

The change of pace is different for RBS and Natwest organisations. RBS was already growing by

acquiring other companies, and so continuously changing. However, Natwest did not invest in

technology and did not acquire other companies as much as RBS, that is why Natwest has a

punctuated pace of change (Burnes, 2004).

RBS and Natwest also experienced the

mode of change differently according to

Van de Ven & Poole’s Framework, for

RBS it was teleological whereas for

Natwest it was life cycle (Beech &

MacIntosh, 2012). The overall change

can be identified as a structural change

on the Burne’s framework, however it is

recognized that Natwest also went

through a relatively short period of

adaptation to the new organization.

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2.2. 7 S Model The detailed diagnosis of the case study will be based on 7-S model from McKinsey (Hayes,

2010). External environment was not that relevant, as change occurred due to growth strategy of

RBS and was internally driven, therefore internal alignment is critical and use of 7-S is

appropriate (Hayes, 2010).

2.2.1. Strategy

RBS’ vision was to deliver a “new force in banking” with the scale and strength to exploit new

opportunities in the UK, Europe and the USA. RBS moved in the right direction and at the right

time. Although NatWest was larger than RBS, it had a recent history a poor financial

performance as the cost income ratio was not improving and they had lost ground to competitors

in those years (Nohria & Weber, 2005; Kennedy et al., 2006).  RBS identified achievable goals,

‘quick wins’ and long-term objectives.

RBS had a strategy to grow, as they were aware of their internal capabilities (experienced staff,

knowledge of market, previous Project Columbus, improved cost/income etc…) as well as the

environment in banking industry prior to 2008 crisis. RBS had strategic options to acquire new

banks in the UK or in other geographies and Natwest acquisition was in line with the growth

strategy of RBS.

The planned change of RBS started with a

closed problem framing according to

WXYZ framework, which is shown in

Figure 3 (Beech & MacIntosh, 2012).

Figure 3: WXYZ Framework in the RBS & Natwest Integration Case

2.2.2. Systems

Effective integration in 3 years was realized by the implementation of the 30-day plan, 30-120

days plan and the longer-term plans. Meanwhile, the plans were split into smaller objectives to

reach the goal gradually.

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Objective Acquisition of Natwest according to the Integration Plan

Process Implementing Integration Plan in all RBS divisions

ResourcesChange Agents, Consultants, Executives of Business Units and Employee and their experience on integration processes

Time 3 years to complete the integration

2.2.2.1. The formal procedures for measurement

GEMC was a forum composed of the chief executives of all the units and the heads of the central

functions. Business performance was measured and the integration process was monitored during

the monthly meetings of the GEMC that were held to monitor progress against existing goals,

establish priorities, and resolve any inter-unit issues. The Technology Integration Directorate

(TID) met daily to plan and review all divisions and actions related to Manufacturing initiatives.

Besides, a small team at group headquarters helped coordination of the integration plan to ensure

that expected benefits were being realized (Nohria & Weber, 2005).

2.2.2.2. Responsibility and task delegation

Both RBS and NatWest executives received consideration for each position. Rather than creating

a separate integration of business-as-usual teams, chief executives were given responsibility and

incentives to deliver both ongoing business unit performance and their integration initiatives

(Nohria & Weber, 2005; Kennedy et al., 2006).

2.2.2.3. Controls, monitors and evaluation

Aligned and consistent set of internal control systems were created, task delegation was clear for

employees. Integrated internal accounting and reporting systems allowed senior management to

view both the performance of different units and the whole group performance.

2.2.2.4. Incentives

Incentive scheme was an effective way for RBS to gain support from its stakeholders and to

motivate its executives and employees. For executives, the incentives were linked to the

achievement of targets. For shareholders, the bank devised an innovative financing vehicle called

Additional Value Shares (AVS). For employees, RBS had granted every employee 150

Additional Value Shares in 2000 and another 150 shares in 2001. This across-the- board common

bonus was intended to create a community of shared interest (Nohria & Weber, 2005).

2.2.3. Skills

The resources that created competitive advantage in RBS and Natwest are summarized in Table 1

in 2 major categories: Distinctive Capabilities and Core Competencies (Lynch, 2009).

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First of all, the brand name and the reputation as well as the strong physical assets were

transferred from Natwest to RBS as competitive advantages. Second, using its multi brand

strategy, RBS was able to keep the Natwest brand with its customer base. Third, RBS used its

internal knowledge on resource efficiency and cost management in Natwest division. Natwest

transferred its IT systems under RBS structure to become more innovative by providing necessary

flexibility. The acquisition helped RBS to take competitive advantage of Natwest customer base,

brand power, existing physical assets and knowledge of the industry.

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Table 1: Core Competencies& Distinctive Capabilities of RBS & Natwest

Core Competencies RBS Natwest

Customer Value Customer service focused multi brand strategy Non-existence of customer focus, Brand name and history, # branches available in many places in the UK (physical assets)

Competitor Differentiation

High resource efficiency , High Flexibility, High Sales base due to multi brand strategy, High investment in innovation, Overseas Acquisitions

Low resource efficiency, Not flexible, more hierarchic and rigid, Single brand, Low and late investment (repeating customers), Not competitive as Lloyds, Barclays and HSBC

Extendable Existing infrastructure of IT and centralized back office activities enable company to be more flexible

Underinvested IT systems and rigid organization structure (BBC News, 2000)

Distinctive Capabilities

Architecture Broad network of partners and valuable relationships to diversify portfolio (Tesco, Virgin, Citizen, Banco Santander etc... ), Human centered approach

Joint venture with Yahoo for Retail Transformation Programme (Late investment), Process oriented

Reputation Growing reputation due to acquisitions, Trust from shareholders

No investment overseas, however well known in UK retail banking, Fragile relationships with shareholders

Innovative Capability First online banking service of the UK and open to organizational learning

Management Team that is enthusiastic and experienced

Old fashioned- paternalistic style of management

Long discussions and lack of strong decision makers in the board room

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2.2.4. Structure

The environment needs to be analysed in order to examine the structural decision (Beech &

MacIntosh, 2012). The environment of RBS was not so stable, and relatively moderate-high

complexity. RBS offered many services to many different customers due to its diverse portfolio,

especially after integration. Therefore they chose to be diverse. Considering fragile companies

being under the threat of acquisition, the environment is very hostile; RBS chooses to be

competitive by innovating. Therefore, RBS needed to have a flexible but robust structure that had

alternatives with a diverse portfolio in businesses but standardized business processes at the same

time, by becoming competitive via cost reduction. “Manufacturing” department, which is why

matched with the requirements of the external environment.

RBS’ diverse portfolio required divisions that served different types of customers. Some of these

divisions were competing in the same market, but RBS used it as competitive advantage to reach

more clients.

The structural change was top down and radical. However, the examination was bottom up. The

plan provided autonomy in day to day decision making, as long as the strategic and centralized

decisions for the 3 years’ plan were achieved. Therefore, what to achieve and when was decided

centrally, however how to achieve it was a decentralized decision.

RBS didn’t create a rigid mechanic or a flexible organic flat structure, instead they created a

hierarchy that allowed functions to have clear tasks, at the same time a top down bottom up

collaboration where organization can be creative and innovative. This structure, which is often

defined as semi-structure in the literature, allowed creating a flexible to influence of external

environment, innovative but a very efficient organization. (Davis, Eisenhardt, and Bingham,

2009; Kennedy et al., 2006)

2.2.5. Staff

Analyzing staff in the context of the acquisition of the Natwest by RBS is needed to create

complete picture of the change. Resistance to change is commonly accepted as an important area

in change management (Burnes, 2009), though the literature doesn’t provide unified judgment if

it’s supportive or destructive (Dent & Goldberg,1999; Binci et al., 2012). In case of RBS, the

reasons for initial resistance from the Natwest management and employees can be identified as

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follows (Oreg & Berson, 2011): low level of trust in RBS management capacity to change

(Roden, 2001); low level of tolerance, as the Natwest employees were insured if they have

necessary skills; different assessment styles - the Natwest culture was considered more flexible in

terms of correlation between achievement and rewards. That’s why high level of engagement was

critical, according to the theory of cognitive dissonance (Burnes, 2004).

Engagement and level of vitality is critical to provide collaborative and flexible environment,

which encourages proactive behavior and values autonomy as a tool for employee empowerment

(Vinarski-Peretz and Carmeli 2010; Tummers et al. 2015; Hornung and Rousseau 2007). The

RBS Annual Review and Summary Financial Statement 2002 showed, at the final stage of the

integration staff engagement level was very high: the response rate to the annual HR survey was

83%; satisfaction level was higher than national average in financial services (Leek et al., 2002).

It proves that HR policy was successful and RBS managed to create collaborative, supportive

environment with high level of vitality. The factors of success are summarized in Figure 4.

Figure 4: The relationship of HR policies and success of integration

2.2.6. Shared Values

In case of RBS and Natwest, new priorities were set in terms of corporate values:  the motto

“make it happen” advocated ambition further internal and external growth through process

improvement, integration and expansion. Moreover, customer interests were prioritized (RBS

kept on developing branches and incentivized customers in case transition to other division; wide

variety of services also motivated customer to stay within a group); the Annual review and

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Core HR objectives set by RBS

Improved morale of employee (training investments, incentives, shared goal)

Effective communication up and down the hierarchy enabled cooperation and clarification of task delegation

“Dunkirk spirit" motivated people perform far beyond their formal responsibilities.

Clear decision process: core decisions were made at the very beginning, it allowed the team to focus on implementation phase

Autonomy given to employees to decide how to achieve the targets

Summary Financial Statement 2002 promotes personalization and improvement of relationship

with clients as achieved goals.  

2.2.7. Style

2.2.7.1 Leadership style

Consistency of leadership guaranteed the success of the implementation. Incentives were highly

related with the achievement, which made employees believe that their interest were related with

the company performance and enhanced the psychological contract. Through advertising

campaign, they built the trust among the employees to make them believe that the integration

plan was feasible. (OK; OK) position which is the winning position is created by the leadership,

which was to communicate that the integration is a win-win (Kreyenberg, 2005)

2.2.7.2 Co-operative Environment

Two mechanisms facilitated the cross-business cooperation that made the integration possible.

Monthly meeting of the GEMC and daily morning meeting in which all members of the GEMC

discussed and dealt with urgent as well as day-to-day issues which helped executives from

different business units to interact regularly and willingly share costs and find solutions to shared

problems.

2.2.7.3 Communication of Change

Effective communication and the power of narratives helped to build the trust among the

employees, mainly through face-to-face talks, a series of executive meetings, the internal satellite

channel, and interviews by the BBC reporters to reach out all stakeholders and strong «story

telling» examples.

Conclusion

RBS-Natwest integration is analysed in Part A using different frameworks and theories of

strategic change. RBS successfully managed this change due to clear vision, task delegation,

shared value creation, well prepared HR strategy lowering resistance and ensuring engagement,

feedback mechanism within the hierarchic organization and effective communication with strong

leadership. There was no need of radical cultural change, whereas structural change was radical.

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Complexity together with external environment changes, driven by the financial crisis in 2008,

challenged RBS substantially during the next years. The RBS change management activities are

analyzed in part B.

B. RBS’s current strategic focus and future outlook

1. Reasons for change

RBS has been implementing a new customer focused strategy to build trust and a long-term

relationship with their customers who are the biggest shareholders (RBS was 81% owned by the

taxpayers in 2014 (BBC News, 2014). Since 2014, RBS aims cost reduction by simplification of

business structure and creation of a customer-focused collaborative environment: establishing

two-ways and transparent dialogue with customers and employees, focus on UK market as a

“strong foundation” and implementation of new agile technology platforms (Leek et al., 2002).

However, the shift from ambitious world-wide growth strategy to customer focused UK based

strategy is not just a fashion influence but an attempt to overcome one of the deepest crisis. Back

in 2007 the RBS, the Fortis bank and Santander bank paid €71bn for a part of ABN Amro after a

long competition with Barclays bank. Though they succeeded, the price was too high: poor post-

acquisition financial condition forced UK government to “save” RBS. Figure 5 shows the main

reasons for RBS failure:

Figure 5: Reasons for RBS failure

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 Lack of resistance at the stage of approval the deal from the top management committee to the takeover of ABN Amro (Pratley, 2011; Wilson et al., 2011)

Poor pre-acquisition analysis of the ABN Amro: after the deal RBS took underperforming London-based investment banking franchise (The Independent, 2011).

Poor analysis of the external environment as the crisis of 2008 with fall of Lehman Brothers Holdings Inc. forced market into huge recession

Poor general preparation for the acquisition: there was no established plan and core goals.

Inability to overcome resistance from the ABN Amro management team and its employees.

Lack of agreement inside consortium on acquisition process: RBS and Fortis could not agree on financial aspect of separation (Wilson et al., 2011)

Experience in mergers and acquisitions is not a guarantee for success, as these processes are very

complex and standard “learning-by-doing” approach is not appropriate (Zollo & Singh, 2004;

Zollo et al., 2013). Current attempt to introduce new customer focused strategy is aimed to

implement cultural change initiative (Beech & MacIntosh, 2012) and overcome crisis driven by

the RBS aggressive M&A strategy, lack of customer focus and multi-divisionalised structure.

2. Stakeholder Analysis & Customers as Stakeholder2.1. Defining the Change and Environment

Change at RBS after 2008 is externally driven, emergent and large scale therefore can be

classified as “cultural change” which can also be identified as ‘Liberate & Recreate’ type of

change where the organization is transforming ‘the state of being’ (Beech & MacIntosh, 2012).

RBS used open problem framing approach for a new strategy, as it suits better cultural changes

driven by external pressures according to Beech & MacIntosh (2012). Therefore, it is important

to analyse external environment using PEST analysis that is shown in Table 2 (Hayes, 2010).

Table 2: PEST Analysis for RBS after 2008

Political factors Economic factors

Highly regulated business environment

Customers: Key stakeholder

Government: Key stakeholder as represents tax payers, high influence at RBS decisions (support for SMEs, establish trust in customer relationships, transparency in all transactions

Forced to focus on low-risk and socially important sectors, like SMEs seeking for financial resources for working capital, new products development resources and merger financing.

Low risk strategy forced company to sell of the non-key divisions

Necessity to decrease costs to increase operational effectiveness

Real estate market crisis (Garnham, 2006)Sociocultural factors Technological factors

Society lacks trust to banks Regulatory requirements force banks to invest in IT infrastructure (Financial Services Authority, 2012)

Software platforms based on data mining, neural networks, risk analysis and predictive analytics

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offer necessary optimization for better decision making

2.2. Identifying the Stakeholders & Mapping

Descriptive dynamics will be used to focus on the actual change in the positions of stakeholders

in line with the guidelines provided in literature (Beech & MacIntosh, 2012). The main

stakeholders are grouped as customers and taxpayers, regulators-government, employees,

shareholders and board of directors. Table 3 shows the scores (0-10) of stakeholders in regards to

their influence and interest. Figure 6 shows the change of positions.

Table 3: Stakeholder Scores Before & After the Change

Stakeholders Influence (0-10) Interest(0-10)Before After Before After

Customers & taxpayers 3 7 2 7Unengaged PlayerShareholders & Board of Directors 10 6 9 6Stronger player Weaker PlayerRegulators & Government 4 7 6 8Observer PlayerEmployees

4 7 4 5Unengaged Observer

2 3 4 5 6 7 8 9 10 110

2

4

6

8

10

Customers & Taxpayers Before Customers & Taxpayers After

Shareholders & Board of Directors Before Regulators and Government After

Regulators & Government Before Employees Before

Employees After Shareholders & Board of Directors After

Infuence (Power)

Inte

rest

Figure 6: Stakeholder Mapping with Descriptive Techniques implemented to RBS Case

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2.3. Changes of Stakeholder Relationships with Customers

Figure 6 presents that both influence and interest of customers increased dramatically in the RBS

case. As the government bought RBS shares to save it, indirectly taxpayers and customers

became the shareholders which made them critical for decision-making processes. It was a driver

for the customer-focused strategy, greater implementation of philanthropic activities and

stakeholder engagement approach at RBS. New customer-focused strategy of RBS required them

reach out more customers, change their offering system (offer different packages to customers

that were not targeted before, people struggling to pay mortgage etc.) and “transform” their

relationships according to Ansoff matrix (Beech & MacIntosh, 2012). According to CSR

stakeholder mapping customers/ taxpayers became ‘partners’ (high interest, high influence).

2.4. Engagement with Customers & Overcoming Resistance

RBS implemented a Digital Engagement strategy, partnering with LivePerson to offer customers’

web chats 24/7 available to replace phone and enabling customers to tweet their problems to RBS

on social media whilst enhancing two-way dialogue (Youtube, 2015). It resulted in improvement

of customer satisfaction level and reduction of communication cost. Customer engagement

through simplified communication channels (chats) and prioritizing ‘mortgage businesses helped

to re-build trust and create a stronger engagement opportunity for RBS, as a part of the customer

focused strategy.

3. Managing the Cultural Change & Creation of Shared Values

RBS previously had a ‘differentiated’ culture due to their divisionalised structure, however RBS

is transforming its culture now to an ‘integrated’ one to be consistent with behavioral patterns and

shared values across the organization (Beech & MacIntosh, 2012). In case of RBS shared

corporate values are presented in Figure 7 (RBS, 2014).

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Serving CustomersCustomers feedback became more important

Working TogetherHR policies to create collaboration and team work

Doing the right thingFairness, diversity, thoughtfullnes and integrity

Thinking Long TermOpen, transparent communication with stakeholders, especially with customers for sustainable business

Figure 7: Shared Corporate Values at RBS (RBS.com, 2014)

The cultural change at RBS can be summarized using Johnson’s cultural web, which includes

physical, social, symbolic aspects of the organization shown in Figure 8 (Beech & Macintosh,

2012).

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Figure 8: Summary of Managing Culture using Johnson’s Culture Web

4. HR Strategies: Employee Relationship

Establishing sustainable relationship with employees is an important area for enactment of

change (Beech & MacIntosh, 2012). Strategy change requires RBS to address and manage staff

effectively, especially after all the challenges of the past decade: permanent growth, financial

crisis, government intervention, change of CEOs, etc. Currently “Working together” is one of the

core values of RBS.

Beckhard and Harris’s approach (Burnes, 2009) can be useful to analyse commitment planning,

which is required to overcome resistance. According to this approach a critical mass of customer-

oriented employees, who can commit themselves to deliver introduced strategy, is required. In

these regard, HR strategy of RBS had to re-think the definition of engagement as a core to the

performance (BITC Diversity - Opportunity now 2015). Communication and establishment of

collaborative environment, as well as updated reward system are critical for this purpose. A

number of initiatives, like agile working strategy (Robson, 2015), focus on equality and diversity

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Customer Centred RBS Culture

Stories

External communication of company's change strategies

(youtube videos etc..)

Rituals/ Routines

Unlearning habits to sell to customers and learning to serve to customers

Organisational Structure

Divisions decreased from 7 to 3

Power Structures

Stakeholder approach rather than shareholder approach

Control Systems

New bonus and incentives for

employees

Symbols

Famous executives left the company, which symbolized the starting

change

in HR communications (BITC Diversity - Opportunity now, 2015), re-designed benefit

proposition (Uttley, 2014) and recognition programme “Living Our Value (Investorsrbs.com,

2015) underpins HR strategy and aims to raise employee engagement index to 8% within of GFS

norm in 2015.

5. Communication of Change & Leadership

As we have previously discussed, customers/ taxpayers became the key stakeholders for RBS.

So, they should be “managed closely” to maintain sustainable relationship and mutual benefits.

Communication strategy and transparency are critical to establish two-way dialogue. RBS pays

great attention to the process of understanding real needs and worries of their customers and

employees through constant simplified communication channels (Live 24/7 web chats mentioned

earlier) and independent surveys, which measure customer experience and trust, level of

employees satisfaction. Moreover, RBS uses omni-chanel strategy to communicate and report

commitments and progress to its key stakeholders: public and social media (Facebook, LinkedIn,

Twitter, YouTube and Google+), regular corporate and independent reports (Transparency

International study, Independent Lending Review), close interaction with clients through visits

and open dialogue (Investorsrbs.com, 2015). Generally this type of strategy seems to be a

mindful combination of two basic strategies identified by Clampitt et.al (2000) as cited in Hayes

(2010) “identify and reply” and “spray and pray”.

6. Changing Structure

Customer focused strategy also prioritized structure optimization. RBS reduced the number of

divisions from 7 to 3 (Personal & Business Banking, Commercial & Private Banking and

Corporate & Institutional Banking) in order to introduce more organic structure and become more

‘responsive organization’ (Beech & MacIntosh, 2012) to focus their business processes around

delivery to key clients segments. ‘Smaller’ structure supports the idea of becoming a leader in

UK which is line with RBS’ targets to sell some of its assets in non-core markets, decrease

operational spend to achieve a cost income ratio of around 55% by 2017, increase assets focus on

UK market up to 80% (RBS, 2015)

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Conclusions

The UK banking industry is a very complex environment, which will be challenged in the future

by increased competition, new regulation policies and sustainability initiatives on relationship

banking (Cable, 2014). In this regard, RBS capabilities to switch from double-loop learning to

single-loop learning and re-invent its daily routines come to the forefront. The difference between

two changes stresses how important it’s to stay flexible. Taking gradualist paradigm and

perceiving change as a “process of continuous adjustments” will require RBS to establish self-

organizing, constantly changing learning environment (Hayes, 2010). Though financial results in

2015 seem to be promising (RBS, 2015) long-term perspective will reveal whether the necessary

cultural change has been successfully implemented.

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