Have you heard the message about Culture from the Royal Commission findings?
The fallout from the Banking Royal Commission was far-reaching and can be seen and felt everywhere, from changes in banking communication through to a new approach to advertising. The report sent a clear message to financial institutions and to the public that ‘big brother is watching’ and what has been accepted in the past is not going to cut it in the future.
The lead sentence in Commissioner Hayne’s Executive Summary was “the primary responsibility for misconduct in the financial services industry lies with the entities concerned and with those who manage and control them: their boards and senior management.”
Further, Hayne recommends….
“All financial services entities should, as often as reasonably possible, take proper steps to assess the entity’s culture and its governance; identify any problems with that culture and governance; deal with those problems; and determine whether the changes it has made have been effective.”
We can all learn something from this report, regardless of the industry that we operate in.
It sends a clear message to boards and senior management, if they are willing to hear it. Boards have accountability for ensuring performance and compliance outcomes and culture has a huge impact on this. The two biggest influences the board can have on culture are;
1. who they appoint as CEO, to manage the business and
2. their personal behaviour and performance, both as individual Directors and collectively as the Board.
My concern is that CEOs may not have heard the message in the same way as Directors.
The findings around culture should be ringing alarm bells for CEOs. While Boards are responsible for ensuring culture is supporting overall direction, the buck stops with the CEO. In six months’ time, it’s pretty certain that Boards will be asking CEOs some hard questions – and it will be critical for you to have the answers.
Commissioner Hayne made a number of recommendations, including placing higher regard on non-financial metrics. It’s those non-financial metrics – diving deeper into culture and values – that ought to be on the mind of every CEO. Just because ‘this is how it’s always been” is not a defence moving forward. As CEO, you set the tone for the organisation on what is acceptable and what is not. What you condone, others are expected to tolerate.
Culture is loosely defined as “how things happen around here, how we treat each other and our customers, what is important, what is said and what happens.”
Culture underpins everything we do. If this is not the most important item on the CEO’s agenda - if you are not checking and verifying, listening, engaging and leading from the front - then you are leaving yourself exposed.
A quick pulse check for you. What is the impact of your KPI and remuneration strategy? KPI’s drive focus and remuneration rewards the focus. What is the real impact, the behaviours created to achieve the metric, and what does it look like when achieving the metric is at risk?
This is where you see your real culture - in the everyday actions of your people.
What are you demonstrating to your people as the most important thing? It’s often not what you say, but what you do. Don’t assume you know. Go and ask – and ask why, at least five times until you get to the real answer.
If you haven’t read the Royal Commission Report, I strongly recommend you do. The findings are relevant to us all.
What are you doing to ensure you can answer those hard questions from the Board?
If you’d like to chat to me about your organisation’s culture, and how to get ready for those hard questions, please get in touch.