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Can Barclays really change?

Posted on: Tuesday 22nd of January 2013

It’s really quite something when a CEO as senior as Barclays’ Antony Jenkins’ takes a stand as he has over  the need for corporate values that build trust.

In his recent letter to staff Jenkins admits that like other banks, over a period of almost 20 years Barclays “became too aggressive, too focused on the short-term, too disconnected from the needs of our customers and clients, and wider society”.

Setting out a new set of values (of respect, integrity, service, excellence and stewardship) he avers: “We must never again be in a position of rewarding people for making the bank money in a way which is unethical or inconsistent with our values.” Anyone who doesn’t like this should leave, he continues.

The challenge of change

The big question however, is ‘how is this new ethical, values-oriented approach going to be enforced and embedded in the way the bank works?’

At one level Jenkins is doing all the right things. Key staff are being trained on how to spread the new values through the organization. And, says Jenkins, “Performance assessment will be based not just on what we deliver but on how we deliver it”.

But the challenge could be bigger than that. Values that aren’t embedded into operations – i.e. how the bank and its staff make their money – rarely last, except perhaps as PR wrapping.

The dynamics of consumer disempowerment

The challenge for banks is that over the past few decades it’s often been a lot easier for them to make more money, quicker by taking advantages of consumer weaknesses (information asymmetries, inertia in moving accounts etc) than it has to make money by innovating and delivering better value.

These ‘easy’ ways of making money can end up getting embedded into entire business models, operating processes, incentives and, yes, cultures.

So-called independent financial advice is a classic example. For decades, the system was structured so that the incentives of the advisor were kept opaque so that advisors could use their superior knowledge to rip off their customers. As Anthony Hilton put it in the London Evening Standard:

“Customers were unaware that what was recommended to them as the best buy might simply have been the investment which earned the adviser the highest commission — a pattern of behaviour which meant insurance companies seeking to increase market share for any particular savings product were more likely to raise the amount they would pay intermediaries in concealed kickbacks, than they were to improve the quality of the product.”

Fact is, raising the level of intermediary kickbacks was a much cheaper, much easier and less risky way of making money than improving the quality of the product.

Business models like this tend to follow a cycle. 1) Find an easy way to make money. This delivers handsome profits for a number of years. 2) A backlash occurs. The media turns hostile as ‘scandals’ are exposed and regulators move to ban or limit the practice. 3) The organization suddenly faces a hole in its sales and profits which it desperately needs to fill. So it turns to another easy way to make money, thereby kicking the cycle all over again.

The really big challenge for Barclays (and all other banks) is to find a way of making money where it’s easier, less risky and more profitable to offer genuine value than to take advantage of consumer weaknesses – where ‘values’ and culture are genuinely aligned to the business model rather than in conflict, thereby helping to build trust and reputation over the long haul.

Information services

It’s early days yet, but we think our work on information services is one way to do this. The essence of the information service is to deploy information as a tool in the hands of the individual/customer, to help the individual achieve his or her own goals. That fits perfectly with Jenkins’ new ‘single cross-purpose business purpose’ for Barclays: to help people ‘achieve their ambitions’.

Information services help people use information in two ways:

  • to get stuff done (like plan, executive, communicate, administer, monitor and respond to changes) and
  • to make better decisions, not only about which products or services to buy but also about what goals to adopt, how to achieve them, and how to manage trade-offs and obstacles along the way.

Information services depend on, and help to create, different types of incentives and relationships. They help create a reputation for helpfulness and service, which is potentially key to both customer acquisition and customer retention and therefore worth building and defending. They encourage information sharing which, if it is to happen, requires higher levels of trust. High levels of information sharing, in turn, open doors to cost reductions (from lower cost access to richer data, using the data generated by the service to enrich/clean up databases and gain new customer insights at low cost) and to new revenue opportunities (potentially, provision of the service itself and/or matching/connecting fees).

In short, they create genuine incentives for a company to take the high road, where values and culture genuinely do support the business model, and where the business model does genuinely encourage positive values and culture.

At the cross roads

This is the big question now for Barclays and other banks. Are they able and prepared to genuinely align how they make their money to newly espoused values? Or will they simply add a layer of espoused ‘values’ on top of a basically unchanged business model of good old fashioned product push? If they stick with good old fashioned product push they will, inevitably, get sucked back into old ways. Then, even with the best of intentions, their newly espoused values will go the way of all flesh.

But if they are able to adopt new strategies such as ‘brands as information services’ then initiatives like Jenkins’ letter could mark the start of a dramatic break from the past.