Resetting Values in the aftermath of the banking crisis


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In the aftermath of successive banking scandals, investigations have rightly identified a failure to “walk the talk” - actions have not been aligned with values.
It may be tempting to believe that a renewed push on resetting and embedding values will change behaviours.
And indeed it is a good start, but all our experience tells us that other factors are at play.

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Resetting Values in the aftermath of the banking crisis

  1. 1. Resetting valuesIn the aftermath of the banking crisis BOXWOOD PERFORMANCE SERIES
  2. 2. SECTION 1In the aftermath of successive banking scandals,investigations have rightly identified a failure to“walk the talk” - actions have not been aligned withvalues.It may be tempting to believe that a renewed pushon resetting and embedding values will changebehaviours.And indeed it is a good start, but all our experiencetells us that other factors are at play. Paul Sweeney © Boxwood Ltd. 2013. All rights reserved
  3. 3. 1.1IntroductionThrough our work advising financial institutions we are in the to” them. Initiatives come and go, many more are started thanprivileged and fascinating position of objective observers. Of late, are finished. Restructures happen to them. They blame thea consistent pattern is emerging in UK banks. It looks like this: remote senior leadership for their situation, not seeing the part they could play in changing it themselves. “Gaming” the systemLeaders are burdened by the enormous complexity of the issues to survive consumes energy and focus. Despite the challenges,they are facing. Having achieved a level of financial stability, they loyalty is still in evidence and there’s a sense of unity driven byare grappling with the challenge of rebuilding trust and shifting shared vulnerability.culture, leadership and behaviours towards a more sustainablefuture. They know they should be dealing with the important stuff Customers are stunned to find that the system treats them more- purpose, mission, engagement – but with all the fire fighting, as problems than as opportunities. Promises are made, thenthere just never seems to be the time. broken: explanations, delays, excuses - everything except the service they feel they deserve.Middle management feel torn between the conflicting demandsof those above and those below. They act more as individuals Despite huge levels of investment, poor customer and employeethan as a cohesive group. They rely heavily on “carrot & stick” to engagement move painfully slowly, if at all. Nobody is quite suremaintain performance. Faced with huge uncertainty, many why it is so difficult to land change effectively – after all, we allhesitate to take real responsibility for change and instead focus agree it’s the right thing to do, don’t we?on survival. Fear and anxiety abound. We’ve noticed that a number of banks are focusing efforts onMany at the bottom of the hierarchy feel unloved, disempowered, resetting and enforcing values, in the hope that that this willfearful. There’s a huge gap between the rhetoric of customer provide the “moral guidance” for change. This can be a usefulcentricity and the reality of life in the “system”. Change is “done starting point, but it is only part of the answer. 2
  4. 4. 1.2Values in crisis?IN BRIEF As with other disasters, the aftermaths of banking scandals bring a search for1. We are driven to seek answers on what causes and a desire to protect against future breakdowns in trust and ethics. caused corporate scandals Inevitably, the findings lead to a discussion of values, and the misalignment2. Inevitably, postmortems find actions were between an organisation’s stated values and its actions. Integrity was a core value not aligned with corporate values for Enron. Safety was a core value for BP, but a lack of safe practice was evident in3. This does not prove a cause and effect the Deepwater Horizon disaster. Lloyds Banking Group has a core value of relationship - a focus on values will not “putting the customer first” but faces over £5bn in compensation payments for necessarily address issues that are behavioural in nature mis-selling Payment Protection Insurance (PPI) to those very customers.4. A focus on values should be part of an In the face of complexity our natural tendency is to seek constructs that provide integrated approach to unlocking less complex answers. One such construct assumes that a focus on values - performance through education, communication and enforcement - will address the behavioural issues at the heart of the scandals. While it is true that actions which caused corporate disasters did not align with stated values, this does not prove a cause and effect relationship. In our experience a focus on values helps in that it reminds people of the purpose and intent of the organisation. But we believe it should be part of an integrated approach to unlocking performance that seeks to understand the interplay of the different drivers of behaviour unique to the business. The following pages explain the foundations of Boxwood’s approach to unlocking that performance. 3
  5. 5. 1.3Behaviour PERFORMANCE BEHAVIOUR Systemic Patterns Cultural Assumptions Structural Drivers Reliably predictable patterns of Shared views within the Organisational structures, rewards behaviour that organisations fall organisation that unconsciously & incentives, physical environment, into over time influence perception, thinking, policies & processes, systems, frames of reference & decisions training, etc. Individual ValuesBehaviour is a key determinant of organisational performance. insights from our own extensive practice of working with clientsFor shareholders, performance includes sustainable return on to unlock the performance potential of their organisations.equity. For employees, performance can mean engagement, You can’t really manage behaviour. But you can focus on the keydevelopment and return on their investment of time and energy. drivers that influence behavioural outcomes. These are theSo what drives behaviour? In our work we have developed a individual, systemic, cultural and structural drivers at play - someBoxwood behavioural model that incorporates leading-edge visible, some thinking, behavioural psychology, cultural research and 4
  6. 6. 1.4Individual ValuesIN BRIEF Research has identified a number of consistently occurring human values*. Each of1. Individual values have an important effect us is motivated by all of these values, but to differing degrees. on behaviours and attitudes The psychological relationships between these different values we hold have an2. Other behavioural drivers can cause people important effect on our behaviours and attitudes. However, our behaviour can be to act in a way contrary to their values significantly affected by other drivers - even to the extent that our actions can3. The primary challenges are: directly conflict with our personal values. • Helping people to understand their own values and motivators and work out Given the current levels of trust and engagement in banks, employees may well whether they align sufficiently with the ask: why should I care? Is this just more propaganda from internal new organisational values communications? Will leaders really be held accountable? Our advice is to: • Encouraging people to take responsibility 1. Make it relevant. Help employees to explore their own values; “unpack” the for making changes to the way they work so they are more fulfilled corporate values; understand how to align them with their own values • Building belief that the leaders really 2. With a better understanding of what they value, encourage people to take more mean to behave according to the new control and responsibility to change the way the work so that they are more values this time fulfilled (this helps to address some of the systemic behaviour patterns discussed in the next section p.6) 3. Consider what early actions can reinforce the new values and demonstrate*Research involving over 60,000 people identified 10 common value leadership commitment and accountabilitygroupings (universalism, benevolence, tradition, conformity, security,power, achievement, hedonism, stimulation, self-direction). FromUniversals in the content and structure of values: theoretical advancesand empirical tests in 20 countries - S.H. Schwartz (1992) 5
  7. 7. 1.5Systemic PatternsIN BRIEF A wealth of systems thinking and research by Barry Oshry* and others has1. Organisations fall into reliably predictable demonstrated that organisations fall into predictable patterns of behaviour. patterns of behaviour The patterns occur at three levels - tops, middles and bottoms. Though it feels2. The behaviours occur at three levels - tops, simplified, the patterns are reliably predictable across geographies and industries. middles and bottoms These levels are not static, for example a senior manager could be “top” in3. These behaviours are likely to run counter business unit interactions, but “bottom” in interactions with the executive board. to key organisational values, and can severely limit the capacity of the system to Tops feel burdened by overwhelming complexity. Top “teams” are caught up in respond to values-driven initiatives destructive turf warfare, failing to understand or support each other. They are frustrated by a failure to drive change, for which they blame the middles. Middles feel torn by the system, confused and powerless. They are pulled between conflicting demands, and priorities from above and below. Middle peers are alienated from one another. They fail to act with collective voice or purpose. Bottoms feel oppressed. Restructures are “done to” them. Initiatives come and go, most fail. They feel unseen and uncared for. They don’t have the big picture, there is no vision they can commit to, they don’t have a sense of purpose. Bottom group members are united by shared vulnerability, for which they blame the tops. Customers feel outraged by the unresponsive delivery systems they encounter, and amazed by the internal focus of the system. *Seeing Systems - Unlocking the Mysteries of Organisational Life - B. Oshry, (2007) 6
  8. 8. 1.6Cultural AssumptionsIN BRIEF Culture is a somewhat abstract idea. You can’t really touch it or see it. But the1. Assumptions underpin organisational assumptions that underpin culture exert a powerful force on behaviour. The culture. They are the result of shared leading culture expert Edgar Schein* describes culture as: learning experiences “...shared basic assumptions learned by a group as it solved its problems...which2. These assumptions influence perspective, behaviours and decisions worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel...”3. Some of the assumptions may run counter to the desired values and will need to be In organisations we have worked with, we have uncovered cultural assumptions addressed before the values can gain that run counter to the stated values. One organisation had stated core values of traction teamwork and collaboration. However, an assumption operating in the culture was4. The first step in changing assumptions is that individual performance was valued above all else. Another had values of making them visible. With the right level of expertise, this can be rapidly achieved honesty and courage, but an assumption that it was not safe to speak out or “rock the boat”. Efforts to enforce these values had repeatedly failed. Assumptions are a psychological defense mechanism against complexity. They unconsciously influence what we pay attention to, how we emotionally react, and how we make decisions. It is easier to distort data by denial or rationalisation, than to change assumptions. Group think is the order of the day. Understanding the main assumptions that underpin the culture is the starting point for shifting behaviours. *The Corporate Culture Survival Guide - E. Schein (2010) 7
  9. 9. 1.7Structural DriversIN BRIEF Within the organisation there are a number of structural drivers. Values should1. Key structural drivers in the organisation inform the decision criteria for resetting these drivers. Primary drivers include: can either reinforce or hinder attempts to enforce values Rewards & Incentives - typically receive the most attention. However, leading research by Dan Pink* and others shows that rewards and incentives often lead to2. Values should inform the criteria against which changes to these drivers should be worse performance. considered - but you must be alert to unintended consequences of “gaming” Organisational Structure - can influence behaviour. For example, attempts to be more customer-centric may not be helped by a product-centric structure.3. Leading research has shown that financial rewards are the least effective way to drive Performance Management - the way in which the organisation defines “good” performance for performance can either reinforce or hinder the desired behaviours. If behaving in line with values is seen to go unrecognised, this will not encourage change. Physical Environment - often overlooked, but it can have a powerful effect. If an organisation claims to be “the best for customers”, yet serves them in shoddy shops or offices, the disconnect is obvious to all. Co-locating employees from different functions is a powerful way to reinforce values of collaboration. Training & Development - do the focus and content support the values? In many cases we have observed the opposite. For example, organisations trying to focus on service values continue to centre training on sales techniques - reinforcing the very behaviours they apparently seek to change. *Drive: The Surprising Truth About What Motivates Us Daniel H. Pink (2011) 8
  10. 10. SECTION 2An Integrated “Everything should be made as simple as possible, but not simpler” - EinsteinApproach
  11. 11. Step 1ExploreOUTPUTS Leadership alignment and commitment is, in our experience, the single most1. Leadership team developing an important factor. The Explore step focuses on two key areas in parallel: understanding of systemic behaviour patterns and their own relationship with the Building Leadership Awareness “system” Bringing into view the systemic behaviour patterns that are driven by the top2. Primary cultural assumptions identified team’s relationship to the “system”. This is the start of a deeply personal change as leaders reflect on their relationship with the system, and with each other.3. Values assessed in light of learnings4. Scale of challenges identified Understanding Cultural Assumptions Cultural assumptions can quickly be uncovered by an experienced team. This5. Commitment to continue exercise combines observations, interviews, and the collection of “cultural artefacts” that are the visible manifestation of the assumptions (stories, memos, photographs, policies, etc.). A cross-functional group then explores the deeper assumptions behind the analysis. The results can be surprising. At one bank, a key assumption was “we don’t really believe that putting customers first will give us the business results we need”. At the end of this stage the leadership team can critically review the proposed values in the context of what they have begun to learn about the individual, systemic and cultural drivers in play. This includes assessing the values for relevance, congruence, applicability, adaptability and clarity. The team can also assess the scale of the challenge ahead, and decide on how much to commit to. 10
  12. 12. Step 2PreparationOUTPUTS Many drivers of behaviour may currently provide employees with powerful reasons1. Wider senior leadership group and key to ignore or push back against change efforts. A “top-down” push is highly unlikely influencers involved in the design to deliver a sustainable change without addressing these unseen drivers.2. Alignment on what the future picture will be A collective shift in behaviour requires individuals and groups to behave differently.3. Change strategy - the what and how of Organisations that are serious about fundamental change have to essentially engaging and motivating our people provide a mechanism for every work team to explore the drivers. Only by making4. The beginnings of a different kind of this personal and relevant will individuals and teams begin to understand their own engagement - driven by an honest performance potential and to take ownership for achieving it. The unique acknowledgement about our starting point organisational context means standarised approaches to behaviour change carry5. Plan for delivery agreed and resources in high risks. This level of intervention requires careful preparation. Typically the place activities will include: • Quantifying the performance potential available and the investment required • Engaging and energising wider leadership and key influencers • Reviewing the structural drivers against the modified values • Designing the change strategy to specifically address the drivers • Building the implementation approach, rollout plans, governance, reporting, collateral and training. Piloting on a small scale if required • Training an in-house delivery team 11
  13. 13. Step 3DeliveryKEY DELIVERY FEATURES The key elements of a delivery structure are illustrated below. Interventions occur1. Interventions are planned and delivered across Tops, Middles and Bottoms to engage people in building solutions to across the Tops, Middles and Bottoms address the systemic and cultural issues at play. The “journey” is orchestrated by2. These are designed to be relevant and a team of internal facilitators, supported for a limited time by a small expert core. personal, and to allow employees to really explore the issues for themselves and take A “Structural Drivers” team pulls together functional experts to understand the responsibility for making their own changes impact on behaviour of these elements and test proposed changes, seeking opinions and ideas from the first-line and middle management teams.3. A specific team address the structural drivers, with guidance from employees at Executive •  Providing clarity, alignment & consistently communicated story all levels. With the exception of this team, Leadership •  Letting go of some responsibility – empowering others to be responsible Team •  Role modelling required behaviours and focus the Tops, Middles and Bottoms experience (Tops) •  Building trust with each other the interventions in their existing teams - CORE Issues to be TEAM resolved at minimising the impact on the business group level •  Identifying and modifying key structural drivers within the context of the Structural BAU operation (incentives, induction, rewards, recognition, KPIs, Metrics,4. A high level of challenge stops Drivers Team L&D etc.) responsibility from being passed upwards. •  Aligning structural interventions to desired behaviours Issues that The focus is on local solutions, not cannot be solved implementing a “top-down” approach functionally Middle •  Exploring the drivers of behaviour and the constraints on performance Management •  Building a common language, purpose and sense of shared identity5. A group of internal facilitators guide the Teams •  Giving and taking empowerment, co-creating solutions, coaching, mentoring (Middles) Taking accountability, making hard decisions process - building change capability into INTERNAL •  Issues that cannot be TEAM the business solved •  Making the values relevant and personal to them as individuals locally First-line •  Customising behavioural descriptors for local culture and practice Work Teams •  Owning and implementing local change– taking responsibility (Bottoms) •  Feeding ideas to the Leadership & Structural Drivers teams Structured Change Process Mobilise Explore Options Deliver Local Implementation 12
  14. 14. Step 4Sustaining FocusIN BRIEF After the initial implementation, a key question is - how can we sustain the focus1. This is a long journey on values and behaviour? This is not a short-term journey. It typically takes three to five years to achieve a sustainable position. Sustaining the focus is essentially2. The CEO needs to retain accountability about understanding whether we are “walking the talk”, at the tops, middles and3. Dedicated resources are required bottom. This is everybody’s game. Different solutions will fit different organisations, but we believe the following points deserve serious leadership attention. 1. Making the CEO personally accountable for values and behaviours in the organisation. This includes regular reporting on progress to the board and should form part of the board’s assessment of CEO performance 2. An executive position leading a team of dedicated resources reporting directly to the CEO - not part of a HR function 3. Metrics linked to behaviours and values that provide directionally good information on progress (or lack thereof) 4. Assessment every two years (or less), for every business unit to establish whether behaviours are broadly congruent with values and provide early warning of risk 5. Ad-hoc intervention by the dedicated resources at the direction of the CEO, or at the request of business unit heads who have issues to resolve 13
  15. 15. ContactsExplore how we can help you to unlock the performancepotential of your businessBoxwood Financial Services TeamMatt Malone ( +44 (0) 7889 078742 | tel +44 (0) 20 3170 7240Paul Sweeney ( +44 (0) 7525 991533 | tel +44 (0) 20 3170 7240Colin Wilson ( +44 (0) 7802 151273 | tel +44 (0) 203 170 5668 T MCA MCA MCA MCA National Training MCA AWARDS AWARDS AWARDS AWARDS AWARDS Awards 2007 2013 2012 2011 PLATINUM 2010 Winner 2005 PLATINUM SHORTLISTED WINNER WINNER WINNER WINNER Boxwood Ltd. 15 Old Bailey London EC4M 7EF | 14