However, this month the board at one of the world's largest banks – Barclays – decided that it was falling behind the rest of the market and that its chief executive Antony Jenkins had been too slow to wield the power of his cost cutting axe, resulting in him losing his job.
In a statement earlier this month, chairman John McFarlane, who has been appointed as executive chairman whilst the bank finds a replacement for Jenkins, said that Barclays needs to focus on reducing its internal bloat and becoming a more agile organisation. He said:
Arriving at Barclays with a fresh perspective, it is evident that we have a standout brand with first-class retail, commercial and investment banking businesses. Nevertheless, we are leaving value on the table and a new approach is required. As a Group, if we aspire to bring shareholder returns forward, we need to be much more focused on what is attractive, what we are good at, and where we are good at it.”
We therefore need to improve revenue, costs and capital performance. We also need to become more externally focused and deal with the internal bureaucracy by becoming leaner and more agile. I have experienced good results in dealing with these matters elsewhere.
And it seems that the bank is wasting little time in addressing its “internal bureaucracy”, as the Times has reported this weekend that Barclays is set to introduce a “radical redundancy” programme that could see 30,000 staff lose their job within the next two years. This would see its global workforce reduced by approximately a quarter and fall below the 100,000 figure by the end of 2017.
The Times notes:
Mr Jenkins was ousted in part because of his failure to get a grip on the bank’s cost base and it is understood that whoever is appointed to succeed him as chief executive will be expected to sign up to a dramatic shrinkage of employee numbers that stand at a little over 132,000.
In particular, Barclays will focus on automating manual processes within its retail bank. Any job cuts are likely to fall especially hard on staff in its middle and back office operations, where it is thought the largest savings can be achieved.
While Mr Jenkins was a strong advocate of replacing labour-intensive operations with technology, there was disappointment within the bank that he had not been more radical, especially in comparison with the deep cutbacks at Lloyds Banking Group and Royal Bank of Scotland.
And whilst we are still waiting for an official statement from Barclays, the Times report makes sense if we assess what Barclays has been focusing on up until this point. Whilst Jenkins had made technology and digital a priority over his time in the top post (if you take a look at the company's annual report it is littered with references to its investments in these areas), what he didn't do was pay too much attention to the back end.
Barclays has made huge investments in its customer-facing mobile strategy, with its payments transfer app PingIt proving to be pretty popular, as well as big investments in in-store technology and a focus on digital inclusion through its Digital Eagles initiative (see our piece on this here).
It's latest annual report notes:
We are working hard to strengthen our brand and in 2014 we made it a priority to listen to our customers to gain a better understanding of what they want. We have focused on developing, testing and investing in technology such as video banking, cheque imaging, smart call and finger scanning to improve our customers’ and clients’ experience and to be responsive to their needs as these change.
These new technologies developed in 2014 are now in place in branches across the UK, and help to make our most important interactions with customers and clients simple – putting power in their hands to transact when, where and how they want to.
However, what appears to have lacked, which is evident from the board's decision to oust Jenkins, is a speedier commitment to pursue cost cutting in the back-end through increased automation. The company's Transform strategy highlights a commitment to the “integration of new technologies, including cloud-based platforms” which it says “will lead to significant reductions in headcount, physical IT infrastructure and data centres” - and it's likely that this is what Barclays wants to see more of.
Although Jenkins did cut more than £2 billion of costs over his time in the top post, this still hasn't satisfied investors. And if you compare the rate at which Barclays has cut its 'bloat' compared to other banks of a similar size, it's no surprise that the board wants to go faster. For example, Lloyds has cut its staff by more than 30,000 and RBS has reduced its global workforce by more than half.
There is a paragraph in Barclays' annual report that sums up its current ambitions, where cost cutting is thename of the game. It notes:
Underpinning these actions is a continuing focus on cost. In a prolonged low-growth macroeconomic environment, cost will be the strategic battleground for banks. We remain committed to a material reduction in cost over time, enabled in part by technology, regardless of the income environment.
As I've highlighted above, Barclays has made impressive investments in improving its front-end, customer facing technology, with the aim of lowering costs by creating a more seamless customer experience. However, there's evidently still huge amounts of savings that can be made in the back-end and it was only a matter of time before attention shifted towards this.
Job cuts are never an easy thing for an organisation to go through, but with impatient investors and shareholders wanting to see those efficiency gains, it was only a matter of time.