Salz Review - Wall Street Journal

139
Salz Review
An Independent Review of Barclays’ Business Practices
incentive schemes (such as ones focused on customer satisfaction) can work. But
narrowing such schemes serves to make them too blunt. Incentive schemes should
consider overall behaviours and be linked with performance management, and offer
non-financial forms of recognition as well as financial rewards. Changes to Barclays’
incentive scheme to date appear still to rely on pay as the primary driver of
behaviours, even if this is now measured by customer satisfaction not sales.
11.37 Individuals need to understand how their performance is regarded. Therefore, where
an incentive scheme focuses exclusively on collective behaviour, management will
need to give close attention to how individual performance is assessed and how
appropriately it is recognised. Good collective metrics must not hide poor
individual behaviours.
11.38 Bonuses typically reflect an individual or a team reward for a job well done.
A collective profit share ties reward to the performance of an enterprise overall.
With the new Barclays emphasis on team rewards, we are drawn to the notion that –
at least in part – bonuses paid to retail employees might reflect the economic
outcomes of a larger team and, ultimately, the retail bank or even the whole Group. 223
In terms of building a common culture and pride in the institution, there would seem
to be advantages in employees sharing in the successes and the disappointments of
the enterprise as a whole. This philosophy could be applied more broadly across the
bank but we recognise this is something for the future.
Recommendation 22: Retail incentives
Barclays should avoid retail sales incentives which may encourage behaviours
that conflict with meeting customer needs. It should ensure that indirect salesbased
targets (such as internal league tables) do not take the place of sales
incentives in such a way as to encourage prioritising sales over customer needs.
Retail incentives should, where practicable, be based on a balanced scorecard
covering overall behaviours as well as customer satisfaction.
Discretionary Bonus Arrangements
11.39 The majority of staff across Barclays are eligible to receive incentives in the form of a
discretionary bonus. The bonus is a financial reward to individuals based on shortterm
(annual) performance, not formulaically linked to any KPIs and with very high
levels of discretion given to line managers to decide individual awards. For many
staff, especially in the investment bank, the discretionary bonus forms a very
significant part of their compensation. The average investment bank bonus was 70%
of base salary in 2012 and approximately 135% of base salary in 2011. These figures
are significantly higher for senior employees, with the average managing director
bonus at 350% of base salary in 2011 and 210% in 2012 – rising to many multiples of
salary for the most senior bankers. Typically, base salaries for the managing director
population fall in the range of £150,000 to £300,000.
223 Any consideration of profitability at a business unit level should be put in a Group context which would
significantly reduce incentive pay-outs in instances where that business had been profitable but the overall
Group had not.