Terry McCrann: NAB, under chief Andrew Thorburn, aiming for the 21st century

REALITY is coming at NAB — like it’s coming at every business — in two waves and it’s coming 24/7, relentlessly and without end, writes Terry McCrann.

NAB chief executive Andrew Thorburn. Picture: Stuart McEvoy

BRUTAL and shocking: but ultimately, it’s dealing with reality. That reality is coming at NAB — like it’s coming at every business — in two waves and it’s coming 24/7, relentlessly and without end.

The first is the ever-present need for a business — any business, every business — to operate efficiently; to be able to compete at the most basic level in delivering its product or service to customers at a survivable, competitive price.

NATIONAL AUSTRALIA BANK TO SLASH 6000 JOBS OVER THREE YEARS

It is the second wave which is both a life-threatening challenge and prosperity-generating opportunity, on which the NAB move is focused: the digital transformation.

This is captured in the way we have already (largely) traded bank branches and are now increasingly abandoning even the ATMs of the first digital wave to “do it all (and more)” on our smartphones.

If all NAB were doing was sacking skilled bankers and replacing — around one in three of them — with very low-paid process workers, maybe mostly even located in low-wage countries, it might slow the life-threatening side, but it would be failing absolutely to seize the upside opportunity.

It would probably also end up not achieving much on the cost side; that would be a strategy to embrace a cycle of continuous decline. To the benefit of neither staff nor shareholders and also not customers.

The net cut in numbers is part, only part, of a strategy to take $1 billion of costs out of the business. And not just “costs” as a generic slash-and-burn exercise, but costs that are increasingly not generating revenue.

Now, everyone is doing much the same thing to survive. Those that aren’t or haven’t succeeded in doing so, either haven’t survived or won’t.

NAB chief executive Andrew Thorburn. Picture: Stuart McEvoy

But as NAB CEO Andrew Thorburn emphasised on Thursday, the objective is even more aimed at adding revenues as the bank delivered better service, more value-adding service, more customised service — all requiring more skilled staff — to both retail and business customers.

AT bottom line, service that was more relevant to their needs — not what was “easy” for the bank, and service that worked off and optimised the digital dynamic.

So, on the one hand it’s basic survival as the Bitcoins and Blockchains and even the Amazons and Googles keep coming. On the other it’s — at least intended to try — to leverage off exactly the same digital foundation, but also marrying it to the advantages a conventional “bank” had or should have.

Now, NAB could have gone about this less dramatically and less publicly as the ANZ has already done, as Jeff Whalley describes, in mostly the same but slightly different context.

NAB wants to cut 6000 positions over three years and natural attrition runs at around 3000 a year. No, it couldn’t just match the two sides, but a combination of voluntary departures and targeted redundancies could have got there more quietly.

NAB gets a tick for its upfront transparency for staff; that is very much the “Thorburn way”. This delivers focus and clarity across management. It tells both management and staff that this is aimed proactively at business growth and customer satisfaction.

It is also, critically, staff-friendly: a more secure jobs, better-paid jobs, delivering greater employee satisfaction exercise. It is not an exercise in simplistic cost cutting.

This also goes to the challenge of validating the move in the context of NAB’s profit.

Again simply, as many would see it: how can NAB announce its intent to sack 6000 of its staff (4000 net) while also announcing a $6 billion-plus profit?

There are two broad answers to that. The $6 billion profit came in the “very best of times” and, measured in terms of both the size of the bank and shareholder capital, it actually ain’t that large and it certainly isn’t exploitive.

Secondly, if NAB doesn’t adjust to the 21st century coming at it, there very quickly wouldn’t be a $6 billion profit. Indeed, there wouldn’t be a NAB.