RNLI 2013 accounts : highlights

[Rigger Mortice]

I have asked what your credentials are. Apparently you aren't too eager to reply.

He has made it abundantly clear that he neither want to engage in tit for tat, nor does he want to engage in silly willy waving. People are more interested in the content of what is posted and he has made some very good points which are also convincing.
The only clear message we have from you is that you habitually criticise the RNLI, that they have too much stashed away but are likely to run out of income. And the French do it better.

 

[Tranona]

One simple example gives a hint. Payroll numbers : lifeboat service 2 less in 2013; support and governance: plus 21.

What in lifesaving terms required an additional 21 people in the year - and this does not include the large increase in employed fund- raisers?

It's funny, I stumbled across a 2006 thread which said approximately the same thing as I said, only the criticism (of the 'fat cats' travelling everywhere first class and staying in the best of hotels ) if anything was more severe than mine. I didn't participate in that thread.

Once again you are making the error of taking a figure and putting an interpretation on it that suits your opinion. You have noted a "WHAT", but in all of this discussion what is missing from your vocabulary is the word "WHY". You are correct. A change like that asks a question - but it is not the answer. It is not possible from the information given in those bald figures to give an explanation for the change. I could have a pretty good guess, but I would need access to internal management information to go any further than that.

Calling your example "simple" is nearly right - it is actually simplistic. One needs to have a much better grasp of what is going on to turn a simplistic observation into meaningful comment and you seem unable or unwilling to do this. All you do is observe a figure or a phenomenon and immediately jump to a conclusion. As I suggested earlier, you miss out most of the real hard work of analysing the organisation as a whole, in the context in which it operates.

A number of people who know far more about operating rescue services and designing and using boats have told you that once you get below the general level of "providing rescue services at sea" there is little direct comparison between the British service and the French. The operating requirements are different, the scope of activities is different and the two services have come up with different solutions reflecting these differences. On the organisational side, the source of funding is different, the type of resources the two organisations are responsible for are different. Perhaps more importantly they have a different heritage. You will find many examples where the same basic function is provided in very different ways in different countries because of their heritage - things like health services and airlines spring to mind where direct comparisons are very difficult - particularly so when the services do not operate in a market.

The golden rule of performance management and benchmarking is that you compare apples with apples, not with oranges. The use of published annual accounts is only a small part of the process. While they give you a snap shot of the outcomes of previous decisions they are of limited use for detailed analysis and comparison or for predicting future performance. This approach is familiar to most recently qualified accountants, particularly those who have gained their qualification through ACCA or who have studied for a degree in Accounting or Business Studies.

It would be unusual to go into a complex organisation turning over £150m a year and not find some wasteful practices. However it is a big jump from that to saying the organisation is not effective in achieving its objectives which this one clearly is. So as I have said many times, you need to judge the organisation against its objectives, not necessarily against what another organisation does.

Whether the services provided by the RNLI could be provided at lower cost is a completely different question. No doubt if the budget were more constrained those responsible for running the service would find ways of working within a lower budget, probably through a mixture of "cost saving" and service reduction. So the best designed boats might have to go and be replaced by sub optimal boats, the standard of equipment lowered, training facilities cut, real estate sold off etc etc. But this clearly not what the funders and users of the service want as they have consistently shown a willingness to finance a high level of service.

 

[Sybarite]

Once again you are making the error of taking a figure and putting an interpretation on it that suits your opinion. You have noted a "WHAT", but in all of this discussion what is missing from your vocabulary is the word "WHY". You are correct. A change like that asks a question - but it is not the answer. It is not possible from the information given in those bald figures to give an explanation for the change. I could have a pretty good guess, but I would need access to internal management information to go any further than that.

Calling your example "simple" is nearly right - it is actually simplistic. One needs to have a much better grasp of what is going on to turn a simplistic observation into meaningful comment and you seem unable or unwilling to do this. All you do is observe a figure or a phenomenon and immediately jump to a conclusion. As I suggested earlier, you miss out most of the real hard work of analysing the organisation as a whole, in the context in which it operates.

A number of people who know far more about operating rescue services and designing and using boats have told you that once you get below the general level of "providing rescue services at sea" there is little direct comparison between the British service and the French. The operating requirements are different, the scope of activities is different and the two services have come up with different solutions reflecting these differences. On the organisational side, the source of funding is different, the type of resources the two organisations are responsible for are different. Perhaps more importantly they have a different heritage. You will find many examples where the same basic function is provided in very different ways in different countries because of their heritage - things like health services and airlines spring to mind where direct comparisons are very difficult - particularly so when the services do not operate in a market.

The golden rule of performance management and benchmarking is that you compare apples with apples, not with oranges. The use of published annual accounts is only a small part of the process. While they give you a snap shot of the outcomes of previous decisions they are of limited use for detailed analysis and comparison or for predicting future performance. This approach is familiar to most recently qualified accountants, particularly those who have gained their qualification through ACCA or who have studied for a degree in Accounting or Business Studies.

It would be unusual to go into a complex organisation turning over £150m a year and not find some wasteful practices. However it is a big jump from that to saying the organisation is not effective in achieving its objectives which this one clearly is. So as I have said many times, you need to judge the organisation against its objectives, not necessarily against what another organisation does.

Whether the services provided by the RNLI could be provided at lower cost is a completely different question. No doubt if the budget were more constrained those responsible for running the service would find ways of working within a lower budget, probably through a mixture of "cost saving" and service reduction. So the best designed boats might have to go and be replaced by sub optimal boats, the standard of equipment lowered, training facilities cut, real estate sold off etc etc. But this clearly not what the funders and users of the service want as they have consistently shown a willingness to finance a high level of service.

I get the impression that you have never had to manage an organisation under stock market pressure or in periods of difficulty. When you are told that each quarterly result you announce must be better than the previous - no excuses allowed - and we had achieved that for about 25 quarters up to the time I left - you get used to seeing where organisations become lazy. The 21 manpower increase that I referred to is only part of a 71 overall increase in the year, and then you read elsewhere in the accounts that they are trying to find alternative uses for an identified 150000 man hour excess ...! This means to me that conservative and prudent financial management has gone out the window. Why? Because there is no financial pressure on them. They are swimming in funds.

You say that the stock market is picking up and all is rosy. You might want to google a false bull market, which is what some economists are claiming.

I was treasurer of a charity which practically from one day to the next, because of geo-political issues, lost nearly 50% of its revenues in a matter of months. Luckily we had maintained a light structure and were able to carry on. The RNLI has a structure which costs £160m to run. If they had to run at 50% of its current costs, how would they do it ie if legacies dried up?

You say it won't happen, and I sincerely hope you are right, but good stewardship of assets involves preparing for the worst and then being pleasantly surprised.

Finally I think we will have to agree to differ on this.

 

[Searush]

Pressures of the stock market? How is that relevant to a charity? Especially one like the RNLI where the last thing they need is the short-termist, profit NOW view that has brought a few companies to their knees.

Can you suggest how the RNLI income might realistically be suddenly cut by 50% please? No doubt you enjoy the trolling, but it is just making you look silly.

 

[dom]

The use of published annual accounts is only a small part of the process. While they give you a snap shot of the outcomes of previous decisions they are of limited use for detailed analysis and comparison or for predicting future performance.

That's spot on and every enlightened donor and investor would agree. I notice the OP has come back with this point

"When you are told that each quarterly result you announce must be better than the previous - no excuses allowed - and we had achieved that for about 25 quarters up to the time I left - you get used to seeing where organisations become lazy."


Thankfully this nasty, short sighted and commercially idiotic approach went out of fashion nearly a hundred and fifty years ago. It for example underpinned the dangerously overladen mid-nineteenth century cargo vessels. Thankfully, in 1870 (46 years after the RNLI was founded) Samuel Plimsoll drew a line on the side of each vessel, indicating the maximum depth to which it could be loaded. The “coffin ships” were no more and Plimsoll Lines protect sailors to this day.

But my dear Tranona, your enlightened ethical stance has no place in the cut and thrust world of the modern commerce. Then again perhaps it does; you after all speak the same language as Paul Polman, CEO of Unilever who recently said:


"I don't think our fiduciary duty is to put shareholders first. I say the opposite. What we firmly believe is that if we focus our company on improving the lives of the world's citizens and come up with genuine sustainable solutions, we are more in synch with consumers and society and ultimately this will result in good shareholder returns.
"...Why would you invest in a company which is out of synch with the needs of society, that does not take its social compliance in its supply chain seriously, that does not think about the costs of externalities, or of its negative impacts on society?...
"...Historically, too many CEOs have just responded to shareholders instead of actively seeking out the right shareholders," he said. "Most CEOs go to visit their existing shareholders; we go to visit the ones we don't yet have."


So how did the share price of ethical Unilever fare? Look at yahoofinance.com and see how it's done over the past twenty years. Then take a look at how morally bankrupt Fed Goodwin's RBS did ...QED

 

[Rigger Mortice]

If anyone wants to do some willy waving, a quick look at the CV's of both the RNLI executive team, and the board of trustees is interesting. http://rnli.org/aboutus/aboutthernli/ourpeople/Pages/Governance.aspx

I assume they've all actually walked through the doors in Poole and learnt a bit about the organisation, unlike the armchair expert.

I was going to copy and paste the details here.....but what's the point? We'll just have yet another re-run next year anyhow.

 

[Sybarite]

Pressures of the stock market? How is that relevant to a charity?

Management discipline applies in every type of organisation - unless you have money to throw away.

Can you suggest how the RNLI income might realistically be suddenly cut by 50% please? No doubt you enjoy the trolling, but it is just making you look silly.

Legacies represent 62% of current income. Can you guarantee that level for the foreseeable future? To think that there are no risks in the future is to have your head in the sand or not to read the specialized press. If a big problem arises, people may no longer have the means to be as generous as they were in the past.

 

[Sybarite]

That's spot on and every enlightened donor and investor would agree. I notice the OP has come back with this point

"When you are told that each quarterly result you announce must be better than the previous - no excuses allowed - and we had achieved that for about 25 quarters up to the time I left - you get used to seeing where organisations become lazy."


Thankfully this nasty, short sighted and commercially idiotic approach went out of fashion nearly a hundred and fifty years ago.

Now you really confirm that you haven't a clue what you are talking about. For your information, this approach was applied in a group whose CEO was twice voted America's most admired CEO while I was there.

He was a close friend of the CEO of GEC and both groups adopted Six Sigma management methods. This involved computing what was called the cost of poor quality, which cost had to reduce at every reporting period. When my contract (I was an independent setting up a finance department in a division which was being restructured) came to an end I was hired by the larger consulting company contracted to participate in the roll out of Six Sigma to the whole group in Europe.

But my dear Tranona, your enlightened ethical stance has no place in the cut and thrust world of the modern commerce. Then again perhaps it does; you after all speak the same language as Paul Polman, CEO of Unilever who recently said:


"I don't think our fiduciary duty is to put shareholders first. I say the opposite. What we firmly believe is that if we focus our company on improving the lives of the world's citizens and come up with genuine sustainable solutions, we are more in synch with consumers and society and ultimately this will result in good shareholder returns.
"...Why would you invest in a company which is out of synch with the needs of society, that does not take its social compliance in its supply chain seriously, that does not think about the costs of externalities, or of its negative impacts on society?...
"...Historically, too many CEOs have just responded to shareholders instead of actively seeking out the right shareholders," he said. "Most CEOs go to visit their existing shareholders; we go to visit the ones we don't yet have."


So how did the share price of ethical Unilever fare? Look at yahoofinance.com and see how it's done over the past twenty years. Then take a look at how morally bankrupt Fed Goodwin's RBS did ...QED

Suppose you cant get more disjointed than that.

 

[Sybarite]

I really would like a senior representative of RNLI management to respond to the points I am making.

If they can show me that the points I raise are unsubstantiated I will gladly withdraw them.

I would be surprised if they are not aware of these threads.

 

[Rigger Mortice]

I really would like a senior representative of RNLI management to respond to the points I am making.

Maybe they don't feel to need to respond to every tom dick and harry who knows how he would do it? You have after all been saying exactly the same thing for so long and yet, surprise, surprise, they are still there.

You could apply for a job with them. Perhaps they'll read this thread and decide that you have the insight they are obviously lacking?

 

[Bru]

GEC eh?

Oh, yes. I think I remember them. In fact, my first job was in one of their subsidiaries.

Remind me how effective Six Sigma and all the other modern management and accounting practices were again will you please?

Because what I remember is a cash rich company with a successful policy of keeping production in house, making a tidy profit on turnover and growing organically (and, I'm forced to admit, never ever paying a bill until backed into a corner and given a severe kicking!) being dismantled, sold off, and fed to the wolves once the accountants and bankers finally wrested control from Weinstock (who was not without his faults chief among them being a reluctance to invest in new technology)

Whilst you make some valid points in amongst all the guff, holding up modern business management practice as a model for the governance of a major charity isn't one of them

 

[Sybarite]

GEC eh?

Oh, yes. I think I remember them. In fact, my first job was in one of their subsidiaries.

Remind me how effective Six Sigma and all the other modern management and accounting practices were again will you please?

Because what I remember is a cash rich company with a successful policy of keeping production in house, making a tidy profit on turnover and growing organically (and, I'm forced to admit, never ever paying a bill until backed into a corner and given a severe kicking!) being dismantled, sold off, and fed to the wolves once the accountants and bankers finally wrested control from Weinstock (who was not without his faults chief among them being a reluctance to invest in new technology)

Whilst you make some valid points in amongst all the guff, holding up modern business management practice as a model for the governance of a major charity isn't one of them

I was responding to a point by Dom saying that these types of practices haven't been used in the last 150 years and so I was just citing an example. I don't know GEC as such, just that they went into Six Sigma at about the same time as us. IIRC, whereas our group had the most admired CEO, GEC at that time, was the most admired corporation.

There is no reason why Six Sigma could not be applied in a large charity. It means identifying weaknesses in an administrative operation and then tracking the occurrence. If you don't know where you are going, then any road is good.

Correction with my apologies : I intended to refer to General Electric, not GEC.. Jack Welch was the CEO.

 

[Bru]

There is a rather fundamental difference twixt GE and GEC!

Six Sigma and other such tools are not without their uses in the right environment (although they largely feature a lot of fancy names and fluff to disguise the fact that at the core it's either common sense, already existing good practice or bullish*t)

The inappropriate application of such tools, and excessive reliance on them for that matter, can be disastrous

My particular pet hate in this field is the presentation of such formulaic approaches as some kind of wonder solution which they ain't (GE, for example, stand out as an early adopter of Six Sigma but they also stand out as one of the few companies to show long term growth whilst using it as a core discipline. Many other adopters abandoned it in part or altogether according to Forbes analysis)

 

[duncan99210]

I was responding to a point by Dom saying that these types of practices haven't been used in the last 150 years and so I was just citing an example. I don't know GEC as such, just that they went into Six Sigma at about the same time as us. IIRC, whereas our group had the most admired CEO, GEC at that time, was the most admired corporation.

There is no reason why Six Sigma could not be applied in a large charity. It means identifying weaknesses in an administrative operation and then tracking the occurrence. If you don't know where you are going, then any road is good.

Correction with my apologies : I intended to refer to General Electric, not GEC.. Jack Welch was the CEO.

How confident are you that RNLI doesn't use 6 Sigma or some other management tool?

Rats. I said in my earlier post I'd not get drawn into the annual Sybarite knock the RNLI troll session.

 

[jordanbasset]

Have I understood it correctly and is this the current situation
RNLI pays its managers, (some argue too much) part of that role is the collection of funds, which they do very well. The RNLI is financially solvent, has reserves and does not need any funding from the Government and does not charge to rescue boats or people.

The French service apparently uses unpaid volunteers to collect it's money, it raises about an eighth of what the RNLI raises, it is subsidised by around 25% by tax payers. It does not charge to rescue people but does charge to rescue boats. This may bee a good or a bad thing, depending on your viewpoint, but it is obvious they cannot afford to pay for rescue of boats out of their charity.

I do not believe the French are any less generous in giving to charity than the British, so can only assume the blame lies with the volunteer managers they have, I am sure they are community minded people and should be applauded for their work but I do question whether it is best to pay for a professional job and raise more money or let unpaid people do it and raise less.

As to the RNLI cutting costs, then thy will have even more reserves and am sure will be criticised again for having those reserves.

 

[DanWash]

Its OK!!! his engine is knackered (see recent tread start) and we can all soon look fwd to the story of how he refused a tow from the over funded fiscally incompetent RNLI ....... fingers crossed for a massive helping of humble pie........

 

[Border Terrier]

My only sadness is that, with all the available reserves, the Institution closes stations which are so much part of the community.

The independent rescue service at Boulmer on the Northumberland Coast is an example that comes to mind.

 

[Tranona]

I get the impression that you have never had to manage an organisation under stock market pressure or in periods of difficulty. When you are told that each quarterly result you announce must be better than the previous - no excuses allowed - and we had achieved that for about 25 quarters up to the time I left - you get used to seeing where organisations become lazy. The 21 manpower increase that I referred to is only part of a 71 overall increase in the year, and then you read elsewhere in the accounts that they are trying to find alternative uses for an identified 150000 man hour excess ...! This means to me that conservative and prudent financial management has gone out the window. Why? Because there is no financial pressure on them. They are swimming in funds.

You say that the stock market is picking up and all is rosy. You might want to google a false bull market, which is what some economists are claiming.

I was treasurer of a charity which practically from one day to the next, because of geo-political issues, lost nearly 50% of its revenues in a matter of months. Luckily we had maintained a light structure and were able to carry on. The RNLI has a structure which costs £160m to run. If they had to run at 50% of its current costs, how would they do it ie if legacies dried up?

You say it won't happen, and I sincerely hope you are right, but good stewardship of assets involves preparing for the worst and then being pleasantly surprised.

Finally I think we will have to agree to differ on this.

I am afraid your "impression" is misplaced. Perhaps part of your difficulty is framing the problem in your own experience, rather than objectively looking at the organisation in its context (Beginning to sound like a broken record here). One of the key lessons to be learned from the study and practice of management is that there is no universal "right way" - if there was you would not need human brains, only robots.

The RNLI does NOT operate in a crisis driven, got to beat last month's results, shareholders baying for blood environment. It is in the fortunate position to be able to make relatively long term plans from a secure financial and organisational base. Of course it has to be aware of happenings in the external environment that might impact on its ability to achieve those plans - but what's new? There is a constant stream of doom and gloom followed by everything is on the up - or even as now both at the same time. If you reacted to every one of these scares you would never do anything positive. The art of management is identifying the things you can do something about and using them to your advantage. In our context there is clearly a willingness of charity funders to support the RNLI strategy as evidenced by the significant increase in both legacy and donation income. Just because you have had an experience of a charity losing 50% of its income has little bearing on what we are discussing here - so why make the possibility a key plank for your argument?

Your way of nitpicking on individual figures to try and prove your hypothesis is the very worst form of "science" as it leads you to ignoring other figures that tell exactly the opposite story. Your obsession with minor changes in headcount from year to year is an example. It would be surprising if an organisation had no changes in the composition of its workforce from year to year, particularly in a period of change. Fixation on that figure ignores the fact that staff costs have risen overall by less than the rate of inflation and at a lower rate than the increase in FTE. The number of staff paid over £60k has fallen by 13% - and I doubt you would find many organisations as complex as this with turnover of £150m+ that has such a small proportion of senior staff in this pay category. The overhead cost of support services fell in money terms from 2012 to 2013. Hardly evidence of an organisation where costs are out of control.

Same applies to the pension fund. You see that as a negative and implies it is a bad use of resources. You seem to have little understanding of how occupational pensions work in UK. This is a contributory scheme - and all employers are required to offer employees access to such a scheme - so hardly surprising the RNLI as a major employer has one. However it does not "belong" to the organisation, but to the members who have contributed to the fund along with contributions from the employer. You will find the structure of this fund no different from that in many other large organisations in both the private and charitable sectors.

I know we are unlikely to agree, but at least make an attempt to follow logic and argument rather than indulge in opinion and conjecture.

 

[Rigger Mortice]

Same applies to the pension fund. You see that as a negative and implies it is a bad use of resources. You seem to have little understanding of how occupational pensions work in UK. This is a contributory scheme - and all employers are required to offer employees access to such a scheme - so hardly surprising the RNLI as a major employer has one. However it does not "belong" to the organisation, but to the members who have contributed to the fund along with contributions from the employer. You will find the structure of this fund no different from that in many other large organisations in both the private and charitable sectors.

My betting is that OP would have been one of those pen pushers who, a few years ago were pouncing on pension funds and raiding them by taking "pension holidays". Millions of workers had to continue making their contributions whilst the employers were cutting costs by a few percent. One company did it then, like lemmings other companies leapt onto the bandwagon. Many accountants just follow the latest fashion.

 

[Searush]

Management discipline applies in every type of organisation - unless you have money to throw away.

But the short term attitudes of the stock market are irrelevant to a life saving charity. I'd have thought even you could see that, but so it goes.

Legacies represent 62% of current income. Can you guarantee that level for the foreseeable future? To think that there are no risks in the future is to have your head in the sand or not to read the specialized press. If a big problem arises, people may no longer have the means to be as generous as they were in the past.

In the current climate the incomes of the rich continue to increase out of proportion to all economic indicators. Add in the reduction in family sizes & I would actually expect legacies to increase rather than decline. What evidence do you have to the contrary?