AJ and VOC: what Bob Diamond doesn’t understand about bankers’ bonuses

by Richard Horton

Barclays boss Bob Diamond talked at length about “pay for performance” during his stint in front of the treasury select committee on Tuesday. And perform he did. Yesterday’s papers inevitably focused on his handling of questions on the twin topics of bonuses for investment bankers and lending to retail customers. And while there was good copy to be had in his assertion that no minister has yet looked him straight in the eye and asked Barclays to restrain bonuses, the real story was sat next to him in the form of Antony Jenkins, chief executive of global retail banking.

AJ – as he is known by his friends and colleagues at Barclays – is in charge of the banking that you and I do on the high street or on the internet. However, his boss comes from an investment banking background, what committee chair, Andrew Tyrie, called “casino banking”. Diamond didn’t like the use of that term and made his feelings known to the committee. In fact, Diamond was so strident in his responses to the committee’s questions that AJ could barely get a word in edgeways. That in itself  speaks volumes about the dynamic between retail and investment banking. AJ was there to fire stats about lending to small businesses and customer satisfaction levels. To provide the necessary statistical liquidity to support his boss, just like retail banking deposits provide monetary liquidity for “casino banking” activities.

Of course, it is the “casino banking” area in which most of the 70 current Tory MPs that James Lyons of the Mirror identified as having worked in financial services were (or are) employed. You can imagine how many of them were tellers in a high street branch or middle managers in an insurance company’s back office.

AJ performed his role well; and following Bob Diamond’s “pay for performance” rhetoric I am sure he will be suitably remunerated. One of AJ’s most widely quoted statistics – not that he was quoted much – in the news coverage was that only 5% of Barclay’s retail customers were “dissatisfied” with the bank.

Every large retailer – whether they sell insurance, grapefruit juice or children’s shoes – invests heavily in collecting and interpreting customer feedback. Retail banks are no different. How exactly AJ got to the figure of 5% will only be known by his “consumer insight team”, but it is fair to say that they would have used a technique known as “voice of the customer”, or VOC, to identify and, if AJ is to be believed, preempt the service failures that leads to so much customer dissatisfaction.

I’m sure that AJ and his fellow executives at Barclays use “voice of the customer” in this way, but I wonder what they would find if they opened their investigative focus up beyond their customers’ experience of the branch or call centre. I wonder whether Bob Diamond would still be “compelled to pay big bonuses” if he knew the strength of feeling among his retail customers about the bonus culture in the city at a time of increasing austerity. Similarly, what would Bob say if the “voice of the customer” demanded that banks – the banks where you and I have our savings and mortgages – should not be allowed to fail as he casually suggested yesterday?

Top executives, whether bankers or not, struggle not to get sucked into a bubble where the reality of day-to-day living and the needs of the average high street consumer seem to get warped. If they didn’t, then they probably wouldn’t need so much “voice of the customer” research. If Tony Hayward, the besieged ex-CEO of BP, hadn’t been so dislocated from the very tangible impact of the Deepwater Horizon disaster, then I am sure he wouldn’t have taken a day off at the height of the crisis to sail his pleasure boat in competition around the Isle of Wight. This executive dislocation is not all that different to the Westminster bubble, where some MPs, staffers and think tank wonks become estranged from what really matters to British families and voters. Bill Cash’s self-indulgent amendment to the EU bill is a prime example.

Yesterday’s Independent had a small piece asking readers to email about “what grinds your gears most” – banker’s bonuses or MPs’ expenses. For me, the culture that created the expenses scandal is the same as the culture that “compels” investment banks to pay obscene bonuses – a culture of entitlement and dislocation. It may not be pervasive, it may not account for every executive but it is there, and the only way to get round it is for top executives to stop listening to the “voice of the customer” and start listening to their actual customers.

In case your market research benchmarking hasn’t picked it up, Bob, your customers, no matter how satisfied they are with your service, want excessive bonuses, no matter where they are awarded in your bank, to be curbed.

Richard Horton is a business strategy analyst and Labour party activist.

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2 Responses to “AJ and VOC: what Bob Diamond doesn’t understand about bankers’ bonuses”

  1. Richard Costello says:

    Rich I agree with the points you make, but in a sector that has so little competition I really don’t see the bonuses going away, people simply don’t have that many options when it comes to banking

  2. John Waldron says:

    Whilst I understand the sentiment in these words, but we have only grumbled in the last two years as some one to blame, classic blame culture and the politics of envy. They ( the bankers) were used as a diversion for the gross mismangement of the economy under the last socialist govt. Its really easy to spend other peoples money with no recourse. Need more just tax them again tax air travel , there are more “poor” people go on holiday than rich by definition, so the poor under socialists paid more for there holidays to the costa’s.

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