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ombudsman news

issue 98

November/December 2011

ombudsman focus: '... question, probe and challenge'

Sir Christopher Kelly steps down from the board of the Financial Ombudsman Service in January 2012 - after seven years as chairman and three years before that as a non-executive director. We catch up with him to ask about his management style, the highlights of the last decade - and whether he has any advice for the incoming chairman.

in a nutshell, what's the role of the chairman of the Financial Ombudsman Service?

Being the chairman involves leading our board of nine non-executive directors in determining strategy; managing the performance of the chief ombudsman in delivering that strategy; and acting as an ambassador for the service.

how does your job fit in with Natalie Ceeney's role as chief ombudsman and chief executive?

Natalie runs the organisation. It's my job as non-executive chairman to support her in doing that - which includes both encouraging and challenging her on where we can do better. My role as the chairman is part-time, while Natalie is very much full-time.

how much time does this mean you spend at the ombudsman service - and is that enough?

I spend around two days a week on ombudsman business, although that might not always mean I'm in the office all that time. More than two days and it could risk my becoming too 'hands-on' - which might then mean I'd cease to be a non-executive chairman. With a dynamic chief executive like Natalie, I feel that two days gives us the right balance.

you were appointed chairman in January 2005, having previously served on the board for three years as a non-executive director. How different were the two roles - and was it a difficult job change?

Being chairman is very different from being any other kind of board member. You take on much more responsibility. But I didn't find it too difficult to step up to the new role, because of the support I had from my non-executive colleagues and the quality of the executive team. And I also already had chairing experience in a variety of other organisations. Actually, in some respects, being a chairman is easier because you're much more in control.

you're the third person to have chaired the board of the ombudsman service, following Andreas Whittam Smith and Sue Slipman. Has the role of chairman changed over time - or does the job remain essentially the same?

Andreas Whittam Smith was chairman when the Financial Ombudsman Service was first being set up - which involved merging six existing ombudsman schemes and launching the new one. Sue Slipman was the chair for a relatively short period when the major issue we faced related to our mortgage-endowment complaints workload. So there were some very specific circumstances that presented particular challenges to my predecessor chairmen.

Allowing for the different circumstances over time, I suspect the essentials of the role have remained pretty much the same, though we all have our own ways of doing the job, of course.

what's been the most challenging aspect of your work as chairman of the ombudsman service?

It has to have been responding to the challenges posed by payment protection insurance (PPI) - both the operational challenge, in relation to managing the huge volumes of cases, and of course the legal challenge, in terms of the PPI judicial review brought by the banks. This has all absorbed a substantial amount of time, resource and energy for everyone involved - including the board, the executive team and the ombudsman service as whole.

And we're still dealing with the fall-out of PPI - with thousands of new PPI complaints still arriving each week, and a significant degree of uncertainty about the volume and type of cases we will continue to see into next year and beyond.

the role of the non-executive board is to ensure the ombudsman service is properly resourced and able to carry out its work effectively and independently. The board has no involvement in deciding individual disputes. Can that be frustrating for you?

This is something that has to be explained to new non-executive directors when they first join the board - and some find it a bit strange at first. But I think all of us quickly realise that it's an inevitable consequence of our statutory ombudsmen each being individually responsible for making quasi-judicial decisions.

Personally I don't find it frustrating at all. But that doesn't stop me, on occasions, from asking questions about the decisions we take - after the event - to satisfy myself that the process by which we make decisions is as robust and fair as we can make it.

what were the issues that most preoccupied the board when you became chairman in 2005 - and what are the issues currently at the top of your agenda?

Back in 2005 it was the strategic and operational challenges caused by the high volumes of complaints about mortgage endowments - at that time accounting for two thirds of our workload. Now, of course, it's PPI that continues to make up the largest chunk of our new cases. Plus ça change.

you're also chairman of The King's Fund and of the Committee on Standards in Public Life. What do those organisations do - and how similar or different is your role there compared with your role at the ombudsman service?

The King's Fund is a charity - and the leading 'think tank' in the UK on health policy. The Committee on Standards in Public Life is a small group of people, with an even smaller secretariat, that provides advice to the Prime Minister and others about ways of maintaining high standards of behaviour in public life.

For example, the Committee is about to publish a report on how political parties are funded and what should be done to prevent the suspicion, or reality, that people or organisations who give million-pound donations to the parties get inappropriate favours or influence in return. So the tasks of these bodies - and the work of the ombudsman service - are very different.

technically, you're appointed by the Financial Services Authority with the approval of the Treasury. What does that mean in practice? Do you have to report to those two bodies?

The Financial Ombudsman Service is funded by what, in practice, is a tax on the financial services industry - which inevitably finds its way ultimately into the prices charged to consumers. And as well as having significant financial implications for the industry, our decisions can have life-changing consequences for the consumers involved. So it's essential that we are accountable - even while we guard our independence and impartiality strongly.

As part of our formal framework of accountability, the chief ombudsman and I go twice a year to meetings of the FSA's board - to talk about our work and current issues and to answer questions. And the FSA's board has to formally approve our annual budget, after we have consulted on it publicly.

Every three years our board commissions an independent external review - Lord Hunt of Wirral's report into our openness and accountability was the last one, published in 2008 - and the National Audit Office are currently carrying out a review for us of our efficiency.

We also report formally through our annual plan and budget, our directors' report and our annual review. And informally we carry out a very wide range of activities with all our stakeholders - to be as open and transparent as possible about what we do.

what achievement are you most proud of at the ombudsman service?

Getting the right chief executive - or chief ombudsman in our case - is the most important thing any chairman can do. After our first chief ombudsman, Walter Merricks, announced in 2009 that after ten years he was stepping down, people told us he'd be a hard act to follow. The ombudsman service was then at a significant turning point in its evolution - ten years old and a million cases under its belt. Everyone recognised the vital importance of getting the right new chief ombudsman, going forward. I'm confident that the board's choice of Natalie Ceeney - responsible for leading the ombudsman service into the challenges of the new decade - was spot on.

and is there anything you would have done differently?

Of course. I'm a big believer that if people don't make mistakes, they're usually not trying hard enough. The important thing is to learn from where things didn't go so well, so that you can do better next time.

what do you think the biggest challenges will be for the Financial Ombudsman Service over the next few years?

I believe we'll be dealing with challenges in two key areas. First, PPI of course. Current indications as to the volumes of PPI complaints coming our way are very unsettling. And there's still no clear picture as to how well the banks and other financial businesses will themselves have dealt with these cases before they reach us.

Second, we've already identified - for example, in our plans for a changing world, published earlier this year - how society, business and technology are evolving and transforming - and how the ombudsman service needs to understand and respond to these changes, to be able to continue to meet the needs of our customers.

An example of this is in the area of mobile e-money. We recognise that, given the developing technology, the nature of the transactions, and the time-scales involved, it may no longer be realistic to expect people to wait eight weeks before the ombudsman service can step in. It may also not be realistic for the businesses involved to pay the current standard case fee for us to sort out what's likely to be a low-value transactional problem.

any words of advice for your successor, the next chairman?

You have a very good board and executive team. Trust them to get it right - but be ready to question, probe and challenge.

have you yourself complained about anything recently? What happened - and how did you feel it was handled?

I recently had to complain to the chief executive of a company that had installed some rather pricey new windows in my refurbished flat. I got back a rather antagonistic three-page letter. It set out in detail how blameless the company was - but totally failed to answer the basic point I was making.

I wasn't after any form of financial compensation. I just thought he ought to know what his company was doing, so that he could make it better for the next customer. He obviously didn't see it the same way. I won't be recommending his company to anyone else.

has your attitude to complaining changed since you've been on the board of the ombudsman service?

I'm not a natural complainer. But my time with the Financial Ombudsman Service has certainly helped make me appreciate how every organisation can learn from problems and improve - as long as they take complaints seriously, don't immediately get defensive, and try to see things from the customer's point of view.

what will you miss most when you step down as chairman of the Financial Ombudsman Service in January?

The people, of course.

photo: Sir Christopher Kelly
photo: Sir Christopher Kelly

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