Intelligence Failures at Barclays Bank

by

#orgintelligence @larryhirschhorn has produced a very detailed analysis of Barclays Bank, Robert Diamond and the LIBOR scandal (July 2012). He asks why Marcus Agius (Barclays Chair) and Bob Diamond (Barclays CEO) were stunned at the Bank of England’s demand for Diamond’s resignation, and suggests it was because they lacked something he calls a “political imagination”.

There is a lot of interesting material in Larry’s blog from the perspective of organizational psychology, and I don’t want to reproduce it all here. What I do want to explore is whether what Larry calls “political imagination” is an aspect of what I call organizational intelligence.

Central to Larry’s narrative is a cryptic note, written by Bob Diamond after a telephone conversation with Paul Tucker, the Bank of England’s executive director for markets. This note appears to have been interpreted by one of Diamond’s subordinates as an coded instruction from the Bank of England to lower its LIBOR submissions. However, Diamond later denied that this was the meaning of the note. As Larry points out, this kind of deniability is all too common in and between organizations.

What is more complicated is the decision by Barclays to include this note in its published account of the LIBOR affair. Why was this note relevant to the LIBOR affair, if it didn’t mean what it appeared to mean? Diamond’s self-justification and repudiation looks like what Freud called Kettle Logic – “we didn’t fix the LIBOR rate … and anyway you hinted we should fix it … and anyway it wasn’t a hint”.

The Bank of England was undoubtedly sensitive to the allegation that it had been complicit in the LIBOR affair, and seems to have reacted angrily to the publication of this note. Diamond and his colleagues may have decided to include the note as a coded message to other banks, but failed to anticipate the reaction of the Bank of England. And as one of the highest paid bankers in London, Diamond may also have failed to appreciate the extent to which the Bank of England disapproved of overpaid London bankers.

According to the Wall Street Journal, there were differences of opinion within Barclays as to whether it was a good idea to include this note in its report, and there were some who worried about the reaction. However, the decision was taken to include it. At the time, this might have seemed like a fairly small detail, but such details can sometimes have very significant consequences.

(Of course, we cannot know for sure that it was this detail that triggered the Bank of England’s demand for Diamond’s resignation, but it is a highly plausible interpretation of events.)

One of the most common limitations of organizational intelligence is that all decisions are taken within a fixed frame of reference – which I regard as a failure of sensemaking. Larry suggests that Bob Diamond was operating within a frame of reference based on “technical rationality”, within which the publication of the controversial note seemed perfectly reasonable, and that he lacked the imagination to move outside this frame of reference. Larry also indicates some of the organizational mechanisms that may have helped to reinforce Diamond’s limited worldview, including his experience of being protected by his subordinates.

In that regard, there are some strong parallels with the Murdoch empire and its recent troubles. When Diamond said (speaking to the House of Commons Treasury Committee), “When I read the e-mails from those traders I got physically ill” (BBC News, 4 July 2012), I was convinced I had heard either Rupert or James Murdoch saying much the same thing a few weeks earlier. They are obviously using the same scriptwriter.

Doubtless there will be a stage play at the Royal Court before long, showing us the tragic fall of these doomed heros.

Order, unorder and effectiveness

by

A quick follow-on from the previous post on ‘Complex, complicated and Einstein’s dice‘, in relation to effectiveness in enterprise-architecture. There’s a common phrasing in business and elsewhere that places efficiency and effectiveness as kind-of opposites: efficiency, we’re told, is doing things…

Transformative Enterprise Architecture Framework – Connecting Strategy – Tactical (Operational) – Execution (Implementation)

by

Defeat Darwinian Enterprise Model that is Adaptive, rather strive to achieve Generative Model that is transformative creating rich diversity from minimal sets. Connect – Strategy – Architecture / Operations – Implementation

Using Cobit 5 Part 3 – The Policy Hierarchy

by

Many companies do not do governance well. A primary reason for this is a focus on governance “process” at the expense of policies. And, where policies are established, it is common to observe a surfeit of bad, inconsistent policies that are overlapping and generally ignored. As a result much governance is carried out by opinion; and governance decisions are not easily repeatable.

The Cobit 5 framework provides reference models for process and goals but, other than providing very general guidance, stops short of any detail at all relating to principles and policy. However in fairness Cobit 5 does recommend “a (hierarchical) structure into which all policies should fit and clearly make the link to the underlying principles”.

So what does a policy hierarchy look like? Does each organization need to invent its own unique structure and content?  Actually we need more than just a policy hierarchy, we need a model that helps us establish a consistent approach to policy search and description. And whilst every organization will have unique needs, much of the hierarchy and policy content will be reusable. What will usually be highly customized are the contexts and their relationships with policy assertions.
 
In the diagram:
– policy type – classifies the policy. It can be hierarchic.
– policy subject – identifies the focus of the policy the class of object being governed.
– policy – a strategy or directive defined independently from how it is carried out
– policy assertion  – is an atomic policy requirement, expressed as a statement that must be true or false
– policy context  – an entity that limits the reach of a Policy.
– policy effect – an intended and/or an actual outcome of a Business Policy. This can be the Principle(s), Goal(s) or Outcome(s), which of course map neatly to Cobit 5.
Let’s look at an example:

Meta Class  Example
Policy Type Architecture        
Policy Subject Application Architecture
Policy Interfacing
Policy Assertion All new Application Interfaces must be loose coupled.
Policy Context Global applicability
Policy Effect Principle: Interoperable; IT Goal: Agility

Now to put this more broadly into the Cobit 5 context, here’s a fragment of a policy hierarchy, mapped to Policy Subect and Cobit 5 IT Goals.

The policy hierarchy shown above is not rocket science. However it facilitates consistency and communication to all the various stakeholders. You could at a stretch manage policies in a spreadsheet, but in practice it would be advisable to use something like Sharepoint or an equivalent, that allows you to manage the life cycle, status and so on. In a further elaborations of this little series of blog posts I will explore policy relationships with guidance and standards, policy assertion and context development plus the broader policy management model.

Reference: 
Using Cobit 5 – Part 1: Principles
Using Cobit 5 – Part 2: Policy Nomenclature

Next Step: Talk to David about how to apply effective, policy based governance.  

Speaking at TechEd New Zealand on Business Architecture

by

Haven’t  been to New Zealand yet, but I will be there soon… From September 4 through 7 in Auckland, for TechEd New Zealand.  I will be presenting two topics (Business architecture for non architects, and Aligning IT with capabilities).

Now, normally you wouldn’t see Enterprise Architecture topics on a TechEd calendar.  However, in the NZ market, there just isn’t the demand for multiple Microsoft conferences every year.  As a result, all the conference demand is bundled up into TechEd.  Due to the efforts of Terry Chapman and the hard working architects in Microsoft New Zealand, the TechEd conference there has developed quite a reputation for hosting an advanced architecture track. 

I’m fortunate to be attending and presenting.  If you live or work in the region, I’d love to see you at TechEd New Zealand.  If you would like to see more information about the sessions at TechEd NZ, click here.

Everything As a Service

by

These are interesting times for CIOs in the Federal sector.  Budgets are going down and demands are rising as mission customers are increasingly aware of how technology can impact their mission performance. Many CIOs have turned to philosophy … customer engagement philosophy that is.  CIOs are wrestling with: how should their OCIO engage its customer base how should they measure customer satisfaction how should their organization be configured to best […]

Categories Uncategorized