Next Magazine (Second opinion A004, 2013.09.05)
Hong Kong is blessed with venerable institutions that date back to its early days as a colony, but have survived and prospered in the modern world by adapting to changes. These changes and adaptations sometimes happen consciously with a deliberate plan, but they are also often the piecemeal result of many small decisions within those institutions.
One of our most important institutions is HSBC. Although now part of a group headquartered in London, the building at 1 Queens Road Central has been the headquarters of the Hong Kong and Shanghai Banking Corporation Ltd since March 1865. Many an HSBC employee will say that the spiritual home of the bank remains here.
The company employs 26,962 people in Hong Kong alone, more than any government department except the police force. It supplies many of our bank notes. Its ATMs are pervasive, branches convenient, queues notorious and head office a landmark. Most people of Hong Kong through their MPF funds have little choice but to be its shareholders. The company long served as the government’s bank and has played an integral role in the development of the economy and rebuilding linkages to China.
With its storied history, and confident from a well-timed acquisition of Midland Bank in the UK, HSBC had developed a grand vision. It came to see itself as a global bank, with a universal banking approach delivering all financial products in almost all countries. It was a beguiling vision, backed by slick advertising. So beguiling, that venerable columnist Jake van der Kamp at another venerable institution, the SCMP, recently yearned for a return to old visions.
Unfortunately those visions reached beyond the capabilities of banking technology or organizational competence. Scale helps a little in banking, but specialists have key advantages and as HSBC itself preaches, local knowledge counts. It is hard to create an organization where a boss in London can set principles that lead to the right pricing for personal loans in Mexico and mortgages in Hangzhou. The series of problems that HSBC had in the US, Latin America and with controls can be traced back to an ambition that went beyond the achievable. During the deep financial crisis, HSBC was saved not by its vision, nor by a government rescue, but by the home-grown values of its Scottish and Hong Kong origins – prudent to the core and a strong capital base. Under new management HSBC seems to have recognized this over-reach. In a frenetic couple of years it has sold and exited businesses, reduced the number of countries it operates in, revamped systems and management structures. Focus has returned to its commercial banking and trade finance foundations and a re-focus on its traditional markets.
There are lessons here for other venerable institutions in Hong Kong. Our civil service shares origins similar to those of HSBC’s. Our civil service generalist “administrative officers”, the backbone of the civil service elite, mirror the bank’s “international officers”. HSBC is now reforming its “IO” cadre. It needs people with deeper specialist skills and will only take people for the program after they have proven talents elsewhere in the bank. There is a pressing need for our civil service to also be able to tap more professional talent for management roles with skills leavened in the private sector and offer them career prospects.Our government must also learn to temper excessive ambition. The government should realize that the more it tries to do, the less satisfied people are with its performance. Returning to the original vision of competent, but well defined narrow role, is the government’s best hope to restoring credibility.Government could also learn something about prudent spending from HSBC where underlying costs are down in the past year. In the decade from 2000-2010, total government spending grew 31%. With the current budget it is planned to grow by 50% in just four years.Stepping back from a grand vision to an achievable one requires strong leadership, realism and chastened humility. HSBC may just have acquired those and our government could better serve our people by heeding the same.
Bill Stacey is in his 10th year as a resident of Hong Kong and is Chairman of the Lion Rock Institute.We are now on Facebookhttp://www.facebook.com/Next2ndOpinion