Imagine a front page banner headline in a national newspaper declaring that your company’s strategy has failed. What might you expect? A dramatic share price drop? Huge reputational fallout? Recriminations in the communications team?
But what happens when it is the company itself that has implicitly made this proclamation by announcing that its chief executive is being fired?
Barclays found its answer to this conundrum recently when it unceremoniously kicked out Antony Jenkins on the day of Britain’s emergency Budget. Jenkins had taken the job three years ago with a promise to change the bank’s culture, following a series of investment banking scandals.
Yet John McFarlane, who became the non-executive chairman of Barclays last September and is now stepping up to executive chairman, was blunt in the bank’s official statement about the ousted chief executive’s strategy. ‘We are leaving value on the table and a new approach is required,’ he said.
‘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.’
McFarlane said Barclays needed to speed up its performance on revenue, costs and capital targets, become more ‘externally-focused’ and reduce its internal bureaucracy to become leaner and more agile.
It sounded as if Barclays’ entire strategy was being changed. And guess what happened to the shares? They went up – on relief that action was being taken to stop the rot.
But firing a chief executive in this way is high-risk. For starters, it means it is open season for critics to rubbish the company.
It also then begs questions of what the company is for, why it should exist and whether it should be broken up. So how should such communications be handled?
Can a company admit that a sacked chief executive’s strategy is not working without risking jettisoning many years of hard-won reputation gains? Should such an admission of failure be tacit or actual? And what are the best strategies?
Charles Stewart-Smith, director at PR agency Blue Rubicon, believes it would have been possible for Barclays to handle the matter differently.
‘The removal of a chief executive would suggest that a company needs new leadership,’ he says. ‘It may also mean that it needs a new strategy, but that does not necessarily mean the previous strategy has been a failure. The company could be in a different phase of development, or external circumstances could have made a change necessary.’
James Henderson, chief executive of PR agency Bell Pottinger, believes it is paramount that the real reason for a chief executive’s removal should be expressed clearly and honestly, which appears to be exactly what Barclays did.
‘I think being straightforward and as honest as possible is always the best way,’ he says. ‘Ideally a company should explain where they went wrong and then give their solution to the problem and how they are going to address the issues and move forwards with the right strategy.’
Stewart-Smith agrees: ‘Shareholders would expect that. But, more importantly, it can help set the context for the new arrival and demonstrate why he or she is the right choice for the future.’
In Barclays’ case, that may take a while as the company has indicated that it could be as long as 12 months before a successor to Jenkins is found.
Reading between the lines of Barclays’ carefully-constructed statement, however, Charles Lewington, managing director of communications agency Hanover, believes it deliberately put more focus on delivery that on strategic inadequacy.
‘Jenkins failed to deliver two strategic objectives – substantial cost reduction and the revival of Barclays’ investment banking division,’ he says. ‘In decisively sacking the chief executive, the board has taken the only available PR approach: right strategy; wrong man. However, given quite how expensive investment bankers are, the dismissal begs questions as to whether the two objectives are incompatible.
‘My guess is that any successor will negotiate a change to the strategy in order that they don’t face the same dilemma – though that is not what they will be allowed to say on appointment.’
Jonathan Clare, executive chairman of financial PR agency Newgate Communications, agrees that Jenkins’ departure does not have to be seen as a failure of strategy. ‘Chief executives run companies and chairmen run the board,’ he says. ‘But when it comes to the crunch, the only real job a chairman has is to sack the chief executive. At Barclays, clearly there was a disagreement about the speed of change. Antony Jenkins’ mistake wasn’t so much failure of strategy but a failure to retain the confidence of shareholders, a failure to build a relationship with his new chairman and a failure to grip the issue of the investment bank.
‘Given all that, Barclays did the only thing it could: it admitted Mr Jenkins wasn’t the right man for the job.
‘That, though, was an admission of management failure, not of strategy. After all, there’s no real strategy to being a bank: you borrow money from some people to lend to other people. It’s the management of the detail that complicates things.’
It may also be instructive to contrast the communications of Jenkins’ exit with that of Hisao Tanaka, who resigned as Toshiba chief executive and president after the company admitted that it had overstated its profits for the past six years by £780 million – nearly triple the company’s original estimate.
Like Barclays, Toshiba has been embroiled in financial scandals. Tanaka also told a media conference called to announce his departure that the company would need to ‘build a new structure ‘ to reform itself.
However, Chris Rowley, professor of human resource management at Cass Business School, says Toshiba’s structural reform will have much more to do with challenging its traditional Japanese corporate culture of minimal management challenges to superiors than with altering the strategy of the home electronics, railways and nuclear power station conglomerate.
Rowley says Toshiba’s culture is of ‘strong teamwork and consensus, with a dislike of outsiders versus insiders mixed with patriarchal hierarchies and expectations of mutual commitment’.
‘This is seen to produce inward-looking, consensual management with a focus on the company, incremental change, the long-term and a risk-averse culture,’ he says.
The culture of Barclays’ investment banking operations could not be more different: swaggering individualism, short-term risk-taking and corporate unity threatened by personal ambitions.
Jenkins and his strategy was taking on Barclays’ culture, rather than hardening it, as allegedly happened at Toshiba under Tanaka.
Yet, Barclays’ stated aim of changing its culture is expected to disappear amidst the new management, while Toshiba’s battle to reinvent itself is only just beginning.
Tom Curtin, chief executive of crisis management and PR consultancy Curtin & Co, believes that the size of this task is such that Barclays may regret dispensing with Jenkins.
At the time of his 2012 appointment, Curtin recalls, Barclays had been stung with a £290 million fine for fixing the Libor interest rate. It had also suffered fallout from the vilification of Bob Diamond, the swashbuckling American investment banker that Jenkins replaced. As a result, Barclays’ shares were trading at their second lowest point since the 2008 financial crisis.
Since 2012, Jenkins has steered Barclays through crises including a fraud lawsuit brought in relation to so-called ‘dark pool’ trading operations last year and this year’s record $1.5 billion dollar fine following foreign exchange rate-fixing allegations.
Against this backdrop, Curtin argues that Jenkins has been the ‘safe pair of hands’ that Barclays desperately needed in 2012 and that the company is simply moving on by seeking to replace him with what chairman McFarlane refers to as a ‘new skill set’.
‘In many ways, the manner in which Antony Jenkins has been replaced by Barclays is refreshingly honest, and has left no ambiguity as to the direction in which the board wants to the company to take,’ he says.
‘It is also a very public reassurance to investors and shareholders that the company is now moving from a damage limitation phase to a growth phase. Undertaking such a public change of strategy is bold. The danger for Barclays will come further down the line if the new strategy does not deliver on its ambitious aims.
‘Should that occur, then sticking with the safe pair of hands strategy might appear to have been the better decision all along.’