Is Barclays getting holistic?
“Culture eats strategy for breakfast.” That’s an old saying attributed to management guru Peter Drucker, and it’s been particularly pertinent over the past five years. A more modern meme is the “new normal”, but I think they’re closely connected. And a good illustration of how and why is the news coming out of Barclays.
Investors reacted well this morning to Barclays results and restructuring plans, despite much of their annual profits being wiped out by fines and compensation for mis-sold products. The bank was reeling from massive fines over LIBOR fixing and the closure of its tax avoidance unit. Now it says there are 3,700 jobs to go as part of a strategic review that aims to cut costs by £1.7bn.
Newish CEO Antony Jenkins stepped up to address these big changes on Radio Four’s Today Programme this morning. And the strategic intent was clearly a big part of his pitch (to his own staff and shareholders, it seemed, more than customers).
“We were too short term focussed and that's something that will change,” he said. “In my view the returns in financial services were historically driven by leverage - those days are gone. Banks have to reposition themselves to become more efficient and effective to serve customers and clients.”
That’s not just about cutting headcount, then. It means taking a look across the business and seeing how it all fits together logically – from the sources of capital and the services it buys in, through to the customer (both in terms of offerings and perceptions).
How it manages its cost base – be it the seemingly mundane like power and print; or the more exotic, such as professional services and IT – has to be a fundamental part of that review. Critically, those efforts must be aligned not just to the operational or strategic realities Jenkins is trying to create. They have to be culturally appropriate too.
Jenkins went on to say this morning that mis-selling (products and services customers don’t really need – which is a gold-plating of the requirement not to “treat customers fairly”) and the bonus culture would also be addressed. Would this hurt profits? Possibly, in the short term. But the long-term future of the bank – something “good” shareholders care about above all else – would be well served.
In other words, the culture is changing, too. And Jenkins’s message was stark: “If you don't want to work this way, you can go work somewhere else.” That suggests a properly holistic approach to the sea-change in financial services. Drive for efficiency, focus on the customer, develop a proper service culture.
And, critically, get functions like procurement and outsourcing – which underpin those more visible changes – in the right shape to support that whole-business review. Cutting headcount might grab the headlines. But it’s holistic change that delivers results.