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Published: May 29, 2007

 
 

Barclays’ Global Acceleration

How one global bank successfully transformed itself.

In 2003, the management of Barclays Bank resolved to put our foot on the accelerator of performance. There were two main reasons. We saw an opportunity to create faster growth in shareholder value. And we thought it was important to develop our capabilities around the world so that, when customers chose a bank in the markets in which we operate, they would think of Barclays first.

This spring, we announced our results for 2006. They represented the best performance in the bank’s 300-year history. Net profits rose 35 percent, to £7,136 million (about US$13 million), and earnings and dividends per share went up 32 percent and 17 percent, respectively. We have made an emphatic turnaround in our flagship United Kingdom retail banking business, and we have sustained high performance levels in our investment banking business (called Barclays Capital) and our commercial banking activity. Approximately 50 percent of profits now come from outside the U.K., compared with 25 percent three years ago. We are also well positioned to deliver further growth, both organic and through acquisition, in the years ahead. For example, Barclays’ 2005 acquisition of the South African bank Absa has made it a market leader on the African continent. We regularly evaluate other possible combinations, big and small.

These results did not take place by accident. They represent the successful execution of that 2003 decision to transform Barclays from a company with disparate operations in many different countries to a unified global enterprise, one that now serves 27 million people. We were not certain we would succeed, and we don’t take our continuing success for granted. But we have learned, in the past four years, some universal principles that allow us to keep moving forward.

  • Setting a Vision: To “Earn, Invest, and Grow.” At many times in its long history, Barclays has been a formidable force in international banking. And Barclays is an iconic brand. But in recent years, because our portfolio was excessively concentrated in the United Kingdom, the fortunes of our shareholders were dependent on the vicissitudes of doing business in one country. This also made us curiously lacking in self-confidence, relative to the Barclays of 30 or 40 years before. So we set ourselves the task of increasing the rate of profit growth by diversifying our business base, strengthening our retail and commercial banking activities outside the U.K., and expanding such global businesses as Barclays Capital, Barclays Global Investors (asset management), Barclays Wealth (private banking), and Barclaycard (credit cards, loans, and insurance products).

The new vision has been easy to articulate but quite difficult to accomplish. We know that our shareholders will not accept a profit growth holiday while we invest for future growth. To grow and maintain profitability simultaneously, we rely on the fundamental health of the Barclays franchise: its standing in the minds of employees, in the communities where it operates, and, most of all, among customers. Furthermore, all our employees understand that they are expected to focus their efforts on two primary tasks. The first is serving customers brilliantly. The second is complying with legal and regulatory requirements, and maintaining the financial controls that preserve our license to do business and justify the trust that our customers place in us.

  • Adopting a Universal Banking Model. Barclays serves customers who range from individual mortgage holders in Manchester, England, to corporations managing their risks by means of complex derivatives in different tax jurisdictions around the world. Increasingly, however, customers cannot be served in silos; for instance, our mortgage business in Spain is facilitated by our ability, through Barclays Capital, to securitize that risk to investors. So we seek opportunities to sell and deliver services across internal boundaries. We promote synergies both within our two main divisions — global retail and commercial banking (GRCB) and investment banking and investment management (IBIM) — and between them.

When Frits Seegers, chief executive of GRCB, first looked at our customer base, he said, “I can’t believe how narrow our relationship is with them.” Customers who thought of us as their bank often had only one or two accounts with us, and the rest with competitors. Today, the “universal banking” principle continually pushes us to make it easier for customers to do more business with us.

For example, the Open Plan program, which we have now made available in many markets, allows customers to reduce their mortgage costs by offsetting them against the money they hold in savings and checking accounts. The typical savings — about £700 per year for every £100,000 borrowed — reduces our margins, but it leads to a big increase in the number of products people hold.

Other examples include our investments in a single online interface to enable customers to oversee their credit card accounts, mortgages, investments, and bank accounts together. Extracting interstitial value requires great management skill and a streamlined organization. We have halved the size of the Barclays executive committee (to five members) and decentralized operations so that many more decisions are made locally.

  • Creating Focused Points of Strategic Control and Direction. In 2004, we combined the investment banking, asset management, and wealth management groups into one “cluster” (IBIM). This has allowed the team leading IBIM (under Robert Diamond, president of Barclays) more latitude in reaching out to today’s financial-services customers, who increasingly need all three services together. We can now more easily use the know-how developed in asset management and investment banking to invigorate the wealth business; wealthy clients, who were previously served by a traditional stockbroker model, now have access to the same comprehensive advice and innovative products developed by Barclays for institutional clients.

The other cluster (GRCB), led by Frits Seegers, addresses the increasingly homogeneous needs of retail consumers and businesses around the world.

  • Executing a People-Based Agenda. We focus attention on the husbandry of talent because we recognize that the quality of our advice and innovation is the primary source of our value to customers. If you’re the CFO of a listed company with a defined-benefit pension scheme that is heavily in deficit, then you want specialist — not generalist — advice; you need the best advisors in the market. We seek to create a good balance of talent development from within the organization and selective recruitment from outside. The group president’s board responsibilities include championing talent and making sure that Barclays continues to deliver on an increasingly challenging human resources agenda.
     
  • Putting Customer Relationships First. Customers base their decision to choose a particular financial-services provider on the relationship they have with that provider. We thus need to know: Do customers find us valuable, congenial, and dependable? Do we make it easy for them to maintain multiple lines of business with us? We measure customer service in a variety of ways: surveys of customers, employees, and consumers; “mystery shopper” visits to retail banks; complaint volume and market share metrics; league table standings; and tracking of community engagement programs. Because we make decisions based on these measurements, they affect the behavior of every employee. It’s an article of faith with us that whatever one’s job is in Barclays, we must all be in touch, directly or indirectly, with customers. And that applies to a group chief executive like myself just as it does to everyone else within the organization.

The Barclays journey began with a single strategic step, but it soon came to rely on the actions of thousands of employees. We have seen firsthand that when people at all levels follow a customer-focused ethic, with the support of the corporate structure and metrics, it can raise the metabolic rate of the entire company. Only then can we accelerate the three main components of our vision: to earn, invest, and grow.

Author Profile:


John Varley ([email protected]) is group chief executive of Barclays Bank PLC. His previous roles have included finance director, chief executive of retail financial services, and chairman of the asset management division. He is a member of the International Advisory Panel of the Monetary Authority of Singapore and a nonexecutive director of AstraZeneca PLC. 
 
 
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