Sandy Begbie reflects on the first days of the newly merged Standard Life Aberdeen Plc and emphasises the importance of people and culture in making this organisational change a success.
In his new integration role Sandy looks at what lies ahead for the business in its new position as the UK’s largest asset manager.
Can you explain a bit about your role how it has evolved in the past two years?
My role until the recent merger between Standard Life plc and Aberdeen Asset Management PLC was Chief People Officer of Standard Life plc. In addition to that I have also been a lead executive in our joint venture business in China and small retail business in Hong Kong where I chair the Audit and Risk committee and Strategy and Planning committee. I have been in this additional role in China for six years, and it has no HR function.
This dual role really reflects my approach to my career, and HR in general. Firstly, I have always tried to keep a foot outside the HR function, and secondly, I have always looked to really grab different opportunities when they have come along. As a function of the merger, I have been asked to take on a lead integration role. The view and approach from both Martin Gilbert and Keith Skeoch as joint CEOs is that culture is fundamental to the success of the merger. We know that whilst there will be some significant complexities we can get the IT systems and the properties to work. The biggest risks to success are the people, organisational design and culture. We need to get those vitally important parts right from the outset.
When you look at an asset management company at a basic level we are a people business, much more so almost than many other types of business. Our differentiator is the people we employ, the people we work for and with, and the culture that we engender in the business.
My role is definitely evolving as we begin life as a merged company. This is the largest merger in Scottish history, and one of the largest in the UK. The chance to lead on the integration of the two businesses was certainly too good an opportunity to miss.
When considering your role in the organisation’s Chinese business, is it less common in the finance sector to have the chief people officer or HR Director in a more ‘business-specific’ function? Yes, I would say so. There are other firms who have done it, but it is relatively rare. I did originally come from a banking background and that really has allowed me to broaden my leadership into other areas.
For me personally to be involved in other parts of the business keeps it interesting and also makes the HR/people function more relevant across the organisation. It gives me and my team a better overview of the whole business. The business in China is complex, and I sometimes think if I can understand and navigate that process, I can get to grips with any area of the business. I do truly believe that you can learn a lot more about yourself and the organisation by expanding your network. In general, I think there needs to be more business breadth amongst HR people, and having a strong understanding of the business workings, as well the importance of the people to the business benefits everybody.
Standard Life Aberdeen is a global organisation and has emerged as the UK’s largest asset manager. What would you highlight as the key challenges in addressing the changes this merger has brought to the employees across both organisations? There is absolutely no getting away from the fact that there is a period of time with any change which will bring a lot of tension and we need to work through this. This involves realising synergies in the business and making cost savings, ultimately resulting in a reduction in people. This has been made public and there is awareness that there will be a headcount reduction of 800 from the current combined population of 9,000 employees, over a three year period, as a result of the merger. Synergies will come in part from customary employee departures and natural turnover, and we will be taking all appropriate steps to mitigate the number of compulsory redundancies.
We will be working through our approach over the next three to six months. It can’t be a sequential process, but we have to start engaging with people about what the new company will look and feel like. It is exciting for some people, but for others there is a continued anxiety about what it will mean for them. We realise that we need to address this as early as possible, whilst also stabilising the business and keeping customers and clients on the journey with us.
The external and internal worlds will be watching this whole process; assessing how we approach these challenges while merging the organisations, people and culture together.
As separate entities, there are inevitably differences between how the two businesses have worked in the past. The organisational structure, governance, and culture have been different. Although operating internationally, Standard Life Investments has been pretty Edinburgh-centric, with decision-making largely centralised here and a comparatively small global presence. It has also grown almost entirely organically, with one acquisition in its history. Aberdeen Asset Management has been a more global business operation and has grown mainly through acquisitions in the past decade.
Integrating these two businesses together will be the most significant marker of success. We know it’s important to all our clients and future clients that we keep our best people, continue to attract the best people and generate the best investment performance and returns. This is what we are committed to doing with the merger.
Standard Life Aberdeen is operating with a dual CEO structure. What will that mean for the business and the organisational structure?
We are not the first organisation to do this, there have been a number of success stories. It has worked well in large international organisations such as Oracle, for example. Investment banking particularly also has a history of joint CEOs due to the diverse nature of the business make up.
This dual role has worked where you are genuinely merging two companies, and that absolutely is what Standard Life Aberdeen is. It is a merger – the mutual joining together of two organisations to make one larger entity. It would quickly meet a tipping point of not being considered a merger if there was a predominance of one organisation taking senior roles.
When you consider our two CEOs, they are quite different people. They do have commonality around values and approach, and very established and successful track records, but in terms of their innate interests and strengths they do differ.
Martin has a strong focus on the external side of the business – client, customer and external affairs. He is interested in marketing and brand building, and is a very engaging communicator.
Keith is an economist by background, and has always traditionally had a stronger focus on the investment and core business elements. He has built Standard Life Investments and of course he has a strong focus on clients, but he also recognises the importance of getting the culture right internally, getting people to work together.
They make a very impressive team and have real personal strengths and qualities which complement each other. To date it has worked as well as anyone could have expected, and it looks set to continue on that path.
What are the key methods that you and your team will be adopting to share the new brand and vision for the merged business with all your internal audiences?
We certainly cannot underestimate the importance of brand values and culture. It stretches right round the organisation, internally and externally. The client experience is heavily driven by the employee experience, and that needs to be as seamless, aligned and real as possible.
The ubiquity of technology does bring different avenues of communication and this can really help when addressing a larger, globally spread out audience. However, we can never underestimate the power of visibility. At times of change, this is paramount. We need to have leaders of the business on the ground, meeting, talking and updating. Those leaders who can communicate really well absolutely come into their own at a time of change.
How does the explosion of social media and constant availability of online news content impact on your interactions with staff and other stakeholders?
The way the two companies have typically communicated has been quite different up until this point, but it is starting to come together. From day one we have had to work hard at ensuring the approach is joined up about how we share information.
Social media has provided a really big jolt to internal communications particularly. It has created the need for quicker, smarter engagement and being able to reach audiences in a way that the internal communications function has not done before.
One of the initiatives which was launched just after the merger was a mood and sentiment survey. This has gone to all 9,000 across the merged group. We want to get real time information about how people are feeling and thinking and get a closer insight into existing cultures. We had been developing it for a while with Standard Life Investments, but this is the first time it has been carried out, and we are really positive about how this will help inform our approach. We will repeat this regularly to allow us to gain an instant sentiment to people and culture over the next couple of years.
It is amazing when you run a business like ours that we can get financial information and customer information instantly, but we didn’t have that same level of access to employee sentiment until now. It will be a very important tool for us and puts more emphasis on the leadership to take visible and accountable action.
The merger comes at a time of political and economic uncertainty in Scotland and UK, particularly in relation to Brexit. Can you outline how you address the challenges this external environment brings when communicating within your organisation?
Interestingly, and this is very typical when organisations or institutions are going through significant periods of change, people will naturally focus in on what it means for them, their role and their team. This is perfectly normal and we are very aware of this.
Of course Brexit and the political and economic uncertainty are key topics of internal discussion. Preparing for a successful Brexit transition is a strategic priority. However certainly at the moment, there is a more immediate focus on what is happening internally and how this might impact right across the organisation.
This is highlighted during our regular leadership calls which we hold as part of the merger integration process. During these calls the majority of questions are about people, culture and organisational structure. These really are the areas that are uppermost in our employees’ minds.
Of course, by no means are we an organisation which is close minded to what is going on externally, but when it comes to communications, we have to get the balance right about where we focus during this period of significant change and listen and pre-empt the needs of the business and our people.
With increased regulation across the sector what challenges does this bring? Does it make people management and recruitment more complex, requiring a greater level of technical or specialist knowledge across all levels of the business than in the past?
It does make recruitment more complex. Really good people have a lot of choices about where they can work. Most sectors nowadays have some form of regulation, but the financial services sector has a very high degree of it.
We find particularly with graduates that the opportunity to work in financial services doesn’t necessarily hold the same attraction as it used to. Graduates looking at the wider job market are placing a great deal of emphasis on values and what companies stand for. Certainly a company’s approach to sustainability is one of the top criteria a graduate would use to make choices about their employment. I’m pleased to say that we are well recognised for our approach to sustainability and have featured in the Dow Jones Sustainability Index (DJSI) for seven years now. The index is designed to measure the performance of sustainable companies by looking at how well they manage environmental, social and governance (ESG) risks and opportunities which impact on their long-term success. Our listing places us within the top 10% of leading sustainable companies in the world from our sector.
However, one of the key points is about the reputation and the issues the financial sector has experienced in the past decade. As a result of the 2007/8 crisis, the regulator introduced a senior manager regime which allows it to hold senior people much more to account than in the past. This brings a far higher degree of reputational risk, particularly in functions like HR and IT, and this also can make this sector a less appealing area to work in. Many financial organisations remain large, deeply complex organisations and I believe that finding the right people, the best people, is going to become harder.
Is there a need for greater diversity at a senior leadership level (not just gender specific) in the financial sector and beyond? If so, how can this be addressed?
There is definitely a need for financial services’ organisations to be much more mindful of the social climate and the change we have seen in the past, and continue to see now. There is still a considerable amount of discussion around remuneration, the purpose of organisations, diversity and inclusion. This debate needs to be widened and positive action taken to address these issues. I believe that how businesses respond to the social inclusion agenda will go a long way to rebuilding the sector and demonstrating the good that these businesses can have in broader society. Financial services is very important to Scotland, and of course the UK, but to regain trust in the sector amongst customers and clients will take time and require a lot of work from many organisations in areas where they have historically not been involved.
Standard Life has worked hard to be inclusive over the past five years particularly and I am a huge advocate. Our strategy leads with inclusion - based on attracting and retaining a diversity of talent in its broadest sense and on ensuring we have an environment in which all our people can fulfil their potential and feel they can be themselves at work. For example, we were the first private sector company in Scotland to become not just a living wage employer, but a Living Wage Friendly Funder too. We’ve made sure that we pay a minimum of the real living wage to all our employees, regardless of their age, and this applies to all our young interns and apprentices. At the same time, As a Friendly Funder we also make sure that any roles we fund with the charities we work with are funded at the Living Wage. We’ve also built the living wage into our supply chain. What that means is that all suppliers who work with us need to be living wage employers or give that guarantee to all their employees who come onto our sites. Another project we are involved in to reinforce the importance of the living wage and help young people get into work is through the Princes’ Trust. We fund one of its initiatives in London, and more recently five other cities, which brings young people in to work with SMEs by offering them training and coaching. In some cases the SMEs don’t have the funds to pay the living wage but we have committed to subsidising the salary of any young person employed by this scheme to guarantee it.
We have also done a substantial amount of work with those coming out of the armed forces. We have a network of about 40 ex-armed services personnel employed in our business, and look to support organisations who help those out of the army into work. A few years ago we worked with the British Royal Legion to fund the introduction of a brand new training programme and website, to help those in the armed forces to improve their financial fitness. This was the first time that structured financial education was built into all Armed Forces basic training, bringing real and tangible benefits.
One of the key points of diversity is of course gender. We cannot deny that we have challenges with regards to our gender diversity at the top of the organisation. We are working hard to shift this balance and a lot of emphasis is on growing a sustainable gender balanced pipeline. Our graduate level is more than 50 percent female; at emerging leader level we have 50 percent females; and at the senior leader level it is approximately 25-30 percent. In our succession pipeline, 38 percent of those we consider will be ready to operate at Executive Committee level in 3 years plus is female and we are focussed on supporting their continued development. At board level we have been above 30 percent female for the past decade, and that is a trend that will continue. We have a very strong women’s development network, which has been recognised externally also. We are moving in the right direction in this area, and it is fundamental part of our long term strategy.
An area that we need to focus more on in the future is around disability and we have projects in the pipeline to address this with regards to our employment approach and wider social mobility strategy.
Looking ahead, what will be your biggest indicator(s) of success in the change management process in the next 1-4 years for Standard Life Aberdeen plc?
We are embarking on a three year programme of change, but I would like to think that the bulk of my work in this integration role will have been carried out over the next two years, and the businesses are effectively merged. I am very aware that it can’t run for too long, as there is a greater risk of project fatigue.
For the business at large, being counted as one of the successful mergers to take place in business history would be a great indicator that the process has worked. There is some research which suggests a higher rate of failure for mergers than acquisitions. This higher failure rate has largely been put down to lack of integration and proper establishment of culture and purpose.
When setting out on the path of a merger, there is a fine balancing act required. We have a dual chief executive function and a board which is 50/50 from both organisations. There is a full commitment by both sides to making it a success.Some of the more measurable indicators which we would assess on a regular basis include maintenance of business as usual; asset retention; staff retention; graduate and staff recruitment; customer satisfaction; brand awareness; attraction of new clients; management of change; and integration of new culture.
Standard Life Aberdeen is now the largest asset manager in the UK, second largest in Europe and one of the top twenty in the world. If we get this right, we will create a vitally important financial power house based in Scotland. This will have a real impact on people’s lives, both in the capital and beyond, within the organisation and externally. This is our ultimate goal and one that we are working very hard together to deliver.
Sandy Begbie is responsible for the Global People, Organisation & Culture Integration since the successful merger of Standard Life and Aberdeen Asset Management on 14 August 2017. He is also the Lead Executive for the Joint Venture Heng An Standard Life in China and the Asia business based in Hong Kong. Sandy joined Standard Life in May 2010 as the Group Transformation Director. He is the Chairman of Career Ready, Scottish Advisory Board (SAB) and also Chairs the new Regional Developing Young Workforce (DYW) group to tackle Edinburgh and Lothian youth unemployment. He was recently appointed as a NED to the Open University Board.