Diamond said the trading floor taught him the necessity of taking risks to succeed. “It’s easier there because you don’t always succeed, you’re not always right,” Diamond said. “But you don’t make the same mistake twice.”
He didn’t, and for a decade, he continued moving upward professionally, running Morgan Stanley’s bond trading in Europe, managing all of First Boston’s operations in Asia. It was about this time that Cooke, Diamond’s mentor, first saw him in action, not as a protégé but as a full-fledged senior manager. “I was very impressed,” Cooke said. He remembers thinking, “Holy shit. He’s really matured. He’s good at this.”
Cooke was so impressed that, instead of retiring in 1997, he went to London to join Diamond at Barclays. So, what makes Diamond such a good manager?
Cooke broke it down into five points.
“One, you have to listen,” he said. “You can’t have the type of ego a number of people have where, because they’re in a particular position, they believe they know it all. Bob’s a very good listener.
“Two, he’s very honest. And it’s always good to work with somebody who is honest. Being honest is always very difficult. Bob’s good at delivering difficult messages as well as constructive messages.
“Three, he’s smart. So he’ll get people’s respect because he’s smart.
“Four, he has a lot of energy. He works hard. He sets the pace.
“Five, he believes, as I do, that culture and a meritocracy are very important. By culture, that means you may produce a lot of revenue but you’re [a jerk]. We should fire you.”
This isn’t as easy as it sounds, Cooke pointed out.
“You’re under constant pressure for numbers on Wall Street, because we get paid so well. When you’re willing to cut ties with someone simply because they’re a jerk, and you’re willing to take a revenue hit, that takes a lot of courage,” he said.
In 1996 Diamond brought his no-jerks policy and meritocratic philosophy to Barclays de Zoete Wedd (BZW), the moribund Barclays investment operation. Diamond ran counter to the prevailing wisdom, moving away from the then-booming equities market into fixed income. There were doubters, but the gamble paid off and the foundation was laid for what would become Barclays Capital.
“When he joined Barclays, which was about ten years ago, I think that what we had then was an underperforming, subscale investment banking capability. And what we have today is an outperforming world leader. That’s quite a transformation in ten years. And Bob has personally led that.”
—Barclays Chief Executive Officer John Varley
Shaping the organization has, in Diamond’s case, involved removing several direct reports, including members of executive committees. In organizations that reward performance, meritocracy starts at the top. “And clearly, all of the executives who have succeeded are ones who believe in it also,” Cooke said, “who believe in real competence, who are willing to get rid of people who don’t perform. No, ‘don’t perform’ is wrong. Who perform average. We really don’t want average guys. We want exceptional guys.”
Those exceptional people—including the one at the top—have helped to produce exceptional results.
For 2006, pre-tax profits for Barclays Capital, which Diamond heads, were up 55 percent, while Barclays’ overall profit was up 35 percent. And, according to John Varley, Barclays group chief executive and Diamond’s boss, 2007 was off to a strong start, with first-quarter profits up 15 percent over last year. Barclays Capital had its strongest quarter ever.
Merger or no merger, Barclays is poised to take advantage of an expected surge in corporate financing through capital markets in Europe and Asia.
Varley gives much of the credit to Diamond.
“I think he’s been the progenitor of [Barclays Capital’s record performance],” Varley said. “When he joined Barclays, which was about ten years ago, I think that what we had then was an underperforming, subscale investment banking capability. And what we have today is an outperforming world leader. That’s quite a transformation in ten years. And Bob has personally led that.”
“A compendious knowledge of the industry,” Varley said, without hesitation. And then he went on, crediting Diamond’s sound strategic outlook, demanding performance ethic, flair for talent development. And a fervent belief in a performance-driven meritocratic culture, one that has been inculcated not only at Barclays Capital but across the entire Barclays organization. A clear-sighted sense of business purpose, and a pioneering sense of business focus.
“It’s that combination of attributes,” Varley said. “They make him a good businessman. You have to be a very good businessman to pull off what he’s pulled off at Barclays Capital.”
Diamond’s success has spread his reputation beyond the world of international banking—especially in London, where the press tracks top executives in The City, London’s financial district. Much of the attention directed at Diamond has focused on his compensation package, which, with Barclays Capital’s phenomenal run, has topped $20 million annually. That has led to criticism from some in the press that Diamond has opened the door for American-style executive compensation in Britain.
Varley steadfastly defends the bank’s compensation packages as both deserved and essential to attracting and keeping the best talent in what is an increasingly competitive and global industry. “I think there are times when opinion formers in Britain … are equivocal about wealth and wealth creation,” he said. “Not only are we in a goldfish bowl here because of the fact that we are a leading player in the British financial services industry, but we’re also in a goldfish bowl because there is an obsession about compensation in the United Kingdom.”