What the Banks Can Learn From Plumbers

In order to ensure a healthy banking sector, it needs to adopt the practices of the plumbing industry or any other services sector. Those include capping bonuses at no more than annual salaries, making bankers work harder for their pay and persuading them to care more about customers.

Last week I did an interview for the New York Times about fixing the European banking sector, where I pointed out the mind-numbingly obvious fact that if just one bank decided to buck hundreds of years of tradition and actually give its customers a good service it could potentially corner the market.

So far this article has been reprinted in the City of London, New York and the tiger economy capital of south Asia, Mumbai, in India. Common sense seems to be spreading across the globe - let's hope some of it rubs of on the bankers!

My idea was to reduce bankers' pay and by doing so force banks to become more cost-effective and customer-friendly. Threats that bankers would leave London or Frankfurt and move to the United States or Asia should their compensation be curbed are bluffs that need to be called.

There are a lot of bankers out there already, and ours aren't any better or cleverer. It's plumbers' common sense.

I became involved in this debate when the Swiss bank disclosed that it had given almost 25 million Swiss francs to a new member of staff to join from Bank of America Merrill Lynch last year. The sum struck me as obscene and one of the clearest signs that the financial industry is in urgent need of repair.

In order to ensure a healthy banking sector, it needs to adopt the practices of the plumbing industry or any other services sector. Those include capping bonuses at no more than annual salaries, making bankers work harder for their pay and persuading them to care more about customers.

Better value for customers equals more business, and more business equals higher earnings and greater competitiveness. If you make banks more efficient, people will want to use them more.

Just like the banking industry now, at one stage the plumbing industry had a tarnished reputation and plumbers had a bad name for being unreliable and charging too much. There is no doubt that traditionally, with the possible exception of used car dealers, journalists and maybe politicians, plumbers have had arguably the worse professional reputation of any occupation in the country.

So I compiled a list of 20 things that people didn't like about the industry. They included arriving late for appointments, driving dirty vans, wearing scruffy clothes and not telling customers in advance how much the job would cost.

Then I set out to do exactly the opposite. I painted all my vans a shiny blue, dressed my staff in uniforms and was completely transparent about prices. If you turn up at 7.50am for an 8am appointment, you're the best plumber in the world. It was so easy.

And it worked. Pimlico Plumbers now employs 200 people with £20m in annual sales. We haven't done anything clever or new, we've just done what customers want and what is common sense, and that's what the banking industry should do as well.

As public debates go, the one about bankers' bonuses has been one of the more heated and drawn-out ones. I simply have no patience for arguments like this. Instead of debating how to continue to keep compensation high, banking executives should instead focus on how to improve their business and services to attract more clients. Once earnings increase, banks can think about raising pay.

Plumbers, like bankers, could argue that if everyone continued to act like a bunch of cowboys they would all survive, due to their being no alternative. But as soon as one breaks rank and leads a cavalry charge of customer service, the game's up. The bank that clocks this simple point and starts working for its customers, and I mean actually doing it, not just saying it on TV, will be the winner.

Banks are still living in the pre-crisis world when they were in governing position, but the world and the financial sector have changed. In the plumbing industry, if we paid bonuses, we wouldn't be competitive anymore.

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