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Must a beautiful bank have a beautiful purpose?


TonyTony Allen, Dragon Rouge

Peter Drucker suggested that while profit is a measure of the validity of a business, “it is not the explanation, cause, or rationale of business and business decisions”.

In our book, Business is Beautiful we encountered a challenge; could we justifiably feature a leading bank to support our hypothesis that five ‘human’ hallmarks – integrity, curiosity, craft, elegance and prosperity – characterise all businesses that truly stand apart and succeed for all who encounter them?

Far from this challenge being a short sighted endorsement of bank baiting, it really did seem to us that most banks either present their story, or have it presented for them in ways that increasingly make banks seem unimaginative and undifferentiated, and quite the opposite of what they are actually doing and achieving.

As an example of underplaying a strong hand, we took two statements and asked ourselves which of the two banks that describe themselves here would we rather invest in?

Bank A:
Our company was built with hard work over 200 years. We would like to create a company that all can be proud of, and we are confident that, working together, we will build the best financial services company in the world.

Bank B:
Our banking practices always take a responsible approach to the development of wealth and prosperity. We respect the environment and the differing cultures and customs of the countries we operate in and we understand that maintaining our solvency and liquidity is a prerequisite for continuity.

Bank B is Rabobank, which is regarded as one of the world’s strongest banks and would be our choice and we suspect many others too.

As part of researching cases for Business is Beautiful we were happy to grab an hour’s conversation with Vincent Lokin, Rabobank’s Head of Cooperative and Governance and Bouke de Vries, Head of Financial Sector Research.This excerpt from our conversation about integrity and building around a purpose, reveals how Rabobank’s organising principles explicitly position profit as a means and not an end in itself.

As Vincent Lokin explains it, Rabo’s folksy roots believe a radical and distinctive organization:

“I think it is important to understand our history in order to understand our reason for being. We were not founded by people who had money and wanted to make more money. We were founded by people with limited access to money who decided to organise themselves to achieve more. And the single purpose of this cooperative was to serve its members and its clients. But in order to achieve this you need to generate order to comply with the rules of the larger system. Making money is an important aspect, because in the interests of our clients and of the bank we need stability, continuity and solidity. In order to maintain that we need to make profit. Profit is a means through which to serve our clients. It is not a goal to pursue for its own end, or for our shareholders, which is an important difference compared with listed banks.”

Last year, Rabobank was ranked number 10 in Global Finance’s ranking of the World’s Safest Banks’ and number 26 in The Banker’s list of ‘The Top 1000 World Banks’, so its approach is clearly admired by many.

Debate is a recurring theme in our conversation. According to Bouke de Vries, the main point of the cooperative model is that it is democratic and a key aspect of this is that you are willing to be held accountable –“the executive board has the authority to set the strategy but they have to ask for approval for the strategy from the 138 local member banks. If the local member banks say with good reason that they would like to have the strategy changed, then the strategy will be changed. At the local level, in turn, Rabobank has around 1.9 million members. It is harder to organise debate with millions of members than with 138 member banks, so we’ve developed other instruments to help to do this, like the Advisory Council, where entrepreneurs and citizens have opportunities to engage with the bank.”

Maintaining the integrity of any organising principle is a huge responsibility. Vincent Lokin is clear that Rabobank’s own integrity relies on the extent to which it takes its own values seriously. “I think it is good to revisit our core values, not just to assume they persist because they are perfect. I have always tried to understand them. It can sometimes mean we don’t sell a product. For example, we are in the middle of an interesting discussion about how we can measure the performance of our employees, because the one that sells the most mortgages is not likely to be the person that always works in the best interests of our clients. So how can we resolve supporting our clients’ interests with our commercial requirement to make enough money to keep the system going?

We also discover that Rabobank’s purpose gives it a structural differentiation as it expands. In developing countries for example, as a food and agri bank, Rabobank acts as a catalyst to connect smallholders, entrepreneurs and global food giants in supporting the formation of extended co-operatives.

“We are in a position to make a difference by supporting the global food system and by making it possible that the 9 billion people living on the planet in 2050 can eat” says Vincent Lokin. “A lot of the large parties in food and agriculture are our clients but in order to feed 9 billion people, it will be necessary to introduce more small farmers to the system. The way to do it is to encourage them to work together as a cooperative, to develop them and to connect them to the food system. We think we can teach them to work together. It requires knowledge more than money”.

At a time when many regard the financial sector with less certainty and admiration than a generation ago, it’s positive to see how Rabobank has used a fundamental mission to guide its strategy.

More broadly however, it seems that the times, the stresses of strategic reporting and the need for frequent image recovery over the past three years may have led many banks to lack of confidence in their founding stories resulting in a neutering of their original purpose.

As our book demonstrates through its case studies, a great deal can be achieved by enacting and frequently revisiting the bigger story that sits in your organisation. This could just help ignite growth at a time when standing apart in the financial crowd has never been more valuable.

Tony Allen is a co-author of Business is Beautiful and works at the design and innovation company Dragon Rouge.

Global Banking & Finance Review


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