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A number of years ago I was privileged to work alongside a recently retired U.S. Army “Bird Colonel.” Had he not retired, his next rank would have been Major General. I consider him one of my mentors. Perhaps the greatest lesson that he taught me was that, “You do not have to fight every battle. Fight only those battles that you know you can win.” He claimed that was a quote from Napoleon, so I’m not too sure how reliable that advice is in the military (see: Waterloo). It only seems to work 50% of the time.
I am, however, confident that picking only the battles you know you can win is excellent advice in business. In business I believe the principle can work 100% of the time. The problem is that executives all too often take “calculated risks” in order to grow their businesses. Speaking as an investor, I am significantly more inclined to put my money with a company that has a reputation of having a winning strategy based on knowing which battles it can win. Barclays plc (LSE:BARC) announced in April 2013 that its wealth management division would undergo some restructuring. Barclays Wealth has been a laggard for some time, posting, as an example, just 2.5% ROE for the first half of 2013 when the company pretax profits fell by 53% year-on-year on a cost-to-income ratio of 91%. We could make more than that selling used mobile phones on the street.
Bob Diamond’s replacement at the CEO position, Antony Jenkins, is going to run the company based on the principle of fighting the battles you know you can win. This was confirmed by a Barclays spokesperson who said, “This is part of our new strategy, focusing on reducing complexity and competing where we can win.” The strategy will be directed and implemented by the new CEO of Barclays Wealth, Peter Horrell.
Allow me, please, to reflect upon the other principle by which Horrell will be guided – reducing complexity. Not a bad idea all by itself. “Reducing complexity,” by the way is a euphemism for cutting internal operating costs. I’m pretty keen on that principle too.
Where was I? Oh yes, “competing where we can win.” Some readers are probably thinking to themselves that this is nonsense, because EVERY company wants to win. I agree that every company typically wants to win, but wanting to win is a far cry from knowing you can win.
The strategy for applying the winning principle includes
- withdrawing from 130 countries in which the wealth management arm is already a losing battle
- trimming its booking centers from 17 to 12
- discontinuing full-serve management for investors with £500,000 or less
- focusing on the 70 markets in which 86% of the world’s wealth is
- discontinuing efforts to find new business outside of those markets
- ending client relationships in those markets
- significantly reducing headcount in proportion to the cutbacks and where necessary to reduce complexity
I am becoming a fan of the new Barclays management team. They are just going to try to win. They plan to win where they know that they can win.
Barclays share price was down 5.3 pence to 267.75 this afternoon. Whilst the share price has been falling since the beginning of this month and has declined since its half year report on 13 May when it had peaked at 333.80, it remains up 25% over 26 September 2012 when it closed at 213.65.
