Martin Palethorpe, executive coach at performance consultancy, The Pragma Group, shares his views on the link between company culture and the recent Barclays disaster.
The importance of ‘culture’ and what it can mean for the success or failure of a business is yet again on display with the recent events at Barclays.
If they didn’t know before then Barclays certainly knows now how important culture can be. But it’s not just financial institutions who can learn from this epic fall from grace.
As the depth and scale of the disaster continues to unfold, CEOs and senior managers should take this as an opportunity to address the issue of culture within their own organisation - no matter what size or sector they may operate in.
Importance of culture
Barclays is not the first globally renowned organisation brought to its knees because of a disaster largely caused by its culture. It was also a key contributor in the collapse of Enron, in the failures at RBS, in the BP oil disaster and even in the Columbia space shuttle disaster.
So, do leaders realise just how important culture is for their business? Or are they paying lip
service to it?
To any CEO I would say start by asking yourself the question ‘how important is culture?’
The answer to this may seem obvious if you focus on cases such as Enron, BP, NASA, RBS, and Barclays. For those in finance, or any other organisation where security or safety is critical, then developing a positive and responsible culture - as well as a high achieving one - is a no brainer.
But it is just as vital for those in other sectors.
The reason a positive culture is so important is that it can impact heavily on performance and employee engagement, which in turn can strongly correlate to a company’s financial results.
A recent Government report, ‘Engaging for success: enhancing performance through employee engagement’, highlighted a number of studies which have shown this link.
One such report by Gallup found those firms with engagement scores in the top quartile averaged 12 per cent higher customer advocacy, 18 per cent higher productivity and 12 per cent higher profitability. The earnings per share growth rate of such organisations was also 2.6 times higher.
Getting it right
So when you get it right, the benefits can be broad reaching – impacting on your employees, your business results and ultimately on the UK economy. And there are those who are getting it right. For example, culture gives companies like Virgin and Pret a Manger a significant advantage.
So where did Barclays go wrong? The banking group has placed some focus on culture and they define their values on their website. These include:
Winning together - We look for opportunities to help others accomplish goals and actively contribute to the firm’s successes…
Client focus - Our clients’ interests always come first. We are committed to flawless execution and going the extra mile for our clients…
The best people - We strive to hire, develop, and retain the best professionals in the business…
Trusted - We expect the highest ethical standards to be maintained and seek compliance with the law… In everything we do, we focus on the processes and controls to protect the Barclays brand and our shareholders.
Pioneering - Our pioneering spirit delivers superior solutions for our clients…
However, what becomes clear from examining these values is that there is a conflict between these espoused values and those ‘values-in-use’ they appear to have been working by and which may have led to the current crisis.
Their espoused values “our client’s interests always come first” and “the highest ethical standards” are juxtaposed to the culture and behaviours that have now been revealed. In reality it seems more of a ‘do whatever it takes to drive growth and make money’ attitude has been at play.
Developing a culture
It is a common problem within businesses that they will define a set of values that they wish to live by, but fail to truly embed them into their culture.
Other than defining a set of values, as a CEO it’s vital to know how to develop the culture you’re striving for. Many leaders will fall short of providing the emphasis needed to actually create the culture they want.
For leaders facing this situation, there are some simple steps they can take:
- Use a survey to specifically assess and understand exactly what your current culture is (your own ‘values-in-use’)
- Use the survey results to examine to what extent you’ve develop the culture you want and understand the gaps
- Assess and challenge your leaders’ behaviours. You need to know and challenge to what extent their behaviours are aligned with the culture you’re aiming for.
- Run values-led development for all managers and leaders. Leaders have a disproportionate impact the culture. For example, train them very specifically in how to live ‘client focus’ or ‘trusted’ in practice. They need to know what is expected of them, and what not, and they need to be held to account
- Talk with all your people about the importance of the values. Involve them in the process and do it with them, not to them
- Consciously live the values. Talk about them every day. Discuss them in meetings and at conferences. Use them as the compass for decisions and evaluation of anything you do
- Re-evaluate and if necessary revise all HR processes, such as recruitment, redundancy, appraisal, development, training, performance management, promotion and remuneration to ensure that they are truly aligned to the desired culture
- Re-survey and assess your culture and related initiatives at least annually
What is clear from the events at Barclays is that culture can have a devastating and lasting impact, but get it right and develop a positive and responsible one and you will reap the benefits at every level for many years.