The 'Wrong Way'

During the nineties, high street banking became far more competitive than it had ever been, with new challenger banks emerging and low interest rates meaning that relying purely on fees from money transmission and the margin between lending and savings was no longer sufficient to cover the massive overhead of expensive branch networks.

The solution - a move to providing new, insurance-based products; traditional, stuffy institutions built on the foundations of caution and care needed to transition into modern, dynamic sales businesses.

Understandably, the impact on colleagues was significant. The competencies of numeracy, attention to detail, and judgment that had been so valued for three hundred years would be replaced by product knowledge, overcoming objections and a desire to be the best.

‘I didn’t join the bank to sell' became the new battle cry for many, as anxious staff realised that they would need to adapt to doing something they never thought they would ever have to or ever wanted to.

It wasn’t easy -even before the acronym PPI stimulated the bile glands like it does today, persuading customers to buy insurance products was tough. The Reward teams in HR had to find new ways of motivating branch staff to do what was now expected of them, and that is when annual, monthly, weekly, and even daily sales targets were introduced, coupled with the enormous carrot of being paid more for doing well against those targets, and a massive stick behind their arse if they didn't.

Rewarding people for doing well makes complete sense, but it also creates the risk of unintended consequences - if you reward people for doing something or punish them if they don’t, human nature means they will try and do more of that thing. And, because humans are not perfect, they may not always do that thing 'in the right way'. Greedy people get greedier, desperate people become more desperate, and those in between go one way or the other.

So customers were at risk of being sold products that potentially they didn't benefit from, couldn't afford or in extreme cases didn't even know they had (and in some cases, all three). And what allowed bankers to do these things the wrong way was that the culture in the industry was toxic. Everyone needed income and that meant senior executives would expect everybody below them to achieve; decent bosses were put under considerable pressure to sell products, and they'd do the same to their frontline staff -many of whom had neither the skills nor the inclination to do so.

And once this had kicked off, too many people, especially senior ones, failed to ask enough questions to satisfy themselves that they knew what their staff were saying when they sat with their customers. I've already mentioned PPI, but it really was the ultimate example, the daddy of all banking cock-ups. Frankly, I don’t care less whether the Senior Executives of the time claimed (either then, or now in retrospect) that they didn’t know what was happening because they did; that's negligent.

And those that still claim they didn't know, then they bloody well should have known; if they didn’t then they were incompetent. Complicit or negligent, either way, it simply wasn’t good enough. But in big organisations, it is possible to be so far away from the customer that you can also distance yourself from any wrongdoing and let the front-line colleagues take the rap.

So were the folk in branches and their leaders bad apples or were they good apples in a rotten barrel? Was it their fault that they allowed something to happen that wasn't right for the customer or were they victims of a culture that made them do it? Whatever the answer (and it may well be a bit of both), it’s a period that the banking industry is still trying to forget - nearly £50 billion in remediation tells you how wrong this was.

Describing it as a warning from history is maybe a bit over the top, but what happened is a clear illustration of how even decent, honest people can end up not doing things 'in the right way' when they're stuck in a toxic culture. And, the senior people who allow this toxic culture to exist should be accountable - saying that you don't know what was going on chaps just isn't good enough - you're paid the big bucks, so try harder to find out what's going on out there . . .