Just because performance is good does not mean management is. A hard-hitting report by the parliamentary commission on banking standards (An Accident Waiting to Happen) pulls no punches. One of our major banks had to be rescued due to incompetence and recklessness by senior management. The report makes clear that an organisation can be making lots of money and earning big bonuses for bosses yet be very badly run. Does this only happen in the private sector? Is the opposite also true? Can an organisation be struggling to hit performance targets, suffering from low morale and experience high staff turnover yet still be well run? Does this mean poor leadership and bad management can ruin an organisation but good management does not guarantee success? So how should we judge managers?

‘Your boss gets a big bonus because performance targets were not just achieved but what did they actually do that contributed to this success?’

If your salary is linked to your annual appraisal you will be familiar with this debate. Your boss gets a big bonus because performance targets were not just achieved but exceeded but what did they actually do that contributed to this success? You on the other hand struggled to cover for absent colleagues, had to deal with the fallout from a big restructuring and spent a massive amount of time on a major investigation and subsequent disciplinary. In short a horrendous 12 months, for which you get no bonus or thanks.

Strategy flawed

What senior management contribute is the strategy. According to the parliamentary report, the bank’s strategy was flawed from the start, warnings from the former finance director were ignored and the regulator failed to act on their own concerns. There are parallels here with the public sector in the push by hospitals to obtain foundation status, the strategy of merging trusts and local authorities’ enthusiasm for outsourcing services. Don’t tell me that the financial directors of some of these organisations have not expressed concern about unproven benefits and increased financial risks or that the enthusiasm of the chairman and chief executive is shared by all. And the regulators/inspectors while they may have their concerns consider this area outside their remit.

The criticism is of boards, and in particular chairman/leaders, who with their chief executives adopt high risk, short-term strategies, who dismiss the concerns of their financial directors as being over cautious, who cut short discussion and debate as simply postponing the inevitable and consider any dissent to be personal disloyalty. These individuals are arrogant and over confident, lacking insight into how their behaviour affects others within the organisation and creating a “brash” culture.

The most telling quote from the parliamentary commission was that from the deputy chairman of the bank Sir Ronald Garrick: “I have no doubt that the HBOS board was by far the best board I have ever sat on.” Good for him. But not good for the rest of us.