Friday 29 June 2012

Which Bank is next?

In 2012 we have had Goldman Sachs with the Greg Smith Affair, RBS and the Steven Hester bonus saga. Now Barclays. I am at a loss of words whilst I am reading about Bob Diamond and the mess that Barclays have got themselves into in rigging market interest rates. The PR of the bank is lacking so much social awareness and totally out of tune with the mood of the general public whose patience is being pushed to the limit. For the CEO to say ‘I will not resign’ and blames a number of staff. Mr Diamond, permit me, you are the CEO. The buck stops where you are.  If he had any honour left of course he has to resign. In my view the entire board needs to resign and let us start the radical shake up in the banking sector that we keep on talking about.

After four years since the financial crisis in 2008 and after all that has happened with the bail out of banks at the tax payers’ expense and the consequential wider public suffering from the on-going current debt crisis; why have we not learnt our lessons? There are so many questions that we should be asking ourselves amongst these large and powerful organisations in the financial services sector. Let me think of some. Are banks there to serve their own needs and that of each of their own individual employees or the needs of their customers? How is their selection process when it comes to their recruitment intake in so far as their employees behave in such a way? Who is accountable when their very own CEO says he is not to blame but a small number of employees?  For a CEO to shift the blame is in itself a reflection of very weak leadership and of a weak organisation.

A re-examination of our very own values and moral conduct when we do business must be looked at and where action needs to be taken. A change in culture and mentality is the only way to re-instil our integrity and honour which are commodities that appear to be now rarer than ever. Of course this is very difficult. I know from my own past experience that where money is involved it is very hard to change. Let us see where we can make a radical shake up and provide some ideas on the practical side. Regulation as we can see does not seem to be working as persons with sub-par conduct in their characters will always find a way to flaunt it not to mention the extra cumbersome costs it fuels. No something more far reaching.

  1. A radical review of bankers remuneration policy which ought to reflect more the current economic times and also more aligned to other sectors. This has to start at the top.
  2. Ending the type of bonus culture that links employee conduct to short term gain. Moreover looking at eliminating profit sharing or fee earning amongst employee, senior and or partner pay.
  3. A radical look at financial products which are linked to positions that encourage such conduct and behaviour.
  4. A radical look at positions that allow persons to conduct themselves in such a way.
  5. True character assessments in Banking recruitment intake. Annual re-assessments of employee work force to the very top. No room for sub-par behaviour privately and professionally as this is a reflection of the true nature of the person.
  6. Or to sincerely follow up on the suggestion of the breakup of the banks and a return to a traditional service provider for the long term needs of their customers. After all the banks are service providers in simply safeguarding the assets of their customers. I am going to go so far as to question the principle of lending and whether banks should be encouraged to lend. Lending is simply fuels debt which puts individuals, organisations and countries at their mercy and into a spiral not to mention the increased duress it causes (as what we are witnessing with the Euro crisis)
  7. Criminal prosecution to those who break the rules and are seen in manipulating the market for their own needs.

Why am I writing this? The answer is very simple. A radical shake up means that many jobs are going to go in the short term but that is better than the whole system collapsing in its current form. The system requires filtering. The apples which are rotten in the core need to go. In the long term jobs and growth will benefit. Short termism, and this obsession for profits for personal gain, speculative greed, selling of misguided products in the financial service sector is evil and it has to stop. The ‘quick buck’ mentality is simply foolish and is a reflection of human fear and finally making a gain from someone else’s misfortune is neither contributing nor adding value to anything at all. This entire culture has to stop. It is greed, it is intoxicating, and it is simply wrong. This has been proven over the last lost decade. The public know it and they have had enough. The change has to start from the top. An example has to be set from the top.

All this can bring in negative publicity as with this current Barclays debacle. The consequences and damage can be enormous. All hell can break lose. Confidence, synergy and trust evaporate. Many more jobs will disappear. Many good people will suffer. Many good bankers will suffer and endure a bad name because of the sheer foolishness and lack of integrity of others. Good people who worked very hard with their entire life can suffer simply because we have not changed or bothered to make that change in our culture. Most bright and intelligent people with honest aspirations to do well who feel they are really contributing and providing a service will feel totally let down. 

It really is time for real change before I am sure more banks will follow in jumping on the negative publicity band wagon and entering into an intractable mess.

Letter to The Times 19/03/2012

Dear Sir,
"In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves."

This is the statement put out by Goldman Sachs regarding Greg Smith resignation. I feel sorry for Goldman’s; they could be falling over their own sword. They certainly have a problem with their own PR and in my view lack a little social awareness. They appear to underestimate the mood of the general public who do not take themselves as fools. Let me try to illuminate more thinking to some distortion here and try to solve their problem which is clearly endemic and as I understand pretty toxic. Let’s start by taking some of the dressing off this opening statement.

As they are an investment bank, we can use the word money.  ‘We only depend on rich clients; that’s how we make our money.’ Let me go further and throw the word success into it with a bit of emotion. ‘We only depend on very rich clients, this is how we make a lot of money this is what we need, we are good at it and we want more. This is the fundamental truth at the heart of how we conduct ourselves.’ I think you see what I am getting at. Greed we have already learnt in a culture is intoxicating and I have heard it is getting worse. It is linked to my theory in business where we stop asking ourselves the ‘why’s’ and the ‘how’s’ but just do. The only ‘how’ we are familiar with; is how can we make more? Some of us are getting cleverer at it than ever before. I have seen this culture before amongst my former colleagues certainly in myself as a former Managing Partner of a leading Executive Search Firm which too mind you was ‘fee earning.’

The crisis of 2008 has now been four years, of which the lessons should be learned in our mentality, personal behaviour and conduct. Humility seems to be a rare commodity. By now I was hoping for a bit of common sense that we would see statements along these lines; ‘This crisis has taught us that we have learnt our lessons and we are deeply sorry of the past debts we have contributed to our governments and the effect it is still having on our wider society. After some soul searching we have had a fundamental shift in our own values, we now understand that with an organisation that is client focused we have had to change and attain a deeper sense of our own selves in each and all of our fee earning employees & partners. We have learnt finally to understand and serve better the needs of our clients which are the key to our future strength.’ This is the fundamental truth which lies at the heart of how we now conduct ourselves.

Do you see the shift?  It could take a while; change in mentality requires a change of heart which is a challenge particularly when money is involved. It would perhaps require change in the way they conduct business. One idea is dismantling the concept of ‘fee earning’ and introducing normal salaries at partner level. In general I believe the mood of the public is looking for a change and moreover demands it. Pride & stubbornness in persons who have the combination of wealth and intelligence are not easy to deal with. They don’t like to be told what to do. Particularly in a time when they were once used to it as per in our last growth period, they will do anything to maintain it. I have recognised this in myself and took me a while to understand. The pursuit of profit can be a good camouflage to our own weakness. The danger is we can view wealth as an innate right or as something delusional that somehow we are masters of ourselves when invariably we are the very masters of disguise. 

‘We must become the change we seek in the world’ Gandhi.

Yours sincerely,

A muppet