Opinion

Has Barclays missed a trick in firing CEO Antony Jenkins?

7 min read

09 July 2015

Antony Jenkins has been fired due to disagreements with the board about the pace of cost cutting and the size of the investment bank. However, his focus on company culture may have been exactly what the bank needs to restore its reputation, as well as boost growth.

The now former CEO took over from Bob Diamond in the wake of Barclays’ first £292m fine for Libor rigging in 2012, and his departure has shocked the capital. However, it follows on from similar exits from CEOs in Standard Chartered, Credit Suisse and Deutsche Bank.

Upon being crowned chief executive, Jenkins claimed he would make Barclays the “go to” bank – and even installed five blocks inside the company’s entrance hall to promote the methods he deemed would best get the bank there. Each one was covered with a single word: respect, integrity, service, excellence and stewardship.

But according to Mike Rake, one of the non-executive directors who ousted Jenkins, it became clear that new skills were required for the rough period ahead.

John McFarlane, who will become executive chairman of Barclays until a successor is found, said the strategy of Jenkins was not at issue, but rather the speed at which he changed things was problematic. He reiterated Rake’s statement in saying that existing management plans had shareholder value creation too far out in the future. Barclays shares stand where they did six years ago, and the dividend is flat.

McFarlane stated more branches would close and jobs would go. “Barclays is not efficient,” he said, while pointing out that the bank needed more “energy and speed of decision-making”.

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However, Mark Garnier, a Conservative MP who sits on the Treasury select committee, suggested that Barclays sacking Jenkins is worrying, and that a new focus on cost cutting, revenue growth and balance sheet leverage sounded “rather pre-2007 crisis”.

This was echoed by Colin Price, chairman at Co Company, who claimed shareholders often care far more about a company’s short-term financial performance than the overall health of the organisation. 

“This is a misguided view to take, and unhappily widespread: too many leaders still focus on delivering strong short-term financial performance over and above long-term robustness of the business, not that you can entirely blame them if that’s what their job is perceived to be,” he said.

Following the recession, most companies are shifting from a cost-cutting attitude to prioritising growth. But while financial performance is an excellent measure of a company’s success today, organisational health must be assessed to create a clear picture of how the same company will fare in the years to come, Price claimed. 

In fact, roughly 50 per cent of performance variation between companies is accounted for by organisational health. This is something that should matter to CEOs and shareholders.

Boiling a company’s achievements down to its profit and loss can give a very misleading impression, Price suggested. Take, for example, the collapse of Lehman brothers. The organisation was characterised by an obsession with financial shareholders, and indeed managers. The bank’s collapse can in part be attributed to inherent cultural problems and a disregard for the needs of clients. 

Unfortunately, banks are not the only companies to have focused on financial results above all else. BP have learned some lessons since the Gulf disaster about the impact of a performance culture and taking the eye off the fundamentals.

Antony Jenkins’ focus on the values and culture of Barclays was a crucial part of rebuilding trust in the organisation. 

“Barclays may have praised his achievements, but it is important that they continue to follow his work,” Price said. One can’t help but agree given that changing the culture at the top is one of the most important things a company can do to drive growth and implement long-term success.

Building a strong culture may not guarantee business success, but neglecting to hinders a company’s chance for long-term sustainability. Of course, “culture” most likely won’t appear in your annual report, or as a line item on your balance sheet, but it is undoubtedly the glue that holds a great firm together. Essentially, If you create a company with a culture that appeals to employees and customers alike, you will attract plenty of both. 

Furthermore, the right culture ensures you not only have the talent required today, but are also investing in succession to ensure the continued successful leadership of the business in the future. Not to mention that it goes a long way in making your business attractive to possible acquirers – with a good company culture helping new members of staff slot in much more fluidly.

As for long-term thinking, there has to be a reason why Amazon’s Jeff Bezos is so obsessed with longevity. The answer lies in letter he sent to shareholder in 1997, which listed the benefits to long-term thinking.

Essentially, the main point was that any company or being couldn’t realise its potential unless it had a long-term plan. Every subsequent year Bezos has ended shareholder letters by attaching the original 1997 essay with a reminder of the importance of thinking long term. And every year, he is proven right.