Sir Chris Kelly's "Review of the Cooperative Bank: Failings in Management and Governance" was published today.If we just focus on the section on culture then you get a good indication of what went wrong based on how the place operated and the importance of having openness and transparency in safeguarding against such failures and potential disasters. Just to quote one of Kelly's key points on culture "Tolerating- as the Bank did- a culture of under-performance, weak transparency and a lack of accountability, constrains an organisation's ability to respond quickly and robustly to any challenges it faces".
It continues " within the Bank, the culture did little to discourage the wrong behaviours or to focus attention on areas of highest risk, encourage staff to speak up about potential issues....The bank appears to have operated with managers discouraged from speaking beyond their own areas of responsibility...when staff try too hard to anticipate the reaction of their bosses, self censorship can lead to important issues being suppressed".
This then clearly shows the importance of having a culture where openness and the confidence to speak out at all levels is seen as a fundamental aspect of risk reduction and risk mitigation. Genuine ethical cultures surely create organisations which are better equipped to avoid/respond to disasters and reduce reputational damage giving them sustainable competitive advantage?
Wednesday 30 April 2014
Wednesday 23 April 2014
Will there be a revolting shareholder spring?
We're coming up to the AGM season where shareholders have the chance to ask questions and express their views about how their investments are being managed, including the continuing hot topic of executives' pay.
Vince Cable, the Business Secretary, has written to all FTSE 100 members to remind them that pressure on pay awards needs to continue. The public are still not convinced by the arguments justifying pay levels that seemingly bear no relationship to performance. It continues to be a key reason why trust in business is at an all time low.
"A lot of trust has been lost, because of the extremes of what happened in 2010, when pay escalated massively unrelated to the performance of companies" Cable has told the BBC. In relation to the banks he goes on to say "we will see how far they have listened to the people who own the bank.... He calls for them to "exercise responsibility in the long-term".
With pressure now on more responsible business practice from customers, regulators and the government it still looks like some executives just don't get it. To change market positioning eg to rebuild trust in a bank, an organisation has to be competitive, consistent and credible. It's this lack of consistency in the area of pay which causes all other "responsible" initiatives to misalign and lack credibility and commitment.
Isn't it time now for NEDS and shareholders to flex their combined muscle in this area for the long-term interests of their companies and their returns? Or are they going to continue to let the proactive media stir the public pot of fury further? .
Vince Cable, the Business Secretary, has written to all FTSE 100 members to remind them that pressure on pay awards needs to continue. The public are still not convinced by the arguments justifying pay levels that seemingly bear no relationship to performance. It continues to be a key reason why trust in business is at an all time low.
"A lot of trust has been lost, because of the extremes of what happened in 2010, when pay escalated massively unrelated to the performance of companies" Cable has told the BBC. In relation to the banks he goes on to say "we will see how far they have listened to the people who own the bank.... He calls for them to "exercise responsibility in the long-term".
With pressure now on more responsible business practice from customers, regulators and the government it still looks like some executives just don't get it. To change market positioning eg to rebuild trust in a bank, an organisation has to be competitive, consistent and credible. It's this lack of consistency in the area of pay which causes all other "responsible" initiatives to misalign and lack credibility and commitment.
Isn't it time now for NEDS and shareholders to flex their combined muscle in this area for the long-term interests of their companies and their returns? Or are they going to continue to let the proactive media stir the public pot of fury further? .
Wednesday 9 April 2014
Is there a quick fix in changing organisational culture?
Margaret Doyle, Head of Financial Services Insight at Deloitte,in a recent presentation covered findings from "The Deloitte Banking Survey" which focused heavily on culture within banking. The survey was conducted with 41 global bankers at Executive level. 2/3 of respondents said the industry had a problem with culture.
Many banks are now creating the new appointment of Head of Culture as the focus on conduct and behaviours ramps up. The Richard Lambert Review with its call for industry benchmarking in such areas as culture has probably got a key part to play in this(e.g.. is the expected organisational conduct understood by employees and embedded in recruitment, promotion etc?)
One interesting aspect in the findings was that "compensation structure" (81%) headed the factors given by respondents as causes for cultural problems in their bank. So is simply changing the compensation structure the most effective trigger for culture change?
We know that "what gets measured gets done" but is culture change really so simple? Hopefully the bankers don't really think so although their expected speed of conduct change was reported as just a few years in this research. This is worrying because, for example, in the days when Mystery Shopper research was prevalent one bank branch responded by putting up notices for staff saying "watch out, there's a mystery shopper about" showing a sad lack of understanding that the research was designed to measure genuine behaviour change leading to improvements in outcomes for customers. But maybe it was just to get good scores?
With industry benchmarking on the cards following the Lambert Review, the danger is that the focus may concentrate on the relatively short-term job of just getting the scores right, the tick-box exercise that compliance teams and boards are so good at? What we really need is to recruit leaders who have the relevant intrinsic values and espouse "good" conduct themselves, creating leaders and their management teams who discuss, adopt, demonstrate and live, everyday, meaningful, personal and organisational values which are subsequently copied by all employees and witnessed by customers. Cultural change is the long game and measurements are there to support,not to replace, it..
.
Many banks are now creating the new appointment of Head of Culture as the focus on conduct and behaviours ramps up. The Richard Lambert Review with its call for industry benchmarking in such areas as culture has probably got a key part to play in this(e.g.. is the expected organisational conduct understood by employees and embedded in recruitment, promotion etc?)
One interesting aspect in the findings was that "compensation structure" (81%) headed the factors given by respondents as causes for cultural problems in their bank. So is simply changing the compensation structure the most effective trigger for culture change?
We know that "what gets measured gets done" but is culture change really so simple? Hopefully the bankers don't really think so although their expected speed of conduct change was reported as just a few years in this research. This is worrying because, for example, in the days when Mystery Shopper research was prevalent one bank branch responded by putting up notices for staff saying "watch out, there's a mystery shopper about" showing a sad lack of understanding that the research was designed to measure genuine behaviour change leading to improvements in outcomes for customers. But maybe it was just to get good scores?
With industry benchmarking on the cards following the Lambert Review, the danger is that the focus may concentrate on the relatively short-term job of just getting the scores right, the tick-box exercise that compliance teams and boards are so good at? What we really need is to recruit leaders who have the relevant intrinsic values and espouse "good" conduct themselves, creating leaders and their management teams who discuss, adopt, demonstrate and live, everyday, meaningful, personal and organisational values which are subsequently copied by all employees and witnessed by customers. Cultural change is the long game and measurements are there to support,not to replace, it..
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Monday 7 April 2014
Having the guts to "speak out"
Whistleblowing or "speaking-out" was one of the themes running through an excellent conference (Business Ethics, Business Schools, and the World of Work) at Leeds Business School last week . Professor Amanda Mellor (Group Secretary for Marks and Spencer Plc) quoted the fictional sage Professor Dumbledore "it takes a lot of bravery to stand-up to our enemies, but even more to stand up to our friends".
In the real world, Professor Mellor provided insight into the very real challenges that M and S faced to ensure fairness for all parties during the operation of a Speaking Out policy. One of the main points she made was that the key to resolving issues was really to engender a culture of open dialogue between employees and their managers.
But the culture will surely only change when Boards themselves impose the same Speaking Out criteria on themselves by actively speaking-out about their leadership actions or inactions? This will help to ensure that passive "groupthink" doesn't dominate and that challenge is seen as important as being collegiate with "collective responsibility" no longer a concept to hide behind. These leaders need courage as a key competence of their roles and to understand/welcome the dissenter in forcing in-depth consideration of diverse views to improve decision making. As part of all good communication,leaders also need to ensure they are listening to all parts of their organisations.
Trusting your organisation and your colleagues is key to feeling comfortable/safe enough to talk about difficult issues. The organisational story, where there isn't a Harry Potter wand or a bearded wizard to magic away problems,has to include tales of people feeling safe in their culture and with their leaders so that courage and potential repercussions don't feature highly when speaking-out .
In the real world, Professor Mellor provided insight into the very real challenges that M and S faced to ensure fairness for all parties during the operation of a Speaking Out policy. One of the main points she made was that the key to resolving issues was really to engender a culture of open dialogue between employees and their managers.
But the culture will surely only change when Boards themselves impose the same Speaking Out criteria on themselves by actively speaking-out about their leadership actions or inactions? This will help to ensure that passive "groupthink" doesn't dominate and that challenge is seen as important as being collegiate with "collective responsibility" no longer a concept to hide behind. These leaders need courage as a key competence of their roles and to understand/welcome the dissenter in forcing in-depth consideration of diverse views to improve decision making. As part of all good communication,leaders also need to ensure they are listening to all parts of their organisations.
Trusting your organisation and your colleagues is key to feeling comfortable/safe enough to talk about difficult issues. The organisational story, where there isn't a Harry Potter wand or a bearded wizard to magic away problems,has to include tales of people feeling safe in their culture and with their leaders so that courage and potential repercussions don't feature highly when speaking-out .
Tuesday 1 April 2014
Hopefully there's no fooling the CMA
Today (April Fool's day) the new Competition and Markets Authority (CMA) officially takes over from the Office of Fair Trading. It is tasked with consumer powers to tackle market wide consumer problems or issues affecting consumers' ability to make choices.Hopefully we're going to see it get serious about this over the coming years, championing the fair treatment of customers and transparency (this blog's focus) and indeed Alex Chisolm, the CMA CEO, has already talked about the need for more "openness and accountability".
Alex Chisolm has also stated that the CMA reaffirms its " commitment to active use of our consumer powers where they will have maximum impact and serve the best interest of consumers".Let's hope it does have an impact on the unethical tomfoolery that so many consumers still have to put up with.
Alex Chisolm has also stated that the CMA reaffirms its " commitment to active use of our consumer powers where they will have maximum impact and serve the best interest of consumers".Let's hope it does have an impact on the unethical tomfoolery that so many consumers still have to put up with.
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