Sparknow’s take on the Salz report into business practices at Barclays.
This request by Vija Celmins refers to her sculpture called Fix the Image in Memory. This is explained on the MOMA website.
For this work, Celmins made bronze casts of eleven rocks and then painted the casts to resemble the original stones as closely as possible, ‘a record of concentrated looking with a found piece of nature’. By having each original rock installed with its duplicate, Celmins invites the viewer to examine them closely: ‘part of the experience of exhibiting them together with the real stones,’ she has said, ‘was to create a challenge for your eyes. I wanted your eyes to open wider.’ This is a slow process of noticing, replicating, redescribing, hiding and uncovering detail at the same time. She is inviting us to look really, really closely.
photo | estherase – not by Vija Celmins, but are they the real thing?
Recently, the Salz report was published. The challenge undertaken by Anthony Salz, Russell Collins and the BCG team working with them was to look closely at Barclays’ business practices, not just to observe but also to understand the differences between what the organization said and how it behaved. In this case the differences or gaps were quite dramatic. Understanding them and how they had come about required a very close look indeed.
The Salz report goes a long way into diagnosing the issues that led to the need for urgent change at Barclays. Our purpose here is not to offer a critique but rather to pull out a few of the threads that help move forward the work Sparknow is pursuing on ethical and cultural auditing, which we have covered in previous blog postings.
five things that struck us and some reflections on them
Stewarding culture | the importance of monitoring progress on ‘culture’ is given a very strong emphasis. The Board’s responsibility for stewarding culture is given centre stage, their role is described as ‘cultural engineers’. The review points out that:
- The Barclays Board did not have consistent, granular information on culture.
- The Bank had historically underinvested in HR systems in general.
- The Board needs options for new information in general and for monitoring and publicly reporting progress on building a strong ethical culture.
The concluding summary of what went wrong says:
‘without being aware of it, Barclays allowed a shift in its cultures’ and ‘it was a lack of self-awareness that contributed to the deeply disappointing chapter in Barclays’ long and proud story’.
In short, the Barclays Board did not steward its culture, nor did it give itself the tools to do so. A good example is on page 23:
‘Barclays should maintain effective processes for learning from its mistakes. It should endeavour to understand and address underlying root causes of issues so as to be able to apply lessons learned more broadly. Investigations should be carried out following a consistent Group-wide methodology.’
We think this is both about the vast question of the role of leadership, and the methods available to notice in detail what is going on across a complex and global organisation.
Another important observation under this heading is: what is culture? While we won’t attempt to unpack this here, we feel that the Salz Report does not always show a clear distinction between culture (loosely: a set of behaviours that make an organization deliver is objectives in a certain way) and ethics, or even a ethical culture. They are distinct.
Stated values/cultural shift | Anthony Jenkins’ new values for Barclays have verbalised an aspiration and direction. Strong values need to be clearly articulated and much is made of this important step.
But what underlying engagement is put in place beyond an information campaign and training, with 1,500 values champions building momentum? While recognising that cultural change is very difficult, takes time and involves the organisation as a whole, the report also recognises scepticism on the part of Barclays staff and that what matters most is how collective sense is made of key (and repeated) actions and incidents. An example from page 18:
‘Barclays should set clear targets against which to assess progress on embedding the values necessary to build a strong ethical culture. Progress against these targets should be measured through employee, customer and other stakeholder surveys and should be reported regularly.’
There is an important link to be made (we are not sure it is made clearly in the Salz Report) between culture and the organization’s stated strategy, which moulds that culture.
This gap raises the issue of how to gain traction with culture change and how to invite people to engage with a process of transition. Part of this involves going somewhere uncomfortable. Embracing the discomfort that this change will create and asking the difficult questions should be part of the journey. Management need to be up for that.
Seeing through delusion and inviting challenge | much of the review hinges around remuneration and reward, with a ‘cultural drift towards a sense of entitlement’ and short term profits prevailing over balanced performance. From the interviews conducted, we learn that ‘bankers have an infinite capacity for self-delusion’, and that Barclays Capital’s Top Team disliked bad news. It was ‘an environment in which leaders were rarely effectively tested or challenged.’ For example, on page 92:
‘Reports to the Board from the Employee Opinion Surveys showed an increasingly positive picture. Most of the time, the Board was given aggregated scores which showed that employee satisfaction was increasing year-on-year across the Group. But the Board reports did not consistently include granular data indicating, for example, wide-ranging concerns about escalating ethical issues.’
And on page 88:
‘Many employees told us directly about their sadness, disbelief and anger with what has gone wrong in terms of the much publicised poor behaviours. Some spoke of their frustration with management for not listening to their concerns about the way culture was evolving.’
With a sense of entitlement twinned with a reluctance to hear what is going on, stewarding a new culture needs a shift in orientation at many levels.
Speaking up, or not | the report embraces that challenge, recognising recurrently that conflict is key to values being real/live and also the need for a speak-up culture. Against a backdrop of disliking bad news and weak challenge from HR, the foundations of challenge at Board and senior exec team level will take time to put in place.
We were also struck by the finding that 24% of all respondents to a 2012 survey of 500 financial services professionals in the US and the UK believed that, in order to succeed, financial services professionals may need to engage in unethical or illegal conduct. ‘A similar number purported to have first-hand knowledge of wrongdoing in their workplace.’
Developing a feel for a complex system | again, this is about the role of the Board. We like the language on ‘humility’ as being an important part of effective leadership and a pre-requisite for a learning culture. However, echoing the point on delusion:
‘The Board found it difficult at times to penetrate into what was a large, complex organisation’ and ‘one of the principal roles of the Board is to provide challenge to management.’
This clearly embraces the importantly tacit, felt, not-readily-verbalisable nature of culture and the centrality of change for whether Barclays succeeds or not. It is backed by the assertion that what Barclays needs to do is to become something that ‘feels’ (this word repeated twice) very different, and its constant pointing to failure to grasp or respect the spirit rather than the letter of the law. Looking at the science/politics/intuition triad outlined by Douglas Board and on which we based much of our response to the Salz review terms, this is in the intuition space.
Sparknow has followed the Salz review process, contributing our response with Douglas Board. While Celmin’s work is on display in a museum, playing with the idea of what the eye can see when touch is not available to sense the difference between stone and bronze, the reviews of culture and business practices in large organizations deal with trying to uncover the texture of day-to-day behaviours, decisions, values and practices, in a rather hands on way.
With this in mind, we are not convinced that the sensible recommendations made in the Salz report go far enough to offer a new direction. We can imagine history repeating itself, although we do recognise that a lot is underway, confidentially, within Barclays to address these findings.
In our view, a few things can be built in as ways of linking the front line to the Board, of connecting stated values with behaviours and experience as the organization gets better at learning from its own practices and the evolving expectations of the market and Barclays’ stakeholders. There is much why and what in the report, but not a lot of how.
three recommendations based on our work on ethical and cultural auditing
Build monitoring into the day to day | scan, strengthen and shift. These three steps work together and suggest an ongoing process. The Salz Report points to the need for granular data and cultural monitoring. Our approach offers a pragmatic set of tools and methods to have a closer look at leadership, culture, risk, HR processes, remuneration and other levels with a view to shifting organizational practices, from many angles and points of view. To do this, we work with Cognitive Edge’s Sensemaker platform and you can read more about it on our ethical auditing page.
Define a narrative for a change | know where you have come from, setting a trajectory from past to future, and finding the anecdotes, examples and stories to shape the picture along the way, building it out of many points of view and not just the Board’s. This can be about:
- positive deviance – what do we do well that we want to do more of
- working through examples of practice that is not welcome here anymore, as a collective, participatory process, ‘actively encourag[ing] frequent discussion of its chosen values among all staff, focusing on understanding potential conflicts and how to address them.’
A change narrative can address the issue pointed out in the report:
‘It takes a great deal of finesse to translate the same common values into credible expectations of a trading floor and of a retail branch network’ and ‘the goal should be to change the tangible things about what the service does for customers and how people will do their work; gradually, this will change the culture.’
More details are on our narrative for a change page.
Be explicit about alignment | stated values and experienced behaviours need to join up. Same for an organization’s leaders and front line, back and front office, retail and investment banking, geographies and practices. It’s not so much about becoming one organisation, stepping in tune, but more about recognising what makes practices specific, and making sure a rigorous and flexible method is put in place to build this over time, recognising there will be discomfort in the process and that this needs to be embraced rather than stifled. More details are on our alignment page.
Back to Vija Celmins. Our scanning and narrative research ethos suggests leaving no stone unturned when bridging the gap between board and front line, nature and artifice, behaviours and values. Ultimately, it’s about authenticity over delusion and showing practices in a form that allows them to be seen in a different light, re-described and shifted, over time.