On November 10th, 2009, Lloyds Banking Group controversially announced 5,000 job cuts. Lloyd’s management marked the occasion as “another important step in bringing our business together” i.e. integrating HBOS which Lloyds bought at the peak of the financial crisis.
However, the union didn’t see this step in the same light! They said that the job losses demonstrated “the depth of corporate arrogance within the tax payer supported bank.” The Lloyd job cuts come just days after Royal Bank of Scotland, also government supported, announced thousands of job losses.
Arguably, these divergent views between management and employees reflect a failure of strategy. That is, a failure of strategy to appreciate the complexities created by a new hybrid entity – part private, and part public.
Consider firstly the private sector view. Traditionally, life is tough for CEOs in the private sector. Their performance is scrutinised by analysts and shareholders and if their companies don’t deliver sufficient growth and profit, their days are numbered. So life’s tough but oddly it’s also straight forward. A clear profit goal provides clarity throughout the organisation and helps in making strategic decisions. Put simply, when faced with choices between alternative courses of action the profit goal kicks in: will option A deliver more profit than option B?
In the public sector, the challenge is fundamentally different. There is rarely a clear, single objective and organisations are characterised by multiple stakeholders with different and often competing interests. Added to this, governmental goals posts are being moved! Against this backdrop CEOs are required to be leaders not just of their organisations, but of the places and beneficiaries they serve.
In a hybrid entity – part private, part public – there is a need to reconsider our concepts of strategy and leadership. From a private sector perspective, a shake up to reduce costs is clearly in shareholder’s interests. While from a public sector point of view, initiating the redundancy of thousands of jobs implies an organisational failure and a high social cost. The situation in the case of taxpayer owned banks is additionally complicated as they remain nominally independent of the government, and hence less sensitive to broader public goals; a frustrating situation for bank employees who are part owners by virtue of their tax payer status!
Because of the multiple interests to take into account, Strategy for Taxpayer Owned banks is very complicated. An initial challenge for the leaders of these institutions is to make sense of the complexity and re-set the purpose of the organisation, focusing on the beneficiaries, and not just the shareholders. By doing so, they can provide the security of purpose that enables the organisation to coalesce and more forward purposefully.
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