The Risk of Recruiting a Bunch of Bankers?
Sir David Walker started his new job yesterday as Barclays Chairman. Less than 24 hours in, he has already announced he is to clear out a great number of non-exec directors and pave a similar route for execs…. and already he has received great applause for that announcement. Rid the bank of the scourge of the city; wash any trace/memory/contact of corporate villain, Bob Diamond from the group… Expunge him from memory like Lance Armstrong from the Tour De France almanac.
Jerry del Missier and Marcus Agius have already gone. CFO Chris Lucas is expected to retire as early at Q1 2013 and Sally Bott, HR Director has unexpectedly resigned. Even Bob Diamond’s successor as head of BarCap, Rich Ricci, once rumoured to be the heir-apparent once again, is now seemingly deemed too close to the old guard to form part of the new Barclays exec board.
But is such a cull really needed? The LIBOR scandal is at the centre of issue. Despite a wealth of evidence to suggest that the practice was very well-known in The City and informed suggestions that the root cause emanated from the very highest level including Whitehall, the then Government and the best known inhabitants of Threadneedle Street, Barclays have taken the brunt of the blame, and public venom.
But is the dramatic shift to the culture simply a knee-jerk over-reaction to such an ignorant public outcry and media/political vilification? Is this massive organisation allowing a single, over-reported blip control and influence its entire operation?
Lest we forget, the LIBOR scandal was deemed so bad that Barclays were fined an incredible £290m – the figure set to be reflective of Barclays’ high level of profitability. The fine was approx 5% of Barclays’ annual profit.
The common media-fed sentiment is that Sir David needs to rid the Group of the investment banking arm, formerly known as BarCap (the name has already gone…), the toxic, unsavoury, gambling component of the Banking giant. To do so, he needs to rid the group exec of any influencer who has had any connection, love or background with such a vile business practice.
….except that BarCap accounted for approximately 70% of Barclays profits. Oops. The level of profitability largely thanks to the previous head of BarCap, some unknown gentleman by the name of Diamond. Is getting rid of 70% of group profits really acting in Shareholder interests? An incoming Chairman would be wise to consider his responsibility to such shareholders before adopting sweeping changes, especially with a CEO plucked from their own retail banking arm.
And what of Sir David and his so far fairly vocal plans?
He is 72 years of age, very much a city grandee, ex-Lloyds, ex-Morgan Stanley. He is determined to play a very active part in the leadership of Barclays, seeing his position as partnering, working alongside new CEO, Antony Jenkins. Appointing such a city ‘gent’ is a very good political move, and Sir David has impeccable credentials, essential for a chairman (or should we be say chairperson now?).
That said, I would advocate someone a little more lithe and less ‘establishment’ as Chairman, especially given the PR the business has had, and the worse still PR the sector as a whole has had – as Tony Robbins says, “If you do what you’ve always done, you’ll get what you’ve always gotten”. I’m not wholly sure that recruiting such a stalwart banking grandee is really the perfect option, but it appeases blood-baying City haters to see a 72yr old old school gent in situ, and the Chairman/woman/person/etc is the prime seat for such an individual.
The real risk is, however, how he directs and influences the appointment of the other directors. With a desire to wholesale cull a large number of the current non-exec team, and exec; that will become a challenge….and possibly a far bigger challenge than Sir David realises.
Just about every name Sir David has publically approached about opportunities appears to have ‘Lord’ as their first name? Lord Levene, (former Lloyd’s of London chairman); Lord Davies, (former Standard Chartered chairman) etc.
With that nomenclature comes great experience, no question. It will also appease the age-discrimination fraternity no end, although with there being a distinct lack of ‘Lady’ present, the current Women On Boards movement may have something to say – but then Barclays were one of the few FTSE-100 to have near 25% women on their board during the LIBOR crisis to no noticeable benefit .
But it also brings the potential of great problems. Barclays was not broken, certainly not in the sense that HBOS/RBS/Lloyds/etc were. Yes they were pitched at the centre of the LIBOR scandal, but the bulk of that problem was political/media posturing. It was unfortunate that they were deemed the epitome of the bad banker, unfairly. But the cries to rid the bank of its current culture come predominantly from ignorant mouths.
And it is that forced, quick change of culture that is dangerous to Barclays, and to any business. Barclays was about the only major bank not to need a government handout, and to maintain profitability (and service) throughout the banking crisis. The strength of their business was, whether we, the government, the media and their shareholders want to admit it, or not, was BarCap, their investment banking arm. That is where the bulk of profits came from, and the bulk of the business growth.
With the choice of a retail banking CEO in Antony Jenkins, understanding of the BarCap business diminishes. With the appointment of a cautious, 72yr old, city grandee Chairman in Sir David, that position is heightened.
Even Tim Breedon’s appointment as Non-Exec, whilst a great coup (Tim is an awesome operator) doesn’t help the primary part of Barclay’s operations. He comes from insurance. 25 yrs at L&G, most recent chair of Association of British Insurers and a wealth of financial regulation. He does have fund management exposure, and was one of the victims of the Shareholder Spring earlier this year, but his appointment will not significantly add to the Barclays culture in the right areas.
And here is the problem. Businesses need to protect their culture. They need to foster its development aligned to corporate strategy. Above all, they need to ensure that the culture benefits the business and its people, not panders to external (ignorant & irrelevant) opinion….especially when that culture works.
Here in the North-West, one business dominated the headlines for much of the late 90s/early 00s – the Caudwell Group. A great entrepreneurial business, founded by two brothers that grew into not only one of the biggest mobile phone businesses in the country (Phones 4u, 20:20, Dextra, Singlepoint, LSG etc),but one of the biggest success stories of the current era. The business sold, in total for £billions less than 20 years after it started, catapulting John Caudwell into business stardom.
For just about every minute of its history, the Group was slammed for its ‘dreadful’ culture. But slammed by who? Not the majority of employees who still cite the experience as career defining. Certainly not the shareholders who have received wealth beyond anyone’s expectation. ….and not those seeking to hire the very best talent in the North-West, in the last 20 years – anyone that “survived” the Caudwell culture for more than a couple of years was automatically deemed outstanding.
The culture was deemed bad by those who simply didn’t agree with it. Typically those that didn’t like it, didn’t benefit from it or largely, didn’t really know it, but commented anyway. The culture was known as aggressive and very arrogance. But those traits viewed from a different angle become driven and filled with self-belief….and as every NLP practitioner, every sports psychologist and every motivational speaker will tell us; drive and self belief are two major keys to supreme performance.
Culture and Recruitment
Understanding and being respectful of culture, as well as being appreciative of how that culture fits within a corporate strategy, is one of the most critical factors when recruiting, especially at a senior, or ‘C’ Level, yet it is also one of the areas recruiters so often overlook in an effort to simplify (i.e. cheapen) the recruitment process.
The emergence of web-based solutions, face-less recruitment portals and a myriad of other non-human recruitment products is benefitting many junior recruitment processes where raw skills are more important than cultural fit, but they are also a huge risk to business when they seek to utilise such products at a management level. Removing or even just diluting cultural fit can have a massively detrimental effect long-term.
Our friends the in-house recruitment teams should nullify this problem being on the ‘inside’, however they will often make it worse. Several times, an in-house recruitment ‘co-ordinator’ will give me a steer on what is required from a cultural perspective, but such opinion is often the individual’s personal perspective, rather than a corporate perspective. Fortunately with relationships at Board-Level, we usually have the ability to contrast and qualify that cultural fit. Seldom are the two opinions the same.
Back to Barclays. There is a real risk of “cutting their nose off to spite their face” over the desire to change the culture to appease the public/media. The start of this is the appointment of a cautious, retail banking background CEO who has been reported to promote a desire to focus on ethics above everything else (shareholder value/ROI/ROE/Profitability?), as well as his reported desire to create a convivial environment amongst senior management.
Sir David in his position more akin to an executive chairman than non-exec, is taking advice from a large number of people Lords, all sitting in a very small diversity viewing spot. He has given great credence to another Lord, Lord Turner of the FSA, who famously and politically described Barclays and their contemporaries as “Socially useless” earlier this year, negating the fact that businesses are answerable to shareholders, not the mystical beast, ‘society’.
If Sir David is seeking to dramatically shift Barclays culture then he is succeeding already. Comments emanating from Barclays already include “He’s throwing his weight around a lot more than people internally feel comfortable with”. Others cite Sir David’s forcefulness toward Antony Jenkins, driving him to change his executive team – the early departure of Chris Lucas and surprise resignation of Sally Bott rumoured to be an rumoured response to that. The same rumours suggesting that Rich Ricci is next….
With Antony Jenkins statement of “We are currently in the process of defining a core set of values in order to create a culture that will deliver for all of our stakeholders.” and Sir David’s comments that he wants more non-bankers on the board, Barclays culture is about to change, and change quickly. It is to be hoped that in changing culture they do not remove the banks track record of performance and profitability.
Shareholders may like ethics, may warm to a convivial culture, they may even like being classed as “socially useful”….but they typically value return on investment a little higher.