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.