s the Chief Executive of Tesco Bank, creating the right culture in the bank has been my priority since we assumed full control of the business four years ago. Ultimately it is the culture of a business that transcends all other influences on how its customers are treated.
I encountered an essay recently which contained the following passage:
"Somebody had blundered and the most expensive orgy in history was over. It ended two years ago, because the utter confidence which was its essential prop received an enormous jolt and it didn't take long for the flimsy structure to settle earthward".
The essence of these words could have been written at any point in the last few years. But they were written from the vantage point of 1931 by the great American writer F Scott Fitzgerald in a seminal magazine article entitled 'Echoes of the Jazz Age'.
The importance of having the right culture in business, and in financial services in particular, has once again been illustrated by the failures of the recent past. It is worth reflecting on how history repeats itself in the absence of intervention; how strongly Fitzgerald's words resonate more than eighty years after they were written.
The expression "flimsy structure" can be interpreted usefully in the context of business culture. What do we mean by culture? It can be all too readily discussed in superficial terms. For me, it is the guide rails that determine the enduring distinctiveness of an organisation. It is the culture - good or bad - that conditions how a business interacts with its customers and partners. Almost without exception, organisations describe their strategy, vision, values, and priorities in laudable terms. How often do we hear that customers' interests stand at the heart of an organisation? It is far rarer, however, to observe an organisation that goes beyond rhetoric and embeds the beliefs in the actual mechanics of how the business is managed.
Culture is not about words, it is about actions. And for me, it is the result of two things. Firstly, it is the cumulative impact of decisions that are made by the managers in the business; particularly those made by the most senior leaders. It is not so much whether a particular decision proves to be right or not, but rather that the motivation is appropriate and consistent. The second determinant is apparent from the response to the constant ebb and flow of behaviour in the business at all levels. Which behaviours are applauded, which are tolerated, and which are abhorred. No organisation can expect flawless behaviours. But, when the response to different conduct is largely aligned with the right strategy and the right values, there is an opportunity to build the right culture.
It is trust that binds us together - with our customers, our colleagues, and our communities. Trust can only be created and maintained by having a culture that is anchored in truth. A culture that is characterised by a collective desire to do the right thing.
We serve Tesco customers in financial services, as a bank and as a general insurer. It is a sector that has created an identity dominated by opaqueness, complexity, pressurised selling, and a willingness to treat long-standing customers poorly. These traits are the ultimate consequence of a culture endemic in the sector. A culture that, too often, has put profit before customers.
Tesco Bank is trying to be different. We strive to create the right culture, where it is always the right time to do the right thing. The phrase 'Every Little Helps' is synonymous with Tesco, but it is more than a strap-line. It is also the embodiment of an important notion that no improvement is too small if it is right for our customers, our colleagues or our communities.
This philosophy creates dilemmas. We must be prepared to do the right thing for customers to create lasting trust and value, even if there is short-term commercial jeopardy. As soon as we assumed full control of our customer service centres, based now in Glasgow, Newcastle and Edinburgh, we dropped the practice of having sales targets and sales incentives for colleagues dealing with customers. We did so not in response to an event or to pressure from any source. We made the decision because it was the right one. Some might argue that such targets and incentives can be executed well. We concluded, based on the extensive experience, that in practice the framework is ineluctably corrosive and unlikely to be in the interests of customers.
We also reviewed the sale of 'motor legal protection' which is commonly sold in the industry as an additional product when a customer is buying a motor insurance policy. We reached the conclusion that a customer, in the context of a typical buying experience, would not understand sufficiently what is an inherently complicated product. So we stopped offering it as a separate product and incorporated it in the underlying motor policy. Again, we did so because it was the right thing to do.
A simple test to assess how a bank treats its customers is to examine its behaviour in relation to its savings customers. Routinely and casually, banks look for opportunities to drop savings rates to extraordinarily low levels for customers who are judged to be inert. For Tesco it is anathema to treat loyal customers in this fashion. Indeed we consider earning customers’ loyalty and rewarding it as a defining aspect of how we try to serve our customers. So, for example, none of our customers earn a rate of interest on their savings that is below the benchmark rate set by the Bank of England. How many other banks can say that? Tesco introduced Clubcard points as a thank you. Last year we handed over £100m worth of value in Clubcard points to Tesco Bank customers for buying and using our products.
We recognise the importance of the right culture. One that steers the business in the right direction in how it serves our customers, our colleagues and our communities. One that guides decision making. One that helps us confront the facts when we must recover from a mistake. One that helps us earn, retain and reward customers’ loyalty.
Fitzgerald's words remind us that the substance of challenges we face generation after generation are more alike than unlike. As we reflect on recent events, we must be willing to focus on what matters most and endeavour to be better than before. In the words of TS Eliot from 'Four Quartets':
"We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time".