Bank culture – how did we get here?


When your culture has problems you reap what you sow, argues Shaun McCarthy in this opinion piece.

In the early 1990s, Australian banks began a process of shifting away from a conservative ‘custodial culture’ to a more innovative ‘sales culture’. With increasing emphasis on ‘share of wallet’ through additional financial products and a focus on customer service, banks gradually moved from actively avoiding the provision of advice to being full service and advice providers. Insurance companies did the same soon afterwards.

At the same time, with the emergence of new technology, these organisations went through the process of putting back-office activities out to tender, creating large, centralised processing and call centres, and undertook considerable downsizing of staff. They simultaneously moved from the previous model of multi-skilling, and job rotation, to what was referred to as the ‘McDonaldisation of the banking industry’.

The emphasis was on structures, systems and technologies to build performance, rather than people and culture. It isn’t unusual for organisations adopting these strategies to misattribute their success to their culture. They operate under the misguided belief that their culture is supporting their business when, in reality, it’s working against it.

Such a strategy can produce positive, short-term business results, but will eventually create unexpected consequences.

For the financial services industry, that time has come.

Finding the balance

It is time now for a greater balance between custodial and sales orientations. Society used to expect banks and insurance companies to have their customers’ best interests at heart. We didn’t see them as selling us products, but as helping us achieve our goals. Financial services companies have used this to their advantage in advertising, but it appears their ‘promise’ may have been at odds with their core beliefs regarding customer relationships (an outcome of culture).

Let’s be clear on what we mean by culture. It is the shared beliefs, norms and expectations that guide how employees approach their work and interact. It sets the standards for how people believe they are expected to behave in order to survive, fit in and get ahead.

Culture is established over time by the organisation’s systems, particularly those linked with reward and punishment. The line credited to Peter Drucker – “What gets measured gets managed” – should also be stated as “What gets measured is what’s really important”.

If sales goals are measured more than service goals, then staff will very quickly figure out sales goals are what really matter.

Drivers of culture

Training and goal-setting management processes are drivers of culture. How staff get trained to behave and how managers get trained to manage, create expectations for desirable behaviour. Adopting aggressive sales management and incentive systems is known to create cultural norms of turning work into a contest, where success comes at any cost.

Remuneration drives culture. Short-term incentives (be they bonuses for lower-level staff or options for CEOs) drive a culture of internal competition and a focus on short-term ‘wins’, rather than longer-term effectiveness.

(Previously HRM wrote about how toxic cultures end up protecting the wrong people.)

Selection and placement systems, and performance evaluation, drive culture. Who gets promoted and why they get promoted send important signals.

Leaders drive culture. Through role-modelling, reinforcing and other leadership approaches, individual leaders impact the culture in unique ways. What’s more, the beliefs leaders hold have significant impact on culture.

Leadership drives culture. Over and above the individuals, the collective decisions leadership groups make impact the culture.

Communication systems drive culture. How information flows up and down the organisation, and what type of information flows, combine to impact culture.

Reaping what you sow

In short, culture is the result of a complex interplay of multiple variables.

Simply getting rid of incentives (as many of the executives fronting the royal commission say they will) will not in itself change the culture. What were the underlying beliefs that led to these in the first place? What about all the other factors mentioned above?

Culture will always have the last say. Those organisations that believe their aggressive cultures have led to their success will, one day, pay the price for this. And for many companies, it looks like “one day” has arrived.

Shaun McCarthy is the chairman and managing director of Human Synergistics New Zealand & Australia.


Build your capability and make your mark as an HR professional by achieving HR certification through the AHRI Practising Certification Program. Enrolments close Monday 6 August. Enrol now.

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5 Comments On "Bank culture – how did we get here?"

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michael minns
Yes, in terms of Organisational Culture we do reap what we sow,however, this statement describes the end result and not the cause. A better approach is to ask Question Zero; “Why is it so?” and the answer is;’ It is a Culture of Undermanagement that is based on the both acts of ommission and acts of commission of the seniour leaders in the banking industry. The current crisis can be traced back to 1993 when Bob Joss, somewhat reluctantly, was recruited to fix Westpac. He visited every branch in Auastralia and tore down the silos that had built up overtime.… Read more »
Michael Purtell

Complacent arrogance and an apparent implicit contempt for ethical business practaices appears to be the norm.. What isworse is that they seem to be able to buy their way out of criminal practices such as money laundering whereas the rest of us would face a gaol sentence. Any contrition is only grudgingly displayed when they are caught

Paul Steele
One day for the banks and financial services operators has seemingly arrived. Disturbingly, there is often a degree of incongruence between what is said and what is done. If you take away what have become expected incentives and rewards for a certain behaviour these need to be replaced with something of similar value. the question will be – WHAT? In an incentivized environment, what incentive will be able to replace cash and share bonuses. maybe we are measuring the wrong things. Considering the results we are reaping there is s strong possibility the employed measures are wrong, or at least… Read more »
Catherine
Any Reward system will encourage most people to behave in ways that maximise the possibility of earning the reward – that’s why they work. Couple that with a Reward system that cascades up through management, and there is also a powerful incentive for managers to focus on the outcomes required and not the actual behaviours being employed. I know of a bank which decided to incentivise branch staff to encourage customers to use the ATM at the branch instead of coming to the front counter. Some branch staff took to withdrawing and depositing multiple small amounts to their own accounts… Read more »
Tasman McManis
The analysis from Shaun touches on the key points around culture. Not being part of the banks it would be interesting to know how and what cultures they have been trying to instill into their staff over the last 20 years. It looks like many of the incentive plan designs used in the banks did not balance the up side with a down side. With incentive plans participants people usually look for the way to make the most money with the easiest/least effort. When designing plans it is important to involve the participants in the design process to understand how… Read more »
More on HRM

Bank culture – how did we get here?


When your culture has problems you reap what you sow, argues Shaun McCarthy in this opinion piece.

In the early 1990s, Australian banks began a process of shifting away from a conservative ‘custodial culture’ to a more innovative ‘sales culture’. With increasing emphasis on ‘share of wallet’ through additional financial products and a focus on customer service, banks gradually moved from actively avoiding the provision of advice to being full service and advice providers. Insurance companies did the same soon afterwards.

At the same time, with the emergence of new technology, these organisations went through the process of putting back-office activities out to tender, creating large, centralised processing and call centres, and undertook considerable downsizing of staff. They simultaneously moved from the previous model of multi-skilling, and job rotation, to what was referred to as the ‘McDonaldisation of the banking industry’.

The emphasis was on structures, systems and technologies to build performance, rather than people and culture. It isn’t unusual for organisations adopting these strategies to misattribute their success to their culture. They operate under the misguided belief that their culture is supporting their business when, in reality, it’s working against it.

Such a strategy can produce positive, short-term business results, but will eventually create unexpected consequences.

For the financial services industry, that time has come.

Finding the balance

It is time now for a greater balance between custodial and sales orientations. Society used to expect banks and insurance companies to have their customers’ best interests at heart. We didn’t see them as selling us products, but as helping us achieve our goals. Financial services companies have used this to their advantage in advertising, but it appears their ‘promise’ may have been at odds with their core beliefs regarding customer relationships (an outcome of culture).

Let’s be clear on what we mean by culture. It is the shared beliefs, norms and expectations that guide how employees approach their work and interact. It sets the standards for how people believe they are expected to behave in order to survive, fit in and get ahead.

Culture is established over time by the organisation’s systems, particularly those linked with reward and punishment. The line credited to Peter Drucker – “What gets measured gets managed” – should also be stated as “What gets measured is what’s really important”.

If sales goals are measured more than service goals, then staff will very quickly figure out sales goals are what really matter.

Drivers of culture

Training and goal-setting management processes are drivers of culture. How staff get trained to behave and how managers get trained to manage, create expectations for desirable behaviour. Adopting aggressive sales management and incentive systems is known to create cultural norms of turning work into a contest, where success comes at any cost.

Remuneration drives culture. Short-term incentives (be they bonuses for lower-level staff or options for CEOs) drive a culture of internal competition and a focus on short-term ‘wins’, rather than longer-term effectiveness.

(Previously HRM wrote about how toxic cultures end up protecting the wrong people.)

Selection and placement systems, and performance evaluation, drive culture. Who gets promoted and why they get promoted send important signals.

Leaders drive culture. Through role-modelling, reinforcing and other leadership approaches, individual leaders impact the culture in unique ways. What’s more, the beliefs leaders hold have significant impact on culture.

Leadership drives culture. Over and above the individuals, the collective decisions leadership groups make impact the culture.

Communication systems drive culture. How information flows up and down the organisation, and what type of information flows, combine to impact culture.

Reaping what you sow

In short, culture is the result of a complex interplay of multiple variables.

Simply getting rid of incentives (as many of the executives fronting the royal commission say they will) will not in itself change the culture. What were the underlying beliefs that led to these in the first place? What about all the other factors mentioned above?

Culture will always have the last say. Those organisations that believe their aggressive cultures have led to their success will, one day, pay the price for this. And for many companies, it looks like “one day” has arrived.

Shaun McCarthy is the chairman and managing director of Human Synergistics New Zealand & Australia.


Build your capability and make your mark as an HR professional by achieving HR certification through the AHRI Practising Certification Program. Enrolments close Monday 6 August. Enrol now.

Leave a reply

5 Comments On "Bank culture – how did we get here?"

avatar
  Subscribe to receive comments  
Notify me of
michael minns
Yes, in terms of Organisational Culture we do reap what we sow,however, this statement describes the end result and not the cause. A better approach is to ask Question Zero; “Why is it so?” and the answer is;’ It is a Culture of Undermanagement that is based on the both acts of ommission and acts of commission of the seniour leaders in the banking industry. The current crisis can be traced back to 1993 when Bob Joss, somewhat reluctantly, was recruited to fix Westpac. He visited every branch in Auastralia and tore down the silos that had built up overtime.… Read more »
Michael Purtell

Complacent arrogance and an apparent implicit contempt for ethical business practaices appears to be the norm.. What isworse is that they seem to be able to buy their way out of criminal practices such as money laundering whereas the rest of us would face a gaol sentence. Any contrition is only grudgingly displayed when they are caught

Paul Steele
One day for the banks and financial services operators has seemingly arrived. Disturbingly, there is often a degree of incongruence between what is said and what is done. If you take away what have become expected incentives and rewards for a certain behaviour these need to be replaced with something of similar value. the question will be – WHAT? In an incentivized environment, what incentive will be able to replace cash and share bonuses. maybe we are measuring the wrong things. Considering the results we are reaping there is s strong possibility the employed measures are wrong, or at least… Read more »
Catherine
Any Reward system will encourage most people to behave in ways that maximise the possibility of earning the reward – that’s why they work. Couple that with a Reward system that cascades up through management, and there is also a powerful incentive for managers to focus on the outcomes required and not the actual behaviours being employed. I know of a bank which decided to incentivise branch staff to encourage customers to use the ATM at the branch instead of coming to the front counter. Some branch staff took to withdrawing and depositing multiple small amounts to their own accounts… Read more »
Tasman McManis
The analysis from Shaun touches on the key points around culture. Not being part of the banks it would be interesting to know how and what cultures they have been trying to instill into their staff over the last 20 years. It looks like many of the incentive plan designs used in the banks did not balance the up side with a down side. With incentive plans participants people usually look for the way to make the most money with the easiest/least effort. When designing plans it is important to involve the participants in the design process to understand how… Read more »
More on HRM