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.
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.
Dust off your archives and check out where you’ve been. There can be lost gold.
Over years it’s easy to forget even the really useful things. Then one day you rediscover them and wonder why they disappeared in the first place. Nowhere is this truer than in the corporate world.
New business trends and ideas easily swamp us seemingly rendering older ideas obsolete. Employee Engagement has been a big thing for businesses over the last 10 years. To go with that has been a head-spinning number of ‘models’. Just search ’employee engagement models’ and then click on images. There are hundreds of illustrations of employee engagement models and a quick scan can give a good idea of how diverse the models and language can be. That all points to an idea with some theoretical underpinnings, some will be well researched however there will be a lot of work relying on surface validity (it seems to make sense). However, for this post, it is about what gets forgotten in this emphasis. For me looking at the engagement literature reminded of good work done in the 1970’s and 80’s on job design which gets very little or no explicit mention in any of the models. Even the term job design sounds so last century, mechanistic, old-fashioned and too slow for this agile, divergent, disruptive, digital age. That is rubbish of course, every job has certain characteristics or a design if you prefer. (Regardless, the whole topic was swamped by four ideas that were believed to mediate motivated performance, the belief that the nature of work was changing, the opportunity for social contact, the person’s actual skill levels, and ambition. If you’re interested then read this 2010 article by Greg R. Oldham and J. Richard Hackman. )
Pittsburgh: One reason regulations were developed.
Regulation: A rule or directive enforced by an authority.
Trump has started rolling back regulation because proponents argue regulation costs jobs. Like most things it’s never really so simple e.g. rolling back the Clean Water Provisions allowing Kentucky coal miners to pollute streams and water tables impacts negatively on the communities the miners live in and those downstream. Many miners need the work and if the job bump happens then they and other members of the community will also need to endure the negative impacts, which will come later. It is also likely to see lower standards in any new mines and that comes with a hefty public cost – refer to Mining is Transient. In the end, the mining community will still need to face the problem that the amount of coal mined will reduce, and the number of jobs will reduce.
Why regulations?: Business doesn’t generally like regulations. And it’s true there is a history of bad, outdated and poorly implemented regulations that do need reform. There are also good, well structured and implemented regulations that act to protect us and that includes business.
Regulations are generally assumed to be negative for business and a cost and (in the case of the USA particularly) they can be presented as unnecessary government interference/intrusion. The exceptions are when regulations help maintain a business’s competitive position e.g. stopping or limiting others entering their market. Then a Continue reading →
Can Australia be ‘open for business’ and more strategic about the extraction and use of it’s resources at the same time? And does it really need to limit public scrutiny and make mining protections and applications easier to get through? Mining and resource extraction is absolutely essential to our industrial society. However the mining sector is powerful and influences government in ways that distort good economic and social policy.
It’s Transient: Use public transport or a smart phone and you’re using a multitude of mined products. It takes a lot of money to do and a lot of money is made. Also keep in mind that all mining and resource extraction is transient though some projects are more transient than others. In any location it comes and it goes. It’s important when considering any project e.g. coal seam gas (CSG) extraction with it’s thousands of transient sites (4,489 Queensland sites in 2011) and environmental and social impacts. Income from any particular CSG site is relatively short lived 5 to 20 years.
Hidden Costs and Industry Strategy: Besides the potential to leave behind a very Continue reading →