The Barclays Banks Image Crisis - Coursework Example

CRISIS MANAGERS BENEFIT The Barclays Bank’s Image Crisis Table of Contents Contents Contents 2 1. Summary of selected organisational crisis Barclay is a UK-based financial services organisation and known for retail and investment banking, credit card, and investment management. However, its reputation was tarnished by several controversies such as the 2002 “Big Bank” advertising, CEO Matthew Barrett’s hefty salary and his comment about the perils of credit card in 2003, involvement with South Africa’s apartheid regime, the loan provided to Zimbabwe’s president Robert Mugabe, the £14.8 million bonus received by Barclays Capital head Bob Diamond in 2008, and violation of anti-laundering law and tax avoidance case in 2009. Recently, Barclays got involved in 2011 Del Monte buyout and controversy in Payment Protection Insurance sales. In 2012, Barclays Bank got involved in multi-million tax repayment issue, rate-fixing scandal, discriminate hiring or promotion of women and ethnic minorities in senior positions, and the 2013 manipulation of electricity market. Barclay’s evidently experiencing crisis after crisis since 2002. However, due to limited sources of information, only three of these organisational crises are discussed below. These include the 2002 “Big Bank” scandal, 2012 Tax Repayment, and the current manipulation of electricity market controversy. 2. Barclay response strategies In 2002, Barclay advertised its worldwide online banking service by highlighting the slogan “a big world needs a big bank” . This “Big Bank” television advertisement featuring popular Wells-born British actors received good pre-publicity but turned into a communication disaster when the public discovered that Barclays was at the same closing around 170 branches nationwide. Majority of these branches are in the rural areas thus affecting the growth of small businesses. . Angry with the closures, local communities’ disappointment was further aggravated by government minister Chris Mullin’s statement encouraging customers to gather together and revolt against Barclays and the arrogance of Barclays’ executives publicly justifying their decision. For instance, Barclays Chief Executive Matthew Barrett who himself was implicated in the controversy for receiving £1.3 million for just three months of work announced that Barclays is an economic enterprise and therefore have no obligation to be sentimental and make excuses about branch closures . Another is the coincidence that the actor (Anthony Hopkins) in the advertisement endorsing Barclays’ “big” thinking was born in one of the village victimised by the branch closure and was seen as a “traitor to his heritage” resulting to further image deterioration and wider public displeasure over Barclays business ethics. In 2003 or almost a year after the advertising scandal, Barclays executive made another communication mistake when Matthew Barrett, the CEO of UK’s biggest credit card company for the second time made a blunder by publicly admitting that he and his children never or limit their use credit cards because they are “too expensive” to pay . In the early part of the crisis, Barclays undoubtedly adopted a denial strategy by justifying the widespread branch closures. Another form of this denial is the immediate replacement of its advertising agency in early 2003 in order to counter the effects of the 2002 “big bank” campaign with “more humane” advertising. Finally, it tried to diminish its responsibility by extending 84% of its branches opening hours and added 2,000 more staff in the hope to improve their blemished reputation from the 2002 campaign. There is no indication that Barclays made a public apology but it is somewhat evident that it publicly admitted its mistake by improving its branch service hours and adding more staff. In 2012, Barclays’ reputation was further tarnished by a tax repayment scandal where it openly admitted having paid only £113m in corporate tax in 2009. Moreover, further review of Barclays income for 2012 reveals that it made a profit of around £7 billion but paid only £82 million in taxes . According to the report, Barclays employed two tax avoidance schemes. One is by entering contrived agreements with its clients to avoid paying corporate taxes on profits generated from buying back their debts at lower price. Another is by exploiting the banking rules concerning investment fund in order to get repayment of tax credit . However, despite evident fraudulent act and admission, Barclays adopted a denial strategy and justify its actions by claiming legitimacy of their tax schemes. Moreover, instead of admitting their mistake and apologise, Barclays CEO Bob Diamond publicly announced that the time for banks “remorse and apology” is over . Moreover, in line with this controversy Barclays new CEO Antony Jenkins reduced their responsibility by blaming and shutting down their tax division . In 2012, Barclays was accused of manipulating the California electricity market along with other four traders in 2008. This time, Barclays was accused of making a profit by employing “loss leader” strategy where it offer goods at a non-profitable price in order to attract more customers . Again, Barclays adopted their usual denial strategy, denied the allegations and threatened to put up a landmark legal battle against the FRC or Federal Regulatory Commission to avoid the $470 million fine . Moreover, Barclays’ CEO Antony Jenkins insisted that their trading schemes are legitimate and supported by facts 3. Frequently used crisis communication strategy from SCCT The most common communication strategies employed by Barclays are denial and evasion of responsibility which according to SCCT demonstrate low concern for victims and low acceptance of responsibility . Moreover, this denial strategy include scapegoat or blaming another individual or group and attacking accusers when necessary . For instance, in the 2002 “Big Bank” controversy, Barclays did not issue an apology but firmly deny their mistake and arrogantly stated their insensitiveness and unwillingness to make excuses. Instead, Barclays silently tried to repair their image through bank timing extension and hiring more staff. Similarly, in the second controversy involving tax repayment, Barclays adopted the same denial strategy and again arrogantly stated that the bank had no time for remorse and apology despite clear evidence and admission. Recently, the same crisis communication strategy was employed but this time, Barclays’ arrogance and denial posture is directed to the accuser, the U.S. FRC. In fact, the only difference between the three crisis communication strategy is the person who delivered the arrogant message- former CEO Barrett and Diamond in 2002 and 2012 respectively, and latest CEO Antony Jenkins. 4. Frequently used directed speaker and variation in message strategies As far as these crises are concern, Barclays’ CEOs often make the controversial announcement and there is no signification variation in their message strategy. For instance, rather than being diplomatic in delivering the organisation’s message to the public all of them are arrogant, appears confident and secure in both denying their responsibility and in claiming legitimacy of their actions. However, in terms of crisis communication knowledge, Matthew Barrett seems somewhat badly informed of SCCT. For instance, although he is started the tradition of denying Barclays responsibility over multiple branch closures, he himself disgraced the bank (credit card blunder) in the midst of reputational crisis created by “Big Bank”. The difference between Barrett and the other two CEO is the fact that the latter are more careful in delivering their messages during a crisis. 5. How Barclays follow the SCCT model in relation to selected strategy In relation to SCCT model, Barclays’ strategy seems well informed of the most appropriate response for a particular crisis. For instance, according and , denial is a strategy commonly use when the organisation sees no crisis or has no responsibility for the crisis. In other words, denial strategy is applied whenever the organisation feels that such controversy has little negative effect to their reputation. Apparently, Barclays did not even consider the diminishment strategy despite widespread public protest about “Big Bank” and branch closures in 2002 and instead put the blame on the advertising company who allegedly responsible for Barclays heartless advertisement. According to can be a simple denial and shifting blame and this often occurs when the organisation refuses to take responsibility and publicly state that there is no crisis or the organisation did not create the crisis. Eventually, the organisation will then shift the blame to someone else and evade responsibility and restore its image. By analysis, in its attempt to protect its image, Barclays did apply the recommended denial strategy in “Big Bank” in the early stages of its image recovery only as it tried to diminish or lessen the severity of the crisis by silently implementing improvement in its banking services and hiring more staff to impress its disillusioned customers. Barclays at the latter part probably realised that the “Big Bank” crisis is a “preventable crisis” type that according to Coombs’ SCCT include human error and organisational misdeeds thus decided to employ “diminishment” to reduce the reputational impact of the crisis in the latter part. However, Barclays’ used of combined strategy is only evident in “Big Bank” because there was no indication that it attempted any diminishing strategy in both tax repayment and electricity prices manipulation controversies as discussed below. It is important to note that the main difference between “Big Bank” and tax repayment scandal is the fact that Barclays did admit paying the government an incredibly low corporate tax in 2009 and 2012 despite billions of earnings. However, despite clear deception and questionable arrangements with its clients, Barclays’ denial strategy continued and publicly claimed that their tax avoidance and rule bending scheme is legitimate. In fact, rather than claiming responsibility and employ a crisis diminishment strategy, Barclays’ CEO Bob Diamond proudly announced their remorselessness and reluctance in acknowledging any responsibility. According to , organisations often make attributions about the cause of the crisis thus Barclays in this case probably found no reason to warrant any diminishment or effort to repair the reputational damage. The denial strategy applied in the 2012 electricity price manipulation scandal seems correct in relation to SCCT’s recommended strategy. Initially, the manipulation scandal is only an allegation from US Federal Energy Regulatory Commission hence no responsibility yet for Barclays. However, since such allegation can damage organisational reputation, Barclays is expected to initially adopt a response strategy that can best protect their reputation – denial. According to , SCCT allows crisis managers to select their communicative goal based on perceived responsibility over the crisis thus the most appropriate option for scandalous allegation is to deny. In this case, rebuilding of company image may come later in the process when the court decided in favour of FERC. 6. Evaluation of Barclay’s communication response to protect its reputation Evaluation of Barclays’ chosen communication response in the 2002 image crisis suggests that the bank in relation to SCCT recommended strategies found the issues minor and had little reputational impact. For instance, in SCCT’s recommended crisis responses, denial strategy is best applied in rumour crises and in circumstances where diminishment and rebuilding is unnecessary . In other words, Barclays found apology and compassion unnecessary particularly when the organisation is not directly responsible. For instance, the 2002 image crisis can be considered a product of coincidence because by analysis, public outcry over the multiple branch closures is unlikely if the “Big Bank” advertisement was not shown concurrently. This is probably the reason why Barclays’ communication response was unsympathetic and directing the public to the fact that economic enterprises can actually close its branches whenever they want. According to , a public apology or showing people that the organisation is apologetic and compassionate does not necessarily reduce people’s anger and minimize negative reputational impact. This is because aside from being perceived differently there are some circumstances that admission and apology open the door to more problems such as lawsuits and increased perceived internal crisis responsibility that creates more angry people. However, there is a noticeable inconsistency in Barclays’ crisis communication response that in essence contrary to SCCT recommendation. In SCCT, denial strategies should be use independently of diminishment and rebuilding but Barclays actually mixed them in the 2002 crisis. For instance, the expansion of branches banking hours and additional staff if Barclays truly deny responsibility as an economic enterprises but it did and in fact attempted to repair its image by showing people how sensitive the bank is to customer needs. By analysis, this gesture is in part a silent excuse and public apology, and bolstering or a reminder that Barclays is still a responsible corporation. Barclays crisis communication response in the other two controversies is almost the same but more consistent with its denial strategy compared to 2002 image crisis. In the tax avoidance scandal, Barclays’ denial strategy convincingly counters the allegation by justifying its tax schemes and blaming its tax division. According to the news report, Jenkins even shut down and fired members of their tax division to clean up the bank’s image . This denial gesture suggests that Barclays completely deny any misdeeds and reduced the scope of its responsibility to an allegedly fraudulent division. By analysis, this denial strategy attempted to limit or direct public anger to members of Barclays’ tax division’s fraudulent activities that in essence do not represent Barclays’ overall image. In the electricity price manipulation scandal, Barclays again used similar denial strategy but this time shifted the blame to its accuser- the FERC. This time, the application of denial strategy seems more appropriate compared to “Big Bank” and tax avoidance where the advertiser and tax division were blamed respectively. This is because as aside from being an allegation from a single entity with no evident public support, the pricing issue has no direct effect thus need no attribution. The announcement made by CEO Antony Jenkins, the same CEO who handled the latter part of tax avoidance crisis, is not a threat but shifting the blame to FERC who according to the report did not present full description of the facts . Moreover, the price fixing allegation at that time is not yet confirmed as FERC was still asking explanation from the defendants. If Barclays manage to show evidence of compliance to the law then such allegation will not cause any reputational damage. 7. Recommended strategy for Barclay to improve outcome Evaluation of Barclays crisis response strategy suggests that the main reputational problem is the repeated occurrence of organisationally humiliating situation. In fact, aside from the three crisis discussed here, they have been implicated in both local and international scandal like the Libor-fixing scandal where Barclays admitted misconduct and was asked by UK’s FSA (Financial Services Authority) to pay the fine . Clearly, the consistent adoption of SCCT’s denial strategy without any compassion at this point is not advisable as Barclays’ reputation regardless of virtue and compliance with law is already tainted. Based on SCCT’s crisis response recommendation, Barclays should avoid further reputational damage and consider application of the most appropriate response such the combination of diminishment and rebuilding strategies . In fact, the current Barclays’ CEO Antony Jenkins started to use these strategies in order to improve the bank’s image in the next five years. One of Jenkins’ initiatives is changing Barclays culture into a more service oriented organisation . The transformation should continue along with more compassionate response strategy because denial strategy cannot repair an already damaged reputation. Moreover, Barclays crisis managers should consider the positive effect of apology and compassion such as reduced anger, supportive public behaviour, and public attribution of responsibility to external cause or circumstances instead of Barclays . 8. References BBC_News. 2013. Timeline: Libo-fixing scandal. BBC News Online. Coombs, W. T. (2011). Ongoing Crisis Communication: Planning, Managing, and Responding, SAGE Publications Coombs, W. T. & Holladay, S. J. (2012). The Handbook of Crisis Communication, Wiley Cornelissen, J. (2004). 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