1999 - the cost of consolidation
budget strategy
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4 What'sNewS Issue 12' December 1
With next year's second budget round almost completed, we ask Rik van Slingelandt for a sneak preview of what is in
store in 1999. In a frank interview, he hammers home how much leaner we will have to become to meet what are
described as very, very tough targets. But he also has a more comfortable message as he looks back on the past year and
forecasts consolidation for the first euro year and last of a millennium.
The word is that budgets for 1999 are tougher than ever.
You've played a decisive role in this process.
Can you explain why they are so tight?
I certainly can. But if I may, I'd like to
give you a little context first. We didn't
just suddenly decide to slice people's
budgets. Clearly, there are good reasons.
Your allergy to cost overruns is more than well known.
Is that the basic problem?
It is that. But there is more to it. The
problems we've been tackling in 1998
have everything to do with the fact that
RI has grown dramatically - especially in
the past two years. From a cosy old boys
network of 2,000 to a professional
business with over 4,500 people around
the world. So, firstly, we must accept that
this organization has changed. It has
grown. If you like - we're maturing. And
in that process we have to change and
live in a world of new rules to abide by.
A more formalized structure?
It's more than that. This organization was
extremely free-wheeling, extremely
decentralized. Every country was a
kingdom. That's fine when you're in the
pioneering phase - which we were in the
late 1980s and early 1990s. But our
customers don't operate that way. They
operate cross-border; their approach is
international, global if you prefer. We
have to do the same. We've been
expanding internationally, but we haven't
been internationalizing our attitudes,
approach and mindset. We have to
organize better international product
delivery. And it has to become much
more professional and wider in scope. Let
me teil you that we're losing our shirt on
a regular basis by clinging to credit as
almost exclusive product offering.
Do you mean moving away from credit altogether?
Not at all. We have to keep it as an
entrance fee, or to make things happen
with companies by showing we are
willing to take a risk on that customer
and then underwrite that structure and
sell. But if that is our aim in life, then we
Rik van Slingelandt forecasting future success
might as well not bother
internationalizing at all. By
internationalizing I mean relationship
management and matching the scope of
our systems to our products. It means
worldwide risk management and so on.
So no more decentralized regions?
We have to change the way our
organization is structured so that we're
closer to our customers. That's how we
can deliver products more efficiently, but
especially more proactively. We have to
be better risk managers and our
infrastructure must be global, accurate
and more than reliable. I hate the 'global
manager this' and 'global manager that',
but that's where we must go. Basically,
we're functionalizing the organization.
There has been some opposition to change.
It is not so much opposition. I would call
it confusion. That is because we had tried
to build an organization based on
compromise. We had so much
compromise that people become confused
and insecure. In my view, people should
know who their boss is. They have a
right to talk to that boss and receive
guidance. A lot of people are now saying
that the reporting lines are no longer
clear, and they don't know who their bc
is. I am convinced that if we bring into
the organization the kind of
funtionalization I'm talking about, the
strict ground rules all organizations need,
then we'll have more chance of doing
what we're here for - delivering service to
customers. At present, every issue appears
to be debated by all and sundry at least
15 times - and those are not only the
minor issues.
But isn't that a Dutch cultural thing
I don't see why. It is more about the
maturity of the organization. When we
were building a presence and identity in
individual countries, then there were
parameters in each. People worked within
those parameters and there was no need
of endless discussion. There was
guidance, a boss, budgets to work with -
and a lot of freedom to develop
individual entrepreneurship.
But we've moved on now
Yes we have. This 'structure' doesn't
work any more because we are not
delivering to our customers. We are not
growing up with our customers. We are
not delivering products on a global scale
to our customers who operate on a global
scale and have global needs.
So how does that work in practice now?
When 1 joined the day-to-day
management of RI back in June, there
were four critical elements. One is that
we were investing hugely in new
products. I don't like to talk about
'investment banking' as if it is not an
integrated part of our whole organization,
but I know a lot of people make that
distinction. So when I talk about our new
products, I mean those products in
