The challenge of managing ethical behaviour in banking: reshaping behaviours

Jul 16
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Research by academics and behavioural scientists has shown that individual behaviour at work is determined more by peer pressure than employer proclamations, decrees, rules or regulations. Banks in particular are comprised of numerous sub-cultures, each of which have strong unwritten ground rules for how members should behave in order to “fit in” and remain a “part of the group”.

Experiments in group behaviour have consistently proven that even when individuals know what is right and know what should be done, many will not take the important step of speaking up or going against the “collective group” to which they belong. (Herrero, 2006, 2011; Thaler and Sunstein. 2009).

Reshaping culture is more about shifting behaviour than issuing proclamations, new policies or new values statements, and one of the quickest ways to reshape behaviour is using sustainable behaviour change methodologies and appropriate peer group pressure (Herrero, 2006).

To reshape ethical behaviour within banking, it is important to answer several key questions:

  • What are the specific ethical work behaviours we want from our employees? It may vary from department to department.
  • In what ways do these desired behaviours match with our current business “purpose” and “operating principles”?
  • How would those new behaviours contribute to commercial impact or business objectives?
  • What is the decision-making framework against which employees should judge the decisions they take? What frameworks do they currently use?
  • Why don’t more employees “speak up” or initiate dialogue when they see or know of wrongdoing or risky behaviour?
  • What are the internal and external motivations that will persuade people to adopt new behaviours (e.g. speak up)?

By understanding these key questions, it will be possible to build an evidence-based approach to the challenge of managing unethical behaviours.

Culture Change in Other Industries

Currently there are few, if any, successful culture change activities in banking to use as direct examples. However, an analogy can be made within industries where “safety behaviour” is critical to company performance and people’s lives. In the offshore oil and gas industry, strong, macho subcultures exist among pipefitters, welders, drill crews, and other operationally intensive functions. Line managers often have strong personalities with years of experience and they oversee younger crews, all eager to make a name for themselves and “be the best”. (The analogy to trading rooms is not too far off).

In a testimony before the US Senate Committee on Energy and Natural Resources, MIT Professor Nancy Leveson identified corporate culture as the most critical element of safety in the Oil and Gas industry. (Leveson, 2011). A successful approach to culture change on oilrig platforms using peer group dynamics and sustainable behaviour change methodologies is detailed in an interesting paper by two Stanford and Harvard Business School professors (Meyerson and Ily, 2010).

Recently, I spoke at length with Dr. Scott Geller and Dr. Steve Roberts of Safety performance Solutions and the Virginia Tech University, the recognized experts in behaviour based safety change in the oil and gas industry. Both are adamant that the behaviour change principles so effectively used in oil and gas for decades are transferable into other industries where strong subcultures exist and behaviour can be linked to positive and negative outcomes (Geller, 2012).

The Opportunity for Banking:

Now is a timely opportunity for banking leadership to learn to manage unethical behaviours with an effective intervention where employees at all levels feel confident and empowered and take personal accountability for the behaviours and effectiveness of the business and their colleagues.

Such an intervention should result in positive peer pressures, more open dialogue within peer groups and with management concerning risk, behaviours and values, plus greater compliance and professionalism. Such shifts will lead to a significant reduction in excessively risky and unethical activities. Employees at all levels will begin to accept greater personal responsibility for the culture and the overall spirit and pride in the organization will substantially increase.

John R. Childress will be speaking on ‘Reshaping culture in financial services by linking culture to the business’ at the Culture & Conduct in Financial Services conference this October. Book your place by July 22nd to save $600 on ticket prices. Read his previous blog posts here.

Culture & Conduct in Financial Services

Submitted by John R. Childress

John R. Childress

John R. Childress is Senior Executive Advisor on Leadership Culture and Strategy Execution Issues in both the UK and USA.

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