Barclays must put its customers first

Barclays Group chief executive Bob Diamond faced a tough gig last week when he spent the morning being grilled by the House of Commons Treasury Committee as part of its investigation into competition and choice in the banking sector.

If you add his bonus and basic salary, Diamond earns about £10m a year – or just over £27,000 a day. And he earned every penny of his daily wage last Tuesday as MPs from across the political spectrum challenged him over the £2bn that Barclays is about to pay out in bonuses.

After more than 90 minutes of bonus-based questioning, committee member George Mudie MP changed tack and read out the results from a recent Which? survey that revealed only 53% of Barclays’ current account customers were satisfied with their service compared with service leaders like First Direct and Virgin that share a satisfaction level of 88%. Mudie then referred to Barclays’ all-important net promoter score, widely acknowledged as a key metric of banking performance, which currently sits at the astonishingly low -35.

Mudie asked whether Barclays’ ability to generate huge profits while treating its customers so badly provided clear evidence of a lack of competition in the British banking sector. He looked across at Diamond and waited for a response. But Diamond, sensing that this was a question about customers, took a long drink from his cup of water and handed the floor over to Anthony Jenkins, his head of retail banking.

We will deal with Jenkins’ answer in a moment, but let’s first address Diamond’s lack of response because it tells you a lot about the reasons why Britain’s biggest banks have lost touch with reality.

Diamond could not respond to the customer question because he did not know the answer. Until he took over as CEO earlier this month, Diamond had spent his life working first as a trader and then as the head of an investment bank. His idea of a customer is a large multinational in need of foreign currency hedging or a small African nation in need of underwriting expertise. He knows nothing about over-the-counter service, retail banking or any of the other issues that concern the 21 million people who bank with Barclays.

Barclays makes much more money from investment banking than it ever will from retail banking

And that arguably makes some sense given Barclays, like most big banks, makes much more money from investment banking than it ever will from retail banking. That also explains why Barclays can be continually trounced in the service satisfaction league tables by smaller rivals and still continue to prosper – because most of its money is being made elsewhere.

But there is a catch. Diamond might be the most talented banker of his generation but his lack of customer centricity and obvious disdain for all matters related to current accounts and mortgages means he is a leader peculiarly insensitive to public opinion. And that is going to be dangerous as he, and the other Masters of the Universe that run the big banks and have similar investment banking backgrounds, attempt to negotiate the changing British mood towards banking and its ridiculous bonuses in the months ahead. You need a leader who understands market research, brand equity and service satisfaction because without it you are flying blind into some pretty treacherous skies.

As for Jenkins’ responses to the committee, well perhaps he should have followed the example of his boss and stayed silent. Jenkins pointed out that the Which? survey did not tally with Barclays’ own service tracking, which reported that 90% of its customers were satisfied and 80% would recommend the bank to others.

That is quite a disparity from the independent findings from Which? cited by the committee. And it’s also at odds with several other recent independent research studies that confirm Barclays is among the worst retail banks in the UK. That was the conclusion of the Financial Service Authority in September last year when it reported that, with 195,000 complaints for the first half of 2010, Barclays had the third worst complaint record in the UK.

That also tallies with surveys completed by Millward Brown and Geronimo that both rated Barclays as the worst performing bank in their respective net promoter research studies. Geronimo’s 2008 survey of 30,000 customers revealed that only 19% of Barclays account holders would recommend the bank to friends, barely a quarter of the proportion that Jenkins claimed last week.

Perhaps Jenkins’ own bonus is tied to service satisfaction because rarely in my experience has a company’s own research been at odds with so many independent research surveys.

Or perhaps no-one at Barclays actually cares about what their customers really think. In the weeks ahead the furore around £1m bonuses during Britain’s worst period of austerity in living memory might encourage the leadership team at Barclays to take a more customer-centric view.