By Mark Solomons, Managing Partner, Developing Potential
What do you think?
Before I give my view I want to talk about the situation from an organisational and leadership point of view.
This isn’t about bashing bankers. I used to be one! Although I spent 23 years in the retail banking industry finishing my banking career as a bank’s retail director I was never quite senior enough to receive some of the reported salaries and bonuses that we so often hear about through the papers – these seem to be reserved for a very small group at the very top. I am in no way against significant pay for significant results it does appear that in many companies, not just bank’s, the rewards have become too excessive and seem to be paid irrespective of results, particularly looking over more than a one year cycle.
I loved my time in banking, helped tens of thousands of customers to fulfil their dreams and a lot of what I see in the press I just don’t recognise as being typical of most people who worked there or of most bank’s.
Yet it is clear that something terrible has happened. Sir Mervyn King, the Governor of the Bank of England, commented
“What I hope is that everyone now understands that something went very wrong with the UK banking industry and we now need to put it right. From excessive levels of compensation, to shoddy treatment of customers, to deceitful manipulation of one of the most important interest rates.
We can see that we need a real change in the culture of the industry. And that will require two things, one is leadership of an unusually high order and [the other is] changes to the structure of the industry.”
Words that I think really reflect not just his views but also probably the views of many. He mentions the need for real culture change and leadership and I wanted to focus on this for a moment.
So what might have gone very wrong and what are the lessons for organisations and leaders?
At Developing Potential we support senior leaders and those at all levels of organisations to build long-term high performance and results. We do this in many ways, through raising awareness of personal behaviours and values, building leadership capability and coaching.
At the heart of all of this is our own model of alignment – we call it VEGA – and it can also be used to explain what may have gone wrong at Barclays and other banks and even other organisations too.
Taking just one element of the VEGA model – all of us, and organisations too, work on two axis: –
- being (about meaning and purpose and how we would like to work)
- doing (about achievement – planning and taking action).
Sustainable high performance only occurs when these are in balance.
At a practical level, ‘being’ can be represented through vision and ethical values. Leaders, teams and organisations have to have a clear vision and ensure their way of working matches their own and the corporate values through a set of goals. So when there is an alignment of vision, ethical values, goals and actions great performance will happen and be sustained for the long term.
Why is this relevant for banks and Bob Diamond?
For me, banks always had a vision to support their customers and communities. Many of their employees continue to deliver against this, yet their leadership focus appears to be about making money. While being profitable is important for all businesses, it should be a by-product of doing what they do well and for their customers, if they want to outperform in the long-term.
There is no longer a clear vision that employees and customers want to or can buy into that will underpin future performance.
This change in vision seems to have been followed by a corruption of values – the behaviours seem to demonstrate the internal organisational values have changed? There is no longer a focus on how things are being done, just what is being delivered.
This should be a lesson for all organisations – leaders who deliver great results but it is known they treat their people poorly, treat customers as cash cows or cut corners (and there are lots of them) need to change or be managed out of the business.
Unfortunately the fear of losing short-term performance often keeps them in a job and their behaviours unchecked. Be warned that over the long term they will be found out and with possible significant consequences.
Goals and Actions
The goals that were set to achieve the new money making vision were so significant that it meant that action taken had to clearly target selling products to customers, often ignoring their needs or experience. Think Endowments, PPI, Pensions and recently complex instruments for small businesses to help them manage risk (but actually creating more of it).
Focusing only on achievement is not sustainable and often leads to people not living to their own or company values as it is the only way they feel they can achieve bigger and bigger annual targets.
So should Bob Diamond have resigned?
For me there is only one answer? Yes.
It is suggested that in speaking with Paul Turner, the Deputy Governor of the Bank of England that there was encouragement for this practice. We will find out more on Wednesday (4th July) when Bob is up before a select committee. Even if this proves to be true, senior Barclays leaders should know that it is wrong to manipulate rates to give them an upside and people they are supposed to be supporting a downside. They should also have realised that in the long term they would be found out.
Being told or encouraged to do something wrong, for me, is no excuse and particularly at the top. Whatever happened to personal responsibility? Short-term greed prevailed and the leaders did not set the example about doing the right things. And it has happened time and time again.
The culture has to change and those at the top have to take responsibility for the culture and the VEGA alignment they created.
Bob had to go and many others in the team may have to follow and a new leadership team come in and be given the chance to rebuild both the bank’s internal VEGA and the public’s confidence.
What do you think? Let us know and leave a comment.
How aligned are your vision, ethical values, goals and actions to ensure long-term sustainability and outperformance versus just delivering short- term profit?
If you want to know more about how you can use VEGA to support the creation of outstanding leadership and organisations then please get in touch.