City & Business: Taylor needs to watch his back at Barclays

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The Independent Online
STUFFY, pompous, snobbish, with capital poorly employed and a persistent tendency to misreport profits. These are the sort of strictures you might expect from outside commentators like me about Britain's largest high- street bank. But for an insider and a chief executive at that - albeit a new one - to utter such searing criticisms publicly is virtually unheard of.

Both inside and outside Barclays last week it was being said that Martin Taylor, the bank's newly appointed chief executive, is pushing his luck by launching such an intemperate attack on what remains an entrenched and deeply ingrained culture and management. It may be fully justified, but chief executives, particularly new ones, need to make allies as well as enemies if they are going to survive long enough to implement their vision.

To the institutional shareholders that put him in the job, Mr Taylor, a youngish former financial journalist with no previous banking experience, is making all the right noises; they'll give him all the headroom he needs in his quest to impose modern management ideas and systems. But whether that's all the backing he requires is, at this stage, an open question.

Barclays is part of a small and powerful oligopoly of British banks. Though desperately in need of change, each one is fiercely resistant to it. Given the chance, they would all quite happily soldier on in the way they always have. Together with the public sector and newly privatised industries, bankers share a deeply rooted complacency: a feeling that because things have always worked perfectly adequately, there's no need to change them; and worse, that any form of tampering is a thoroughly irresponsible thing - the 'if it ain't broke, don't fix it' syndrome.

In a rapidly changing world this is a highly dangerous attitude. Competitive pressures have already engendered quite significant changes, particularly at Barclays where the onset of financial crisis has forced the bank to rethink its methods and aims. For all banks, life is not nearly as easy as it was. But despite recession and damning public condemnation, which has seen bankers ridiculed as a bunch of pompous incompetents, the culture is still much the same.

Professor Paul Willman, a lecturer in organisational behaviour at the London Business School, tells how when on a visit to a clearing bank head office he had to wander down a long corridor of closed doors, each with its own individual name tab, to find the gents'. This told him that the bank was made up of a series of closed minds, all unquestioningly ploughing their own little furrows in total isolation from each other, communicating only by memo, prearranged meetings and in the lunching rooms - which in some banks are still regimented according to status.

When he got to the gents' he found an automatic shoe-polishing machine. This told him that well-polished shoes were noticed at banks; that people looked down rather than up, indicating deference, lack of initiative and military order. But the most revealing moment came when Prof Willman tried to polish his shoes, which were brown. The machine only did black, indicating that conformity was the norm. In short, management lived and worked by a preordained pattern of status-conscious rituals. It may be that this exaggerates the position but the point is well made.

Banks are still stuffy and institutionalised, nothing like real, modern businesses at all. Right down to the chi-chi country house furniture in their head offices, banks seem wholly at odds with the modern business world. With his designer suits and silk ties, and his journalistic and industrial background, Mr Taylor could hardly be more out of place in such an environment.

He wants to change this culture profoundly. The danger is that in so doing he'll also undermine some of the essential traditions and systems of prudent banking, methods of character and credit assessment that haven't changed fundamentally in more than a hundred years. If he does that, he'll be throwing the baby out with the bath water. His stated aim of getting closer to the customer - putting the customer first - also looks to be at odds with his other priority of making the capital sweat - which generally means crunching your customers. So far, however, the signs look relatively promising. He's defined his objectives and appears to have some useful and innovative ideas for putting them into practice. He is clearly nobody's puppet despite his relative youth, just 41. Within months he'll have built a small and highly focused team.

It is perhaps unfortunate for Mr Taylor that he is beginning the task of major cultural and structural change in the underperforming core clearing bank business just as the investment banking side of the group, a comparatively recent add-on with a very different, go-getting approach to business, records a massive upswing in profits to near stratospheric levels. The contrast between pounds 100m of bonuses at BZW, with some senior traders and directors getting well in excess of pounds 500,000 each, and the announcement of 5,000 further job losses in the clearing bank, Barclays' first-ever compulsory redundancy programme (previous ones have all been voluntary), could hardly be greater.

Even in the Sun, that self-proclaimed guardian of popular capitalist views, Mr Taylor is portrayed as a heartless hatchet man. In banking, as Mr Taylor is fast finding out, the rules of ordinary business don't apply. Most of us have come to see work as a privilege for which you have to struggle. But bank employees continue to expect total job security from school to retirement. The pay may be modest, the work boring and unglamorous and the environment regimented and stifling, but at least the hours are regular and you don't get fired. At least that's the way it has been.

For a Barclays employee to be told he is out of a job is like the breaking of a promise, a breach of contract. It's understandable that those chosen for the cull should feel bitter. The old rules are being broken, the world turned upside down. One of the biggest cultural shifts Mr Taylor must instil in his employees is the realisation that they have to strive to make their jobs safe; they can no longer simply expect security.

Whether Mr Taylor succeeds or fails in his push for change, it's going to be the stuff of which business school case studies are made. But if I were him I'd watch my back; he's playing for high stakes. Either he will end up changing Barclays dramatically, and with it the whole culture of high-street banking, or he'll end up on the slag heap too, forever stereotyped as the arrogant young man who tried to bite off more than he could chew.

For the time being, the following wind is a strong one, with profits on the mend as the bank recovers from the ravages of recession. There's still scope, however, for things to go horribly wrong, particularly on the investment banking side where I doubt even the intellectually gifted Mr Taylor fully understands the risks involved in some of the derivative trades BZW undertakes on an ever-increasing scale. Every time bankers lose scandalous quantities of money - last time round it was on property and small business, the time before on sovereign debt - they say 'never again'. It's all under control now, they claim - we really know what we are doing. But then something totally unexpected pops up and floors them again. Investment banking, in which huge amounts of money were made last year, could supply the next shock. It's certainly got that feel about it.