The Royal Commission into Misconduct in the Financial Services Sector in Australia has highlighted and indeed helped drive the need for cultural change in the financial sector. This short discussion identifies just five impediments to deep cultural change in the industry.
The five impediments identified are not intended to be comprehensive , however they do serve to illustrate some of the challenges. What can be done from a culture change perspective will also be specific to organisations and can be the topic of another discussion. Before launching into the five impediments let’s set the scene.
Do you think people are getting smarter? Do you think we know more about the risks inherent in running economies and businesses? Do you think we will look to others to work out what we should do? Do these sound like loaded questions? Of course they are, however there is a point to be made. Knowing more doesn’t stop us being human and making the same errors people have in the past. The context and details may differ however the errors are the same.
History Repeats Itself
In early 18th century France an investment bubble developed around shares in the Mississippi Company. Trading over a period became frantic. Normally sober people found themselves investing and those who recognised what was happening were sometimes mocked and just as often developed significant doubt about their attitudes to the trade. At dinner parties, being the only person who seems not to be making great profits can be a deflating experience. Even the person responsible for the float of the company could not dissuade people from being overzealous. Of course the company went bust. It is all beautifully chronicled in Charles Mackey’s entertaining “Extraordinarily Popular Delusions And The Madness of Crowds” published in 1841. It’s a great read as an introduction to what would now be referred to as behavioural economics. And more importantly to draw parallels to the boom phase that led up to the crash in 2007/8. There is the possibility it could be applied to the inflated Australian markets as well.
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