What McKinsey Found at BOE as Carney Consulted Staff

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BOE Governor Mark Carney
Mark Carney is the first foreigner to run the Bank of England, and the study fed into his “One Bank” strategy announced in March, in which he unveiled plans to fuse departments and integrate its growing number of functions. Photographer: Simon Dawson/Bloomberg

Bureaucratic, lumbering, dogged by internal politics. That’s the Bank of England Mark Carney inherited when he took charge in 2013, according to its staff.

A BOE survey by McKinsey & Co. obtained by Bloomberg News showed that key words employees used to describe the central bank included “hierarchical,” “internal politics” and “slow moving.” Pay and staff engagement were among factors that rankled workers most, issues that have plagued the institution for years and prompted an overhaul of its operations.

Hired by Carney in one of his first acts as governor, McKinsey conducted the survey to inform his radical makeover of the three-century-old institution as it merged new bank regulatory powers with its monetary-policy function. Behind the BOE’s 13 meter-high perimeter wall in London’s financial district, pay has long gnawed employee morale, with directors warning back in 2011 about the impact of a wage freeze.

“To truly transform this institution, it was crucial to have staff engagement into all aspects of what we do and how we do it,” Charlotte Hogg, the BOE’s chief operating officer and a former McKinsey employee, said in an e-mailed statement to Bloomberg News. “Staff told us very clearly what they wanted to see change. We listened, and we responded.”

The study also highlighted areas of strength. Employees viewed the bank as “having a noble purpose” and “being of service to others.” In terms of aspirations, their descriptions of what it should represent included “well organized,” “efficiency” and “employee focus.”

BOE Culture

McKinsey found that overall, the central bank scored above-average relative to other public sector organizations. Staff approved of the BOE’s culture, while they said improvement was needed in the direction, accountability and co-ordination provided by management.

McKinsey’s “Organizational Health Index” survey obtained answers from 2,266 workers -- a 67 percent response rate -- in November last year about the central bank’s competency and capability in 37 management practices. The results were presented in January to the BOE’s Court of Directors, its governing body. Bloomberg obtained a summary of the aggregate results, totalling 17 pages after redactions, following a seven-month effort under Freedom of Information laws.

Carney is the first foreigner to run the BOE, and the study fed into his “One Bank” strategy announced in March, in which he unveiled plans to fuse departments and integrate its growing number of functions. Hogg, who started her newly created job the same day as Carney, led work on the overhaul following a six-month review by McKinsey.

Financial Incentives

In the survey, just 11 percent of staff answered “often” or “always” when asked if they approve of the institution’s approach to financial incentives. On whether the BOE sufficiently utilized external ideas, that response was 21 percent, while employee involvement garnered 22 percent.

One finding was that employees felt they had “insufficient authority to make decisions,” and management processes and metrics used to oversee the institution were “comparatively ineffective.”

“Respondents expressed a need to become more nimble and agile as an organization,” according to the survey. “The bank could benefit from a more open, transparent and consultative style of leadership receptive to challenge.”

Staff Ratings

Some of the weak scores reflect events at the time, including a “Value for Money” review that resulted in job cuts, as well as challenges surrounding the integration of the Prudential Regulation Authority into the central bank.

The low rating for staff involvement echoes the findings of the Stockton Review into the BOE’s forecasting published two years ago. It recommended a “more assertive” staff to challenge the central bank’s house view.

“It is critical that the staff are ready, willing and able to constructively challenge policymakers,” said Richard Barwell, senior European economist at Royal Bank of Scotland Group Plc in London and a former BOE official. “Its not clear whether that challenge function is alive and kicking.”

Carney’s strategic plan is designed to address many of the issues raised in the survey and the BOE has taken steps to reduce bureaucracy and increase staff engagement. Management is also currently consulting staff and union representatives on pay structures.

Out of the seven BOE departments that participated, the PRA gave the lowest approval rating to management, with only 27 percent of employees saying they were happy with coordination and control.

That unit, which supervises lenders and is the result of merging part of the now defunct Financial Services Authority into the BOE in 2013, has previously struggled to ensure adequate resources for bank stress tests this year. In July, the central bank’s Court noted that staff turnover at the PRA “remained higher than desired, but recruitment had been stepped up effectively.”

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