12 February 2019

Culture never

We create culture every day with what we say and do. It’s in the tiny details, as well as the grand gestures. With each action, we reinforce or diminish the values that often compete to guide and control an organisation’s culture. Culture changes over time, sometimes dramatically, sometimes imperceptibly, which is why we need to pay attention to it. It never sleeps.

Purpose shapes and drives culture. When the purpose is poorly defined, or we lose sight of it, culture is created on the run or by guesswork. This scenario mostly leads to dysfunction, as values compete at cross-purposes, and people within organisations battle or form alliances with others who share or enable their set of chosen values. Alternatively, we get inertia, which also leads to dysfunction.

At best, a culture beset by conflicting values muddles through. At worst, the culture is hijacked by people with negative mindsets, operating from self-interest rather than for the greater success of the organisation. At other times, complacency and stagnant thinking pervade the culture, leaving it open to abuse and lapses in ethical behaviour.

Unfortunately, the Banking and Financial Services Royal Commission has brought such examples to light.

Some of the common threads running through many of the incidents highlighted so far in the Royal Commission include dishonest dealings with customers and the development of internal cultures that fail to meet broader community standards and expectations. These are serious issues for banks and financial institutions, which erode the valuable currency of trust that is vital to the sector’s ongoing health and, ultimately, prosperity.

However, it would be a mistake to think other industries are immune to these factors too. That’s why the lessons drawn from the Banking Royal Commission can be applied elsewhere. The details may differ, but questions of ethics and culture challenge every organisation across all industries. 

One of the most significant issues to come out of the Royal Commission so far is cultural complacency. No organisation can afford to fall asleep at the wheel if it wants to maintain an accountable and transparent culture. Complacency bred by success, as evident within some of the Australian banking sector, becomes a breeding ground for wilful ignorance and, in the worst cases, outright unethical behaviour.

Part of the problem with complacency is that it also leads to reactive rather than proactive thinking. Questionable behaviour within organisations needs to be acted upon rather than brushed aside until it becomes an entrenched part of the culture. Success can blind us to the very things that eventually become our undoing. Complacent cultures lose their sense of urgency, waiting for problems to present instead of finding the issues that need fixing.

Another thing to come out of the Royal Commission reports is the prevalence of insular, non-critical thinking that can erode the ethical rigour of organisational cultures. This is especially the case within large organisations that lose sight of the people they should be serving and turn inwards instead, becoming increasingly bureaucratic.

Organisations need to engage in a conversation with their customers not only for excellent customer service but also because customers will tell you what you are doing wrong in an often more forthright way than employees will. An open and responsive relationship with customers is an excellent feedback mechanism for the cultural fitness of an organisation.

The responsibility for fostering an ethical and healthy culture falls upon each employee. However, an organisation’s leadership must step up and guide the process, by their words and, most importantly, their actions. Board level governance needs to align with internal processes, especially on critical issues like the structuring of remuneration and rewards for employees. Other monitoring measures for ethical behaviour, like whistleblower programs, also have to be given more than just lip service.

When confronting the challenges of ethical behaviour and culture, organisations have to ask themselves:

  • How do we monitor consumer outcomes?
  • How do we encourage bad news to travel fast?
  • Is remuneration aligned with the organisation's values regarding behaviour?
  • Are the values driving our culture aligned to its purpose?

Every organisation should strive to build a culture that values ethical behaviour, both for the inherent good of being ethical, but also because ethical conduct nurtures trust between organisations and those they serve.

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