Are we getting to the root of what will drive change?
- Ruth Steinholtz
Ruth Steinholtz replies to a question from our webcast on Culture and Conduct
Are we getting to the root of what will drive change?
I recently participated in a webcast for the Chartered Banker Institute, focused on the importance of culture and conduct. It was a great opportunity to talk about something we are both passionately promoting in our respective lines of work: individual engagement with improving organisation culture and our accountability. Not only to our customers, and society but to each other to strive for and uphold the highest standards of ethical professionalism.
It’s a big topic, and unsurprisingly we couldn’t cover it all. When thinking about how to follow it up, I felt compelled to address one piece of audience feedback, which noted:
'… But in my opinion we are not getting to the root of what will drive change. The only thing that drives it seems to be when a company gets it wrong!’
It’s a fair point, though I do not share the implicit despair. Many companies have proactively invested in ethics and compliance. It is true that some companies do not allocate substantial budgets to compliance until they have experienced a major incident resulting in fines. In part this is down to the classical approach to compliance. If the only benefit of spending money on compliance is to avoid fines, then given the relatively low risk of being caught and fined, this is understandable. And, this is part of the reason that I have always disliked the term compliance and the idea that is what we are all doing.
There is a better way
What we are, or should be doing, is creating strong ethical cultures. “Compliance is an outcome, not an approach.” Ethical cultures are healthy cultures. Companies with healthy cultures will achieve better results, over time, in all areas.
Shall I name some benefits? Lower turnover, attracting talent, greater efficiency due to the ability to learn from mistakes, avoidance of major ethical issues, and better financial results are just a few of them.
So, why do we continue to focus on compliance as if it was the answer? Because we have been asking the wrong question, and tried to solve the wrong problem.
Ethical Business Practice
When creating a strong ethical culture is our goal, we take a different approach. We recognise that doing the right thing is everyone’s responsibility - though senior leaders must set the example. We measure culture and consult our employees to discover our core values: what inspires our people to be the best they can be.
Organisations are composed of people, working together, towards common objectives. How we frame those objectives matters too. Do we only exist to make money for shareholders and to pay bonuses? Or do we realise that focusing on all stakeholders will actually create a more successful, sustainable business?
Once you start talking in these terms with senior leaders you will find that the resources needed to change culture will be more forthcoming.
In the webcast we talked about the role of professional bodies: they play a crucial role in ensuring future leaders think about culture in this way. And as people progress towards their ultimate career ambitions, professional bodies provide a community - and safe environment - to test the cultural norms of your organisation against those of your peers.
Culture and conduct … show me the money
Take a look at the pioneering work of the Dutch National Bank (De Nederlandsche Bank or DNB) if you want to see how a financial services regulator views culture and conduct.
“A large body of research shows that the behaviour and culture of a financial institution influences its financial performance…"
(De Haan & Jansen, 2011; DNB Financial Stability report 2015), in Supervision of Behaviour and Culture. DNB is responsible for prudential supervision of financial institutions in the Netherlands, and since 2010 have been considering behaviour and culture as part of their supervision.
Many other supervisory authorities globally are following their example. Another reason to focus on #cultureandconduct. What are you waiting for?
Ruth Steinholtz has enjoyed a successful, international career in law and business ethics, working in many sectors from banking and FMCG, to pharma and petrochemicals. Ruth now uses her vast experience to assist organisations create strong, ethical cultures based on values. For more information see aretework.com or contact Ruth on [email protected].