Monthly Archives: February 2019

Can the Financial Institutions Change Their Culture?: 5 Reasons Not To Expect Too Much

Credit: Fiona Katauskas

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.

Corporate Culture: Culture is often defined as ‘The way we do things around here!” That’s true enough and the universal nature of the statement suggests that just about anything you do can influence culture one way or another. That has been foundational to nearly all my professional work. And the financial institutions will be doing a lot following the Royal Commission.

Expect Textbook Corporate Responses: Much of the response will be good corporate stuff: action plans based around the Royal Commission findings; public relations releases; interviews with a polite, conscientious, empathic CEOs (or the next best person); divesting now unwanted businesses; reviewing remuneration strategies; fixing IT problems; changing a few executives; learning to live with a more active regulator with some new rules; Board members bein more vigilant; winding back the aggressiveness of the sales culture (at least for a while); convincing the public that the banks and others are not really the bad guys, etcetera. The largely ‘virtue signaling’ corporate programs of social responsibility, sustainability, leadership and core values will probably be ramped up and just maybe taken more seriously. Some of what will happen will be uncomfortable, regardless it is all pretty well understood and a variation of what the organisations do now – it will all be implemented within the same corporatist paradigm. In the public arena, some executives being charged with criminal offences will mostly be new (if it happens), and the bank boards will themselves face a decision regarding how much support (direct or indirect) they (shareholders and investors) will fund for these executives. 

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Not So Smart Bankers & The Madness of Crowds

Image: From ABC News

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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Filed under Change Management, Corporate Culture & Strategy, General Business, Uncategorized