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The Gooroo Blog

Changing the bank mindset -- let's get SMART


Ken Henry, Chairman of the NAB, fears that short of firing everyone and starting again, it may take a decade to change bank cultures.

With the Hayne Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry final report due out today, February 4, there is considerable interest in how to change the banking mindset.

The Royal Commission has exposed an understandable bias towards viability, sustainability and profitability at the expense of ability to put the need of the customer as the key driver of success.

As the Commission was being developed and in hearings, government and governance issues have been subject to significant review and greater quality assurance audits in an effort to understand the motivational drivers that lead to a priority of greed over need in the mind of Commissioner Hayne.

All around the world, there has been a considerable  loss of both trust and respect for business leaders found to have been attempting to bolster shareholder value over the interests of other stakeholders.

With the publishing of the findings, some major corporations should take a culture audit to enable them to get SMART—

  • Socially responsive

  • Measurably successful

  • Accountable to stakeholders

  • Relevant to technological change, and

  • Trustworthy and transparent

The Group of Thirty (G30) and Oliver Wyman have produced a relevant white paper – Banking Conduct and Culture: A Permanent Mindset Change – that focuses on two fundamental questions:

  1. How much progress has the banking industry made in conduct and cultures ten years on from the global financial crisis?

  2. In what areas should banks continue to press on, and what evolving questions should they be mindful of going forward?

The report argues that fundamentally getting culture and conduct right is not a supervisory requirement (or a justification for more red tape and negotiations) – it is necessary for banks’ and banking’s economic and social sustainability.

In the report, financial sector leaders came up with the following lessons they had learned:

  1. Managing culture is not a one-off event but a continuous and ongoing effort that must be integrated into day-to-day business operations.

  2. Leadership always matters, and banks must embed conduct and culture messages and expectations from the top down.

  3. Conduct is not just about purposeful misbehavior (by a small proportion of staff) but also unintended consequences from decisions and/or lack of skills and knowledge.

  4. Managing culture requires a multi-pronged approach and simultaneous alignment of multiple levers, including structural processes and policies,beliefs and attitudes.

  5. Diversity must become an imperative for the industry as it improves outcomes for all stakeholders.

  6. Behaviours and outcomes that culture drivers can and should be measured.

  7. Regulation has a limited role to play, given that culture cannot be mandated or defined by rules.

  8. Industry-wide dialogue and sharing of best practices are key to restoring trust and strengthening the entire banking industry.

The report concludes that as society and the competitive landscape rapidly evolve, banks cannot afford to be complacent about their trust and reputational problems. From a competitive perspective, new entrants are quickly moving into traditional banking spaces and may capture clients (and talent) that are more otherwise directed to banks.

The Roy Morgan Research banking confidence studies over the past decade represent a goldmine of valid information that can help every financial institution monitor and identify the measurement of social responsibility of banks and other customer-facing institutions.

Combined with Gooroo research and development into the way that people think about their needs, wants, hopes and expectations, these data sources can help provide SMART alternatives to heavy-handed and impractical regulation

The Gooroo ColourGrid® profiles of the financial sector indicate that people are very reluctant to see their own bank as the enemy and are looking for significant changes at the top of these institutions to more actively listen to, engage with and respond to sources of customer dissatisfaction.

The SMART next steps are likely to include:

  • Greater contact and communication with customers and business interests to increase levels of measured satisfaction

  • Active involvement of all financial industry staff in re-aligning culture to the requirements of the post-Hayne review

  • Development of new measures and monitors of shareholder and business expectations of career performance and executives’ remuneration.

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