8 July 2015
Shareholders 1 Customers 0: back to business as usual at Barclays
Antony Jenkins was a breath of fresh air when he took the helm at Barclays three years ago. His humility and and commitment to change were in stark contrast to the brash arrogance of his predecessor Bob Diamond. He was one of the first big bank CEOs to talk seriously about cultural change and, more importantly, his words followed through into actions.
Barclays is undeniably a better bank than when Jenkins took the reins. The way it incentivises its staff has been completely overhauled, its overdraft charges have been dramatically cut and it is the only major bank to have shown a real commitment to simplifying its product literature. And these are just three of many changes that have been made to the bank.
So when I read this morning that Jenkins had been sacked, I was incredibly disappointed - and all the more so when I read the reasons for his dismissal. In a statement to the stockmarket, John McFarlane, the new executive chairman of the bank, talked about the need to "bring shareholder returns forward" and to "improve revenue, costs and capital performance".
Profit is the outcome, not the aim
As a profit making organisation, it goes without saying that Barclays has an obligation to drive good returns for its shareholders. But if the pursuit of profit becomes the aim rather than the outcome, you can guarantee that customers will end up getting a bad deal.
McFarlane's language is in stark contrast to Jenkins' talk about "purpose and values". Jenkins had a vision for Barclays which would reinvent customer experience in banking. Such a strategy was always going to require patience from shareholders - and the bank was still only in the early stages of its transformation.
But if Jenkins had been allowed to stick to his course, I'm confident Barclays would have emerged stronger in five years time. Improved customer experience drives loyalty and would eventually drive profit. This kind of transformation tends to come at the expense of short-term profits, but greater longer-term profits. Unfortunately, shareholders simply don't have the patience.
Barclays decision to fire its CEO demonstrates that in the battle of customer versus shareholder interests, the latter always wins.
Shareholders vs customers
Last year, HSBC hired the former head of the Financial Ombudsman Service to be its new internal consumer advocate - with a mandate to refocus the organisation on customer needs. She lasted a few weeks.
Jenkins has expertly juggled these conflicts within Barclays for three years, but his removal was perhaps inevitable.
While I'm sure McFarlane and Jenkins' eventual permanent successor will not undo all the good work that he has done, there's every chance that Barclays will start to slip back to its old ways of doing things.
More broadly, the banking sector as a whole will be poorer for the loss of leaders such as Jenkins. As long as an organisation such as Barclays was leading the way in cultural change, it was hard for other banks to ignore. But once replaced by someone whose mandate is to drive down costs and drive up profits, the rest of the sector will be able to relax.
Sadly, the banking sector is incapable of reforming itself, and has once again proven that the only way to create a fair market for consumers is through regulation.