Where to now for Australia’s banks?


“Although bank executives draw salaries that might suggest they have super-human attributes, they are finally human like the rest of us. You prick them, they bleed,” says AHRI CEO Lyn Goodear.

In their reassurances to angry shareholder meetings at the end of last year, some banks showed signs of an awakening to a new reality, while others appeared eager for a quick return to business as usual.

It was reassuring to see one bank admitting that customers suffer when executives are reticent to identify bad behaviour, call it out, and take steps to remedy it. That coyness to act was especially on show when executives realised short-term negative financial consequences would result from taking the right course of action.

The admission of timidity included an acknowledgement that a single-minded focus on financial achievements coupled with avoidance of financial risks may have “dulled” the bank’s senses to signals that might otherwise have alerted it to non-financial risks.

The term non-financial risks is another way of talking about the vagaries of human behaviour and the cultures that dictate how and why human beings behave the way they do. Although bank executives draw salaries that might suggest they have super-human attributes, they are finally human like the rest of us. You prick them, they bleed.

Look out for the warning signs

When a senior executive who reportedly showed signs of wanting to do the right thing was advised to “temper (his) sense of justice”, an amber light should have flashed.

A red light flashed for me when another bank CEO alerted the Commissioner about his concern that publishing reasons for executive pay cuts would make it more difficult to recruit executives.

The issue arose because of the tenure of executives, which was stated as less than three years on average.

That churn gave rise to a problem in determining who was responsible for compliance or conduct failures. If executives don’t stay long enough to live with the decisions they make, or fail to make, they may collect short-term bonuses on the basis of those decisions, but their successors live with the backwash.

If highly paid executives are not being retained in the business, that in itself is a critical issue. Therefore, to be overly concerned about not being able to attract recruits to take their place suggests merely that the defective culture that accounts for the churn will be likely to infect applicants who are recruited into the vacant positions, who for the same reasons will not stay long.

AHRI’s answer

If an organisation expects the culture that results in churn to keep attracting the same sort of executive applicants, that is a problem which needs to be acknowledged and fixed.

While we can sympathise with the problem of sourcing quality talent, it’s worth looking for ways to attract people who bring attributes that will hold good for the long term, and that is difficult.

While not having all the answers, AHRI has recognised the difficulty in doing that and has painstakingly researched and decided on attributes that are likely to measure up. Which is why we now require certification candidates to demonstrate compelling evidence of 10 behaviours that attest to their capability to do in practice what they say they can do.

These are attributes that go directly to building organisation culture, and mandating demonstration of them as part of a postgraduate certification program enables us to attest to the capabilities of those candidates.

None of that came easily. It was triggered by acknowledging what we had previously been demanding was not good enough and led to unsustainable standards of HR practice and poor professional performance, exemplified during the #MeToo scandals, for example.

It’s been a hard message but it’s now resonating. The certified candidates emerging from it are distinguished by their post nominals, in terms of what they’ve been independently assessed as being able to give to the organisations that employ them, because the certification pathways don’t just speak to knowledge and skill, they speak to character and behaviour.

Warning future executives, regardless of industry or sector, that their pay will be cut if they fail to perform in accordance with positive changes to organisational culture, may well contribute to the sustainability of the new culture. Any failures along those lines are likely to be behavioural rather than technical, and successful appointments within an overhauled culture may well result in staff whose credibility derives from a desire to do the right thing, who possess the professional capabilities to act with courage when it counts, and who stay the course for longer periods of time.

Einstein is often credited with having said that insanity is doing the same thing over and over and expecting a different result. We can only hope that the transparency provided by the Financial Services Royal Commission leads to sustainable culture change becoming a corporate priority.

This article originally appeared in national Fairfax media in January 2019 and in the March 2019 edition of HRM magazine.

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Where to now for Australia’s banks?


“Although bank executives draw salaries that might suggest they have super-human attributes, they are finally human like the rest of us. You prick them, they bleed,” says AHRI CEO Lyn Goodear.

In their reassurances to angry shareholder meetings at the end of last year, some banks showed signs of an awakening to a new reality, while others appeared eager for a quick return to business as usual.

It was reassuring to see one bank admitting that customers suffer when executives are reticent to identify bad behaviour, call it out, and take steps to remedy it. That coyness to act was especially on show when executives realised short-term negative financial consequences would result from taking the right course of action.

The admission of timidity included an acknowledgement that a single-minded focus on financial achievements coupled with avoidance of financial risks may have “dulled” the bank’s senses to signals that might otherwise have alerted it to non-financial risks.

The term non-financial risks is another way of talking about the vagaries of human behaviour and the cultures that dictate how and why human beings behave the way they do. Although bank executives draw salaries that might suggest they have super-human attributes, they are finally human like the rest of us. You prick them, they bleed.

Look out for the warning signs

When a senior executive who reportedly showed signs of wanting to do the right thing was advised to “temper (his) sense of justice”, an amber light should have flashed.

A red light flashed for me when another bank CEO alerted the Commissioner about his concern that publishing reasons for executive pay cuts would make it more difficult to recruit executives.

The issue arose because of the tenure of executives, which was stated as less than three years on average.

That churn gave rise to a problem in determining who was responsible for compliance or conduct failures. If executives don’t stay long enough to live with the decisions they make, or fail to make, they may collect short-term bonuses on the basis of those decisions, but their successors live with the backwash.

If highly paid executives are not being retained in the business, that in itself is a critical issue. Therefore, to be overly concerned about not being able to attract recruits to take their place suggests merely that the defective culture that accounts for the churn will be likely to infect applicants who are recruited into the vacant positions, who for the same reasons will not stay long.

AHRI’s answer

If an organisation expects the culture that results in churn to keep attracting the same sort of executive applicants, that is a problem which needs to be acknowledged and fixed.

While we can sympathise with the problem of sourcing quality talent, it’s worth looking for ways to attract people who bring attributes that will hold good for the long term, and that is difficult.

While not having all the answers, AHRI has recognised the difficulty in doing that and has painstakingly researched and decided on attributes that are likely to measure up. Which is why we now require certification candidates to demonstrate compelling evidence of 10 behaviours that attest to their capability to do in practice what they say they can do.

These are attributes that go directly to building organisation culture, and mandating demonstration of them as part of a postgraduate certification program enables us to attest to the capabilities of those candidates.

None of that came easily. It was triggered by acknowledging what we had previously been demanding was not good enough and led to unsustainable standards of HR practice and poor professional performance, exemplified during the #MeToo scandals, for example.

It’s been a hard message but it’s now resonating. The certified candidates emerging from it are distinguished by their post nominals, in terms of what they’ve been independently assessed as being able to give to the organisations that employ them, because the certification pathways don’t just speak to knowledge and skill, they speak to character and behaviour.

Warning future executives, regardless of industry or sector, that their pay will be cut if they fail to perform in accordance with positive changes to organisational culture, may well contribute to the sustainability of the new culture. Any failures along those lines are likely to be behavioural rather than technical, and successful appointments within an overhauled culture may well result in staff whose credibility derives from a desire to do the right thing, who possess the professional capabilities to act with courage when it counts, and who stay the course for longer periods of time.

Einstein is often credited with having said that insanity is doing the same thing over and over and expecting a different result. We can only hope that the transparency provided by the Financial Services Royal Commission leads to sustainable culture change becoming a corporate priority.

This article originally appeared in national Fairfax media in January 2019 and in the March 2019 edition of HRM magazine.

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