As expected, the results season highlighted a few winners and plenty of losers in the financial services sector.
Barclays’ controlled slip of only 1% to £7.1bn profit has been widely praised but Alliance & Leicester suffered a drop of 30% and saw its shares slump. And Lloyds TSB saw its profits dip by 6% with write-downs increasing from £200m to £280m.
Bradford & Bingley cut the value of its sub-prime mortgage-related investments by £144.4m on February 13, al-though a few weeks earlier it said it wasn’t expecting to suff- er write-downs.
And Advantage became a victim of the liquidity crisis a few days later when its US parent Morgan Stanley pull-ed out of the UK mortgage market.
In fact, there are concerns about the mortgage industry at all levels and it is widely believed that we will soon see the introduction of a fresh batch of regulations in an attempt to manage firms’ exposure to risk.
It’s also likely that we’ll see a substantial increase in deal-making as banks, mortgage providers and brokers consolidate.
Corporate change looks set to become a feature of the industry landscape in 2008 and we’ve already seen evidence of this in the bro-king sector.
The Towergate Partnership’s acquisition of Brit-ishinsurance.com is expected to be the first in a series of takeovers by the group.
Meanwhile, Lloyds TSB has declined to comment on speculation that it is considering offers for A&L and B&B.
Although there are question marks over whether the Financial Services Au-thority will allow a bank with a big presence in the buy-to-let market to buy a player such as B&B – the biggest buy-to-let lender by balances – rumours of consolidation abound.
In such an uncertain climate, it’s easy to forget that there’s more to takeovers than the financial aspects. Individuals don’t like change and in a workplace environment it tends to signify trouble ahead.
With any merger or acquisition, the workforce faces significant upheaval and it is vital to manage this effectively. When done well, companies emerge from the changes stronger and more united, with positive employee relations and key personnel still in place. When done badly, loss of morale and uncertainty can hinder progress for months.
The changes we are likely to see in the near future will leave businesses with new management teams. This can affect employees so bringing in interim change professionals from the outside is often advisable.
While senior managers may know what decisions to take, implementing them and dealing with the aftermath can be more problematic than expected. And those with a personal interest in a business may find it difficult to make the toughest choices, such as making staff redundant.
If the choices that have to be made are unpopular, a permanent member of staff may suffer from diminished respect and even a damaged reputation for making them.
But interim change consultants are able to provide a dispassionate and questioning viewpoint and im-plement troublesome strat- egies without worrying about their relationships with the workforce.
When the dirty work has been done and the difficult decisions have been taken, the path is clear for new management to come in and get on with running the business without a tainted image.
When entering organisations, change consultants often find ineffective or redundant processes in place.
In the case of a merger, there may be several conflicting systems that need to be reconciled or abandoned in favour of replacements.
Often, existing management teams are so used to long-standing inefficiencies in their businesses that they can no longer see them.
When there is sufficient trust between management and employees, managing change internally can be the best option.
But in larger businesses there may be relatively little direct contact between senior management and the workforce. In these cases, it may be worth bringing in experts with the interpersonal skills necessary to act as a liaison between groups of workers.
It is vital that communications with staff are honest, open and sensitive throughout change processes because one of the most important elements of such changes is that they are accepted by the workforce. It is also important that plans are in place in good time, whether devised internally or with the assistance of external change consultants.
Although change professionals will only be in position temporarily, they should have the ability to be effect-ive leaders from the moment they step through the door, bringing with them the ability to communicate clearly and build relationships quickly.