ACCOUNTANCY IN THE NORTH: Come Halifax or high water

The chief executive of Halifax plc is a cool dude, although that is probably the last description Mike Blackburn would think to apply to himself. In June, he presided over the largest flotation in Stock Exchange history – a project so huge it made the last government’s privatisations look like table-top sales. The day of the flotation began with a 7am meeting at the Halifax’s brokers to satisfy the final legal details. Then Blackburn was swamped by the media and spent the morning being interviewed by every business journalist with a pulse.

Now how would you celebrate the culmination of three years of high pressure, hard graft and the creation of a #19bn company? Retire with the board to a comfortable location and indulge in some hearty backslapping? Knock back a bottle or three and bask in the afterglow of a job well done? Not a bit of it. By lunchtime, Blackburn was back in his office and getting on with his work-in-progress file.

As to what it’s like being the public face of a massive new company, conceived and birthed in the glare of the media, Blackburn says: ‘Not very different. I was always in the spotlight as chief exec of the Halifax Building Society. The company has 20 million customers. That hasn’t changed.’ See what I mean about cool?

Eighth largest UK company

But things have changed a great deal for the mutual society founded 144 years ago in Halifax’s Old Cock Inn. It was Britain’s biggest building society. Now it is the UK’s eighth largest company overall, joint third biggest bank (with Barclays) and considers itself to be a retailer of financial products.

The scale of what Blackburn and his team have pulled off is enormous.

The numbers are awesome.

The transfer document/voting pack was one of the world’s biggest mailings, with 30 million items sorted into 7.6 million envelopes. It used 5,000 tons of paper and took 60% of the UK’s printing capacity to produce. Piled on top of each other, the 176-page packs would form a tower 56 miles high; laid out page by page, they would cover 160,000 miles, or five times the circumference of the earth. Postmen, delivering the pack to two in every three houses, were prevented from carrying more than 25 at a time.

On this scale, even a fractional screw-up could have yielded nightmarish results. If there had been a 1% error in the mailing, the resulting hoard of disgruntled customers could not have fitted into Wembley Stadium. A 0.1% error would have left 7,600 people bereft. The day-one share-dealing volume could have reached 750,000, which would have brought down the country’s telephone system if everyone had picked up the phone at once. The Halifax had to encourage customers to put their stake in a nominated account rather than take share certificates. Blackburn says: ‘In the end, 20% opted for certificates. If it had been 100%, it would have been utter chaos.’

Last summer, Blackburn was hoping the conversion and flotation would be a non-event. ‘I want it to happen and for people to expect it to happen and for it to happen with the minimum of fuss,’ he told the Sunday Telegraph.

He pretty much got what he wished for: ‘All the logistics worked on the day and 7.5 million people got shares of a value way above and beyond reasonable expectation – the price was as big a surprise to us as everyone else. It is an astonishing outcome. The glitches didn’t even register on the Richter scale,’ he says.

Broader benefits

However, there were glitches – ‘a problem at one of our printing companies’ which resulted in 1,000 wrongly addressed mailings in the Basildon area ‘which we were onto within hours’ – and, more seriously, complaints and a significant amount of bad press about share allocations to disabled people.

At one stage, Cheshire County Council was threatening to sue over the Halifax’s refusal to issue windfall shares to 66 of its residents with learning difficulties.

Shares were allocated to the first named on each account, which meant anyone unable to run their own finances and who had their accounts handled by trustees didn’t qualify. Those in care often have their accounts controlled by their wardens who, as first name, qualified instead. The Halifax had to operate within the 1986 Building Society’s Act and could not make an exception for disabled people. ‘It would’ve opened up a whole can of worms if we had,’ says Blackburn.

He defends the Halifax’s scheme which offered them a better deal than previous conversions. ‘A warden of a home looking after a dozen people did better with us than with the Alliance & Leicester which offered a flat rate of 200 shares to all qualifying members.

‘Ours also offered a variable distribution to members with balances of #1,000 to #50,000 so someone caring for a number of people’s savings would receive more shares. It is up to them to parcel them out among the people they care for. That means we gave people in care a better deal,’ he says.

Cheshire dropped its action on 25 May, just seven days before the float, after consultation with Cherie Blair QC. ‘They obviously realised there was no case,’ Blackburn remarks.

The issue of disabled people’s entitlement was potentially the most serious problem to be faced and the Halifax satisfied itself and the public at large that it was acting honourably and sympathetically.

The worst part of the flotation, Blackburn says, was sorting out claims on behalf of deceased members. ‘We hadn’t realised until well into the conversion the sheer number of customers dying – 15,000 a month. If you look at it from their families’ point of view, they have lost a loved one and then they have to worry about whether they are going to get their share allocation or not.

‘When a customer dies their allocation goes to their executor and we even had cases where the executor then died. These types of things have to be treated very carefully.’

The best part of the process was the reception he and his team got on their road show. Blackburn, his deputy Gren Folwell, chairman Jon Foulds and finance director Roger Boyes gave 90 presentations to 360 institutions in seven countries in five weeks.

‘We worked out that if we got a red light in Rotterdam it would ruin the whole schedule,’ says Blackburn. His brokers warned him of cases where chief execs had heart attacks under that sort of pressure. ‘I didn’t find it tiring even though we were doing the same thing six times a day,’ he says. ‘It is easier to tell a good story than a bad one and we had a very good story to tell.

‘Our argument was constructed concisely and logically, and we prepared very carefully. We went through a number of drafts and rehearsed the Q and As. The whole thing was a tribute to Halifax’s capabilities in managing enormous projects,’ he concludes.

As you would expect from a man who routinely works an 11-hour day, Blackburn kept up with events back at home. He regularly received ‘the equivalent of a red box’. ‘Fund managers were asking me up-to-date questions so I had to keep up,’ he says. His day usually starts at 7.15am. On the road, his first meeting was at 8.15am and the day finished by 5.00pm, which left time to keep up with his work-in-progress file.

Office life

Blackburn, who is 6ft 2in and has a figure built for comfort rather than speed, settles into an equally well-padded black leather armchair in his Cornhill office. His usual home in Halifax’s head office is just as cavernous and minimalist, save for prominent pictures of his wife and kids – Blackburn has four children, two already grown-up from his first marriage and boys aged nine and six with his second wife. But he remarks that it has changed since my last visit.

‘There was no room for a soft area to sit and talk like this,’ he says, patting the upholstery with ham-like hands and puffing happily on his second cigar of the morning. He has me sit on the matching sofa, pours coffee from a silver pot and beams a great deal.

His relaxed and friendly demeanour reflects the management style that has helped win the hearts of his staff. Blackburn is charming, unpretentious and approachable. Little touches, like sitting up front with his driver even on really smart occasions, endear him to his predominantly Yorkshire employees.

Selling the idea to Halifax’s 30,000 staff was a crucial element in the conversion and flotation. ‘Internal communications was just as important as external,’ Blackburn says. The monthly staff magazine Facts became Conversion Facts for the duration and the company’s TV studio dedicated its fortnightly news bulletin to detailed coverage and information.

There was also a massive training programme to teach people how to deal with conversion questions. ‘We had a conversion champion in each of the branches and we conducted regular market research among staff to try and split out views (from head office) from the branches,’ says Blackburn.

‘We had to give the branches confidence. Like everyone else they were asking if it would work on day one. The fact is that it has, and it has given the organisation a tremendous degree of self-confidence.’

Blackburn’s staff have themselves given the flotation deal the thumbs up: ‘An enormous number of staff have become shareholders and 80% have signed up to a save-as-you-earn share scheme. They are saving on average #100 a month and that is a significant amount for most people who are involved,’ he proudly observes.

It is not, of course, a significant amount for Blackburn who is conscious of the tabloids’ propensity to make fat cats of leading businessmen. ‘We have always been aware of the PR implications. None of us has share options and we have adopted the Greenbury code implicitly,’ he asserts. ‘No one could accuse us of having our snouts in the trough.’

The challenge for Blackburn now is to continue impressing the City with how much he develops the business. There has been much speculation of a bid for the Prudential. ‘Any acquisition would have to be a strategic fit and earnings enhancing,’ he says. ‘We don’t want to grow for the sake of it. The Leeds merger was a nil premium merger and the Clerical Medical acquisition was received as a good deal. We don’t want to blot our copybook.’

Blackburn’s plans are to utilise his vast customer base to cross-sell the Halifax’s now wide range of financial services. It is a pity he can’t do the job himself. Few could resist an all-out charm offensive from the big man with the broad grin.