Monthly Archives: September 2014

Tesco ridiculed by worst crisis in its 95-year old history

Tesco was once the darling of the high street but now the 95-year old supermarket chain is facing its worse crisis ever as it admitted this week to inflating its accounts by £250 million. This wiped more than £2 billion off its market value, saw shares drop by 40% and put them at the bottom of the FTSE 100.

As a result, four senior executives have been suspended, including finance director, Carl Rogberg, with UK managing director Chris Bush also thought to be one of the four, whilst an investigation takes place into what has been going on. Questions will also be asked of former chief executive, Philip Clarke, and Laurie McIlwee, the chief financial officer who left last week.



Tesco said it discovered the overstatement of its figures, made as part of an August 29 profit warning, during its final preparations for its forthcoming interim results. It then announced that full-year trading profits could be as low as £2.4billion – some £400million lower than expected – after ‘challenging trading conditions’.

The supermarket has been losing ground since its first profit warning in 20 years back in January 2012, a year after Chief Executive, Sir Terry Leahy stepped down after 14 years in charge. During his time at the helm he saw a leap in pre-tax profits from £750 million on 1997 to £3.4 billion in April 2010. Philip Clarke took over from Sir Leahy, but stepped down from the board on 1st October 2014 after failing to turnaround the retail giant’s fortunes and was replaced by Unilever executive Dave Lewis.


Whilst an investigation will reveal what has been going on over the past few years, with questions answered and possibly charges brought against individuals if they have been found to have acted unlawfully, the reputational damage has already been done.

The trusted brand image Tesco has built up over almost 100-years is now being ridiculed. The papers have reported on the enormous number of tweets that people have made who are almost gleeful to see such a large retail brand brought to its knees.


This type of crisis is far more than a crisis of share price, company value and profits. Tesco is large enough to overcome these in the short term. Unfortunately, to many of their customers they will now be perceived as a supermarket brand that can’t be trusted. People vote with their feet and supermarkets such as Asda, Sainsbury’s, Aldi and Lidl are winning more and more customers, who are choosing them because of brand reputation.

Whether its budget brands such as with the likes of Aldi and Lidl, who have seen huge growth since the recession or a family-friendly brand like Sainsbury’s who trades on its quality food for great value image.


Customers are fickle and with so much competition in the supermarket sector, it’s going to be a tough job for Tesco to regain its position as top of the supermarket chains.

Tesco has needed to give its brand image a facelift for many years, but this latest crisis will make it a long hard slog to win back customers who have deserted them and get back the brand reputation they once had.

Assess Talent but don’t Forget to Look at Risk

According to research from Right Management, the career and talent division of Manpower Group, almost half (45%) of UK HR professionals and senior leaders anticipate increased spending on talent management initiatives for the remainder of the year.

The focus on talent management is clearly good news. However, experience tells us that it is not enough for companies to focus purely on developing talent, they also need to understand the risks that can arise from people not fully understanding their job roles or where their skills gaps lie.


Not everyone in an organisation will be competent in every aspect of their job roles. We work with companies around the world in various industry sectors and typically find that 30 per cent of any workforce misunderstand at least one aspect of their role – something which if left un-addressed can pose a substantial risk.

For a talent management programme to be successful, it must start with a talent assessment, and an understanding of the skills, behaviours and challenges that already exist in the business. Once this is done companies that are facing talent shortages, skills mismatches and weak leadership pipelines will have a clearer idea of the core competencies needed to build the business.


Right Management suggests that no business strategy can be successfully executed without a talent strategy that looks at what skills are needed to move the business forward. They say organisations can seek out talent with individual and team assessments that provide an in-depth assessment, based on competencies and behaviours that assess a person’s current ability and future potential, a key step in identifying high-potential individuals.

One thing to note as well is that assessments can also play a key role in highlighting areas of People Risk – which stem from knowledge gaps or from people misunderstanding certain aspects of the role or even if they are displaying the wrong kinds of behaviour at work and shouldn’t be ignored with the desire to implement talent management initiatives.


All too often companies are in the dark about these risks. Whilst they might have formal processes in place to assess competency – many are failing to measure the human factors – such as how people behave at work, the decisions they are likely to make and how confident they are. As such, they are failing to understand where their risks lie.


Human factors

There are many factors that encompass People Risk in organisations from employees not following procedures, systems, process and rules of the organisation to individual and organisation human factors. One of the unpredictable areas of being human is that we can at times deviate from expected behaviours, deliberately or not. For many organisations understanding human behaviour is a huge challenge, and can often been ignored as they strive to find the ‘best’ talent.


Measuring how people perform and behave across an organisation is crucial, especially in sectors such as utilities and transport where it can affect health and safety compliance, and in highly regulated industries such as financial services and banking, where wrongdoing can lead to a toxic culture of excessive risk-taking and poor decision-making. Even in customer service sectors or sales environments wrong behaviours can lead to companies losing customers, sales, and reputation.

Whatever the business sector, if employees fail to behave in accordance with standards or regulation there can be severe consequences that could lead to death or personal injury, severe legal or financial penalties or customer defection due to damaged brand reputation.


One only has to consider the many banking scandals that have resulted in huge fines and damaged reputations or safety breaches in the NHS that have led to unnecessary deaths to realise understanding your People Risk is as crucial part of your business as ensuring you have the right talent at the top.

So whilst talent management initiatives are clearly an important part of any business strategy, a more holistic approach needs to be taken that also incorporates risk analysis. Only by assessing People Risk as well as talent within an organisation can business performance be greatly improved.


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The Banking Standards Review – Can leopards actually change their spots?

Will banks get on board with the banking standards recommendations?

Last year, Britain’s  largest banks – Barclays, HSBC, Lloyds Banking group, Royal Bank of Scotland, Santander UK, and Standard Chartered, plus Nationwide Building Society – asked Sir Richard Lambert, a former director general of the Confederation of British Industry to create an independent body that will promote high standards of behaviour and competence across the UK banking industry.

This follows years of scandal that have plighted the banking sector, stemming back to the start of financial crisis in 2007, including the role banks played in the crisis, PPI mis-selling, rigging of benchmark interest rates and foreign exchange market rigging.

In February 2014 Mr Lambert published a consultation paper outlining his initial thoughts on what this would look like, followed in May by a report which recommended that a Banking Standards Review Council (BSRC) be established and outlined what this new body would look like. This has been fully backed by Mark Carney, governor of the Bank of England who in May urged all banks that operate in Britain, both domestic and foreign to support the initiative.

Mark Carney said at the time “We need a financial system that is safe, fair and acts with integrity. The Bank of England is doing its part to ensure safety and soundness. Integrity, however, cannot be regulated. It must come from within,” he said.


This is the key to changing banking for the better. The sector needs to rid itself of its so called ‘toxic culture’ of greed, excessive risk and bad decision making and one of the ways the BSRC aims to do this is by identifying and encouraging good practice in learning, development and leadership, with a particular focus on behaviour and ethics.

Of course, Mr Lambert has pointed out that raising standards of behaviour across this large and complex industry will take time and will require a number of challenges to be overcome. However the report highlights its vision of 10 years away which is something the sector as a whole must strive for to start gaining back consumer trust and repair its damaged reputation.


Part of this vision is that banks and building societies want in as visible a way as possible to demonstrate their determination to deliver rising standards of behaviour and capability – because their clients expect them to do no less. Good practice is seen everywhere as a competitive advantage, and the Government does not place mandates with banks that do not publicly commit to meeting and surpassing the accepted industry standards.

This vision however can only be achieved if all banks get on board. Mr Lambert said in the report a decision by major banks or building societies not to engage with the BSRC would be a decision to diminish its chances of success before it gets to the starting gate. He says his report is deliberately aspirational in nature. It is informed by the belief that the banking sector must voluntarily raise its game if it is to win back trust, and that there is a vital public interest in it doing so.


The BSRC next year will start identifying and publishing examples of good practice in the industry, and begin to work on its priority areas for standards setting. It also aims to produce its first full annual report, covering the performance of the sector and of individual banks and building society on 2016.

We will be keeping a keen eye on what is happening at BSRC and the sector as a whole, so do watch this space for regular updates. We really hope this is the start of the banking sector as a whole getting behind this initiative and helping to bring about a cultural and behaviour change for the better.


To read the full report and recommendations of the BSRC click here


Will the iCloud security breach damage Apple’s brand reputation?

Apple is one of the most recognised and loved brands in the world.  However, just this month its iCloud service suffered a security breach, with hackers accessing hundreds of celebrity nude pictures, including those of Oscar winner, Jennifer Lawrence.

The widespread publicity following the security breach will have affected consumer confidence and trust in Apple’s iCloud service.

Many of us rely now on iCloud for storing all our information – from our professional and personal lives – including emails, documents, music and precious photos.

So this news will have sent alarm bells to people and no doubt made them rethink whether it is wise to have so much faith in one brand.

Whilst Apple denied its online systems had been compromised, the company produced a statement confirming that certain celebrity accounts were compromised by “a very targeted attack on user names, passwords and security questions.”

Additional security measures will now be added to its iCloud service. Customers will be emailed when someone tries to change an account password or when a device logs into an account for the first time. However, shouldn’t one of the world’s biggest technology companies been doing this already?

According to reports, reduced consumer confidence may be already having an impact.  This month, the company unveiled Apple Pay which will allow iPhone 6 owners to buy items and services with a tap of their phone.

Due to launch officially in October, some media have pointed out that Apple Pay is making people nervous due to the recent data security breaches, including the iCloud service and begs the question whether electronically stored data is really safe and private.

Whilst Apple is unlikely to go out of fashion any time soon and people are generally highly confident about their products, it is clear no company’s reputation is immune when things go wrong.

Brand reputation takes years to build, but can be damaged at the drop of a hat and all brands need to safeguard themselves against this risk.


Banks sink to a new levels to intimidate customers

Over the past few years it seems banks have been in the news virtually every week for some kind of wrong doing towards their customers and this week is no exception.

This week it was revealed that HSBC, Barclays, Santander and RBS/NatWest have admitted to sending out hundreds of thousands of letters from fake debt collection firms to intimidate customers in the red. The letters misleadingly suggested that law firms and outside debt collectors were being called in.

The admissions came in a series of letters released by MPs. In one of them, the chief executive of Barclays confessed the bank had used a number of ‘debt collection brands’ and RBS chief Ross McEwan said the bogus letters ‘reflected what had become a common industry practice in a sector that had come to put its own interests above those of its customers’.

Andrew Tyrie, chairman of the Treasury committee, which published the letter’s said: “These letters seem to have been designed to pull the wool over consumers’ eyes. Many customers will have been understandably misled. What is more it seems that this practice was widespread. Banks say that they have now stopped sending such correspondence but it should never have happened in the first place.”

This may sound familiar and indeed it is, as it’s not the first time this has happened. Last month payday lender Wonga was named and shamed by the Financial Conduct Authority and ordered to pay £2.6 million in compensation to 45,000 customers over the same practice.

Whilst there is no excuse, one may have not been too surprised Wonga were pulled up for doing this, as they have faced much criticism for their high interest rates and targeting vulnerable people – but our biggest banks guilty of the same dishonest practice is downright disgraceful.

This betrayal of trust and blatant disregard for customers is verging on shameful and once again highlights the poor behaviour and decision making that is going on in our banks. The reputational damage stemming from poor bankers behaviour over a whole series of malpractices from PPI mis-selling and Libor rate fixing, and now bogus letters is immense.

It’s the reason that Sir Richard Lambert was asked to create an independent body that will promote high standards of behaviour and competence across the UK banking industry that is so desperately needed. In May 2014 he produced his review into banking standards and it is hoped some of the recommendations, including the creation of the Banking Standards Review Council – will help to restore public trust in the sector.

Mr Lambert pointed out at the time that raising standards of behaviour across this large and complex industry will take time and will require a number of challenges to be overcome. For banking customers it can’t come soon enough as banks have been getting away with reckless behaviour for far too long.

How can the banking sector have been getting away with such poor behaviour for so long? What realistically do you think can be done about it? Should people be thinking with their feet and moving their accounts to more ethical banks?

Please comment and share via your social media networks using the hashtag #BankingStandards



Simply accepting regulator fines and carrying on will have no lasting impact on changing banking culture

It is evident for all to see that the banking sector has a long road to recovery, and is still falling short across certain areas where simple mistakes are  leading to  hefty regulatory fines. Recently Royal Bank of Scotland (RBS) was fined £14.5 million by the Financial Conduct Authority (FCA) for “serious failings” in its mortgage sales business, by failing to ensure their advisors gave suitable mortgage advice to their customers. As Britain’s sixth largest mortgage lender this is unacceptable.

A day later and Deutsche Bank were fined £4.7 million for getting buy and sell markers the wrong way round when reporting on 29 million transactions. The German bank failed to properly report on more than 29.4 million contracts-for-difference equity swaps thanks to a coding error. This meant that those labelled buy were labelled sell, and vice-versa. That’s a lot of transactions where nobody spotted the mistake.

The FCA said they have “repeatedly highlighted the importance of accurate transaction reporting and taken enforcement action against a number of firms” and said “there was no excuse for Deutsche Bank to get it wrong”. The FCA has already fined 10 other banks for similar breaches, including Barclays and RBS. And several banks have hit headlines in recent years for scandals relating to PPI mis-selling, Libor rate fixing and money laundering.

Huge fines, along with tighter regulations and controls are the penalties, but they are failing to get at the root causes of why these failures are happening in the first place, leading to People Risk and increased exposure to reputational risk. But why are banking employees failing to do their jobs properly? And what can be done about it to change banking culture and employee behaviour for the better?


Interesting, when RBS chief executive Ross McEwan joined the bank back in October 2013 he said “we completely overhauled our processes, and took all our mortgage advisors off the front line for an extensive period of time to get the training required.” This training has clearly not had the desired effect on RBS employees and has failed toaddress the root causes of how a particular employee behaves on the job. Simply throwing training at people doesn’t necessarily mean they understand what they have been taught and how to apply this in their day to day roles.

The FCA said that apart from the computer systems used for mortgage applications at RBS, the only other bit of guidance sales advisors were given into how to do their job properly is a Mortgage Sales Guide. The FCA felt this just wasn’t adequate, pointing out that this was not a step-by-step guide and was more of a collection of policy guidelines, procedures and factual articles.


Banks have been getting away with it for years and now there is a big crack down on those not delivering what is expected, or misleading investors and customers. However for banks to change what has been labelled their ‘toxic’ culture and move away from the norm of greed, excessive risk and bad decision making, they must define the root causes that are causing ‘rogue’ behaviour, develop a better understanding of their employees and the processes in place to guide them, and refine the existing culture within the organisation.

They need to measure a combination of employee competence, knowledge, understanding and confidence to reveal what people know, how they apply their knowledge and how they act in certain job specific situations. By assessing competency and confidence together, companies can spot ‘risky’ individuals – people with low knowledge and high confidence as well as those with high knowledge but low confidence, who may fail to make the right decision when placed under pressure.


This enables managers to gain insight into how individuals are performing, their weaknesses and knowledge gaps and the decisions they are likely to make. The results help identify star performers as well as weak links – individuals who might need more training or who are actually not fit to practice. It enables training to be targeted to where it’s needed most. Organisational risks do not sit in one easy to define central function. Rather it exists in a myriad of behaviours and habits of individuals spread across all levels of the operation.  And here lies part of the problem.

Banks have been allowed to become so large that trying to implement systems and processes to track and measure employee’s behaviour on an on-going basis can seem an enormous task. However if banks are really going to change for the better and drive a positive culture change, it has to start with their employees and making sure they have a competent and knowledgeable workforce. Unless they do, nothing is really going to change and which is just not acceptable any longer.


Do you think banks need to start with frontline employees in order to reduce frequently broken regulations and basic errors? Perhaps it starts with the processes in place and the training designed around these processes? Are banks content with accepting large fines and bad press to continue business as usual, rather than invest in changing the culture within their organisation?Please comment and share via your social media networks using the hashtag #bankingculture