Think Culture

Are we really as surprised as the politicians would have us believe with the latest revelations from the UK banking industry? Let’s face it we’ve now had 3 years or so since the 2008/9 financial crises to understand that the monetary system has been rigged by certain market participants who play an insider game and benefit from the continued cycle of wealth creation and accumulation.

Firstly it’s important to note that the majority of individuals who work within the financial services industry do a great job: as ever it’s the minority that spoils the good work.

Malcolm Gladwell’s excellent book ‘Tipping point’ or Richard Dawkins’ ‘Meme’ theory may now provide a guide as to why scandals are now coming to the general public attention. With so much organisational greed, distorted values and dysfunction embedded in the cultural DNA, we now have a scandal ‘super spreader’ effect where such toxic activity can no longer be contained within a firm’s 4 walls. Certainly in the new relationship economy we now find ourselves, where news is instantaneous, there is no escaping the fact that our business and private actions will gain widespread attention if indeed it’s viewed in the public interest.

So what can we do?

Organisational Culture in its own right is defined by individual and collective behaviour. As such if left unchecked or blindsided, it can result in a dysfunctional state. At the end of the day, it is people who build businesses, people who work for them, people who regulate them and people who buy from them. So with human fallibility and irrational behaviour in mind, we then have to address dysfunction by calibrating the desired behaviour by the current culture and thus identifying the gaps and subsequent development needs the organisation needs to implement to ensure cultural effectiveness, efficiency and stakeholder and customer trust.

Key areas to incorporate:
The Turner and Walker Reviews

  • The Turner review explains that the FSA will establish an intensive supervisory approach to ‘high-impact’ firms, i.e. those firms whose failure would have a wider impact on other firms, as well as the economy as a whole.
  • The review also sets out additional capital and liquidity requirements for banks.
  • The Walker review, in considering the 2008/9 financial crises remarked that ‘Principle deficiencies in (banks’ and other financial institutions’) boards related much more to patterns of behaviour than to organisation. This means we need to find ways of directly addressing the values, and ethics, that underpin the individual and collective organizational behaviour and subsequent culture.

The Vickers Report

This 2011 independent commission on banking, mentioned behaviour twice only but did recommend ring-fenced ‘Chinese walls’ between retail and investment (casino) banking. A move in the right direction, particularly considering the latest LIBOR fixing scandals, but with Gladwell’s super spreader and biological theory in mind, where toxic activity becomes contagious, there is a case for reinstating the 1930s Glasteagle style regulation which segmented investment from retail banking.

Corporate culture and leadership

  • The FSA has previously identified the key cultural drivers to be: leadership; strategy; decision making and challenge; control recruitment and training and competence; and reward.
  • Leadership at all levels sets the tone of an organisation, driving the behaviour of staff and the quality of decisions. NB. In the FSA’s guidance on Treating Customers Fairly (TCF), leadership is cited as a key variable.

Judgment based regulation

The incoming FCA brings interventionist regulation, thus with a code of practice and fit and proper test for approved persons, conflicts of interest and anti-inducement rules, suitability and appropriateness tests, we then have EU driven ‘double lock’ regulation that can see off any inappropriate behaviour and oversee development of constructive culture.

A useful checklist

Financial services by its very nature can develop a security based ‘aggressive defensive or passive culture’ where competitive, perfectionistic, oppositional and power task driven behaviours can be exacerbated by people orientated avoidant, dependent and conservative behaviours.

So to find out what strategies we can implement to gain a more affiliative and constructive cultural style, we can incorporate the above professional and regulatory drives along with asking some simple questions;

  1. What is and how effective is your organisation’s culture?
  2. Are there disparities in culture throughout the organisation?
  3. What is your desired culture that will contribute to the success of your organisation?
  4. Do you have a coherent plan for developing the organisation’s culture?
  5. Are you walking the talk or is your culture at odds with day-today behaviours?
  6. Are you concerned that your organisation is under-performing?
  7. Do you have concerns about bullying?
  8. How are you managing the potential risks associated with an inappropriate culture?

Corporate social development

Never before have we now had such a strong need to ensure the behavioural skills, culture and ethics of the organisation are addressed and strategies developed to ensure the industry moves forward to regain the trust it once had in abundance. With behavioural and business cycles in mind, we need to heed lessons of the past and look to the future with a confident and vigilant mindset to create as Bob Diamond actually said ‘real commercial benefits that creates value for society’; hollow words or a template for a corporate social development culture?