Monthly Archives: May 2013

Could insight into employee behaviour to risk management have saved HSBC?

Understanding your employees’ competence, skills, knowledge and experience, as well as how they actually behave on the job and their attitude to risk is paramount for all businesses, but even more so for the banking sector. According to Oracle, financial crime costs an estimated $20 billion in losses annually, and the operational costs of compliance are growing substantially year after year. Furthermore, there is a higher level of scrutiny in the market today.

 

Compliance officers are seeing an increased expectation, both internally and externally, for concise and accurate reporting on compliance while proving the results. However, compliance management is regarded as a critical component of the internal control process for any business and a prerequisite for assessing compliance with corporate performance standards.

Recent regulatory changes have driven the need for organisations to adopt a holistic view of risk management and compliance, and recognise that a focus on processes and controls is not sufficient to drive effective behaviour. There is now a growing realisation that successful risk management outcomes depend on understanding the behaviours of employees and what is influencing or driving those behaviours. In reality, most companies have poor insight into the drivers of employee behaviour in relation to risk management and it is not being effectively embedded into their business operations.

The recent HSBC money laundering case demonstrates what can go wrong if a business fails to have adequate risk management controls in place to understand and change employee behaviour. HSBC has been forced to pay a record £1.2bn by American prosecutors because of its failure to implement anti-money laundering controls that led to at least $881m in drug trafficking money being laundered through the bank’s accounts.

 

Would this have happened if directors had a good understanding of the competence, skill, behaviour and risk-taking attitude of their employees? Probably not and it highlights the worst case scenario of what can happen if the effect of employee behaviour on risk management is not embedded in the day to day operations of the business.

By not having systems in place to gain a companywide view of employee’s knowledge, core competence, skills, confidence and attitude, how can a business ensure their employees are able to do the job? A sound competency/compliance management system aligns organisational needs with the development needs of individuals within the organisation. It will demonstrate that your employees and contractors are competent to carry out the tasks they are required to perform, and that they are continually developing, alongside the introduction of new technology and regulation.

If organisations have not implemented behaviour change programs to manage identified areas of concern or if managers have not received an assessment of the organisation’s risk culture and behaviour then business leaders will not be able to improve business performance through more effective risk management.

 

In the current climate managing risks is crucial, especially in the banking and financial industry given it has been under close scrutiny because of the behaviour of some of its employees.

Regularly assessing employee behaviour against the desired criteria for a specific job role is now essential. Employee assessments ensure business owners can not only get an insight into how their employees are performing, but also highlight weaknesses and gaps in knowledge, which means tailored training can then be provided.

If companies deploy situational judgement assessments that measure a combination of employee knowledge and confidence managers will be able to see how a person is likely to respond in common work scenarios, including their likely decision making and behaviours The results provide employers with an accurate picture of an employee’s strengths and weaknesses – areas where specific interventions are needed to improve performance. This knowledge enables companies to provide specific training to improve individual performance – not a ‘one size fits’ all approach that so many companies take – which is also very expensive.

 

Perhaps if HSBC had an assessment of the organisation’s risk culture and behaviour, its employees wouldn’t have put the business at risk and further undermined the integrity of the banking sector.

If companies used situational judgement assessments throughout the employee lifecycle – they would not only make better recruitment decisions but ensure an understanding of the behaviours that have the greatest impact on business performance. Improving the risk culture requires an improvement of the organisational footprint of the risk management function. This is more than just rolling out Enterprise Risk Management (ERM) systems but involves expanding the reach of informal risk processes, information sharing and escalation, and representation of employees on key committees.

Finally, an organisation doesn’t have a single risk culture. It is a myriad of small behaviours and habits aggregated that constitute the risk culture at any one point in time.

 

Ensuring that the drivers of employee behaviour in relation to risk management are effectively embedded into the operations of the business will go some way to ensuring illegal practices such as money laundering on the scale of what has just happened at HSBC couldn’t happen in the future.

Mary Clarke – CEO, Cognisco

 

 

Could insight into employee behaviour to risk management saved HSBC from a record pay?

Mary Clarke, CEO of Cognisco, a human capital risk solutions company comments on how the banking sector could minimise employee risk and help improve their damaged reputation.

 

Understanding your employees’ competence, skills, knowledge and experience, as well as how they actually behave on the job and their attitude to risk is paramount for all businesses, but even more so for the banking sector. According to Oracle, Financial crime costs an estimated $20 billion in losses annually, and the operational costs of compliance are growing substantially year after year. Furthermore, there is a higher level of scrutiny in the market today.

Compliance Officers are seeing an increased expectation, both internally and externally, for concise and accurate reporting on compliance while proving the results. However, compliance management is regarded as a critical component of the internal control process for any business and a prerequisite for assessing compliance with corporate performance standards.

Recent regulatory changes have driven the need for organisations to adopt a holistic view of risk management and compliance, and recognise that a focus on processes and controls is not sufficient to drive effective behaviour. There is now a growing realisation that successful risk management outcomes depend on understanding the behaviours of employees and what is influencing or driving those behaviours. In reality, most companies have poor insight into the drivers of employee behaviour in relation to risk management and it is not being effectively embedded into their business operations.

 

The recent HSBC money laundering case demonstrates what can go wrong if a business fails to have adequate risk management controls in place to understand and change employee behaviour. HSBC has been forced to pay a record £1.2bn by American prosecutors because of its failure to implement anti-money laundering controls that led to at least $881m in drug trafficking money being laundered through the bank’s accounts.

Would this have happened if directors had a good understanding of the competence, skill, behaviour and risk taking attitude of their employees? Probably not and it highlights the worst case scenario of what can happen if the effect of employee behaviour on risk management is not embedded in the day to day operations of the business.

By not having systems in place to gain a companywide view of employee’s knowledge, core competence, skills, confidence and attitude, how can a business ensure their employees are able to do the job? A sound competency/compliance management system aligns organisational needs with the development needs of individuals within the organisation. It will demonstrate that your employees and contractors are competent to carry out the tasks they are required to perform, and that they are continually developing, alongside the introduction of new technology and regulation.

 

If organisations have not implemented behaviour change programs to manage identified areas of concern or if managers have not received an assessment of the organisation’s risk culture and behaviour then business leaders will not be able to improve business performance through more effective risk management.

In the current climate managing risks is crucial-especially in the banking and financial industry given it has been under close scrutiny because of the behaviour of some of its employees.

Regularly assessing employee behaviour, against the desired criteria for a specific job role is now essential. Employee assessments ensure business owners can not only get an insight into how their employees are performing, but also highlight weaknesses and gaps in knowledge, which means tailored training can then be provided.

 

If companies deploy situational judgement assessments that measure a combination of employee knowledge and confidence managers will be able to see how a person is likely to respond in common work scenarios, including their likely decision making and behaviours

The results provide employers with an accurate picture of an employee’s strengths and weaknesses – areas where specific interventions are needed to improve performance. This knowledge enables companies to provide specific training to improve individual performance – not a ‘one size fits’ all approach that so many companies take – which is also very expensive.

Perhaps if HSBC had an assessment of the organisation’s risk culture and behaviour, its employees wouldn’t have put the business at risk and further undermined the integrity of the banking sector.

 

If companies used situational judgement assessments throughout the employee lifecycle – they would not only make better recruitment decisions but ensure an understanding of the behaviours that have the greatest impact on business performance. Improving the risk culture requires an improvement of the organisational footprint of the risk management function. This is more than just rolling out Enterprise Risk Management (ERM) systems but involves expanding the reach of informal risk processes, information sharing and escalation, and representation of employees on key committees.

Finally, an organisation doesn’t have a single risk culture. Indeed it is a myriad of small behaviours and habits aggregated that constitute the risk culture at any one point in time.

Ensuring that the drivers of employee behaviour in relation to risk management are effectively embedded into the operations of the business will go some way to ensuring illegal practices such as money laundering on the scale of what has just happened at HSBC couldn’t happen in the future.

 

Put your employees first this year

Mary Clarke says that this year companies will have to pay closer attention to their human capital management and that workforce planning should be top of their agenda. In this article she discusses why and how businesses can start to put their employees first.

The recession has taken its toll not only on business profits but on the workforce, as they have had to bear the brunt of cuts, redundancies and have their career development overlooked while business owners have focused on keeping the business afloat.

However, there is only so long a company can ignore their employees before the cracks start to show – either in terms of poor behaviour and attitude or in high employee turnover. This year, businesses will need to start putting their employees first and look at how they nurture and manage them better to avoid high attrition rates.

Economists are predicting limited growth of less than 1% this year and the possibility of a triple dip recession. Despite the doom and gloom, it’s time for companies to take workforce planning seriously again. It is something that is often neglected during tough times. However, a business is only as successful as its people and without a happy, well-trained, competent and engaged workforce – an organisation will grow stale, unproductive and unprofitable.

On the other hand, if a business can adopt a cradle-to-grave approach to workforce planning and development so that it continues whatever the economic outlook they are far more likely to succeed. Workforce planning is an essential component in any successful business. It ensures a company has the necessary resources in place to handle current workloads and pressures. It also ensures it will be ready for the recovery, that the skills and knowledge of the workforce are being used effectively and their performance and productivity is being optimised.

To address workforce planning, some companies will need to re-think the culture that exists within their business first. As we have seen in the banking sector, a culture that is focused on profits can be detrimental to the wellbeing of employees. In recent times, the sector’s reputation has been tarnished and this will not only have had an impact on employees working in the sector, but could also prevent such organisations retaining and attracting talent. By taking steps to change their culture, companies can help improve employee behaviour, enhance their wellbeing and morale and importantly, help reduce risk by improving employee behaviours.

 

Understanding workforce competency is the first step

However, the core to successful workforce planning in 2013 for any organisation, whatever its size is to first understand its workforce competency. This is one area companies tend to struggle with and the truth is many managers lack insight into the skills and knowledge of their people. Whilst many companies have robust recruitment processes to put new recruits through their paces using psychometric and competency assessments, this is often the last time employees are assessed.

“Workforce planning is an essential component in any successful business. It ensures a company has the necessary resources in place to handle current workloads and pressures.”

Typically, employees will move through the ranks in a company, without their competency and knowledge ever being tested again, a factor which could be placing the company at unnecessary risk. This lack of insight can lead to other problems. If managers don’t know how competent their employees are, they won’t understand their training and development needs. Managers might also overlook star performers who are able to take on greater responsibility or who could be used in other areas of the business. Worse, they may fail to spot weaker individuals who may misunderstand key aspects of their role or in the worst case scenario aren’t fit to practice.

One way that companies can gain a better understanding of their workforce is by putting in place competency frameworks for every role in the business. Such frameworks can be mapped against national standards and will define the core competencies needed for roles as well as the desired level of knowledge, motivation, behaviour and experience.

Without fully understanding what each role requires, it is difficult to generate a clear career pathway for individuals. Defining the types of knowledge areas, behaviours, skills, experiences, and motivations for each role will also clarify what resources exist already in the organisation and where the gaps lie. If a business doesn’t know this, then how can it prepare its recruitment plans going forward?

Once in place, new recruits and existing employees can be then assessed against these competency standards, in order to give managers greater insight into their performance. This information will lead to better recruitment decisions, improved talent and performance management, more targeted training and development and easier succession planning.

 

Measuring employee development

The next challenge is how to accurately measure employee development against these frameworks. One solution is introducing customised assessments that can help achieve these measurements because they provide accurate, factual and objective results.

The assessments that tend to produce the most accurate results are those with well-designed questions which are validated by occupational psychologists and meet international/national standards. The questions are mapped against the ‘ideal’ competencies for every job role within a company and based on realistic scenarios that an employee would encounter in their job. That way the results are meaningful and highlight accurately how well a person understands aspects of their role, how they apply knowledge, their decision making and their attitude or behavior.

Customised employee assessments work best if they test employees in work-based scenarios, asking them a series of multiple response style-questions that can’t be guessed. Assessments that measure a combination of competency, knowledge and confidence will also identify quickly any knowledge gaps, areas of misunderstanding or employees with low confidence which could impact their decision making.

The results provide rich data for managers and a rounded picture of an individual. They will reveal not only how competent a person is but their likely behaviour and attitude when performing their role. Managers will be able to see where additional and specific training and support is needed and this information could also form the basis of a future training and development plan.

By gaining such insights into their employees, organisations are able to deliver more tailored and cost effective training programmes and better manage their employee career progression. It can also help managers address and eradicate any unacceptable employee behaviour by providing targeted interventions that improve individual performance. Managers will also understand their workforce better – how they perform, behave on the job and what makes them tick.

It is not surprising that the impact of the past few difficult years has led many companies to neglect employee development. However, this year, this will need to change if businesses want to retain their core talent.

Putting in place competency frameworks and using regular competency assessments managers can really help companies improve their human capital management and workforce planning. By putting their people first in 2013, businesses will be in a much stronger position and more able to reap the rewards as the economy starts to grow again.

Mary Clarke is CEO of Cognisco

 

 

Does employee behaviour pose the greatest risk to the Banking sector’s reputation?

Mary Clarke, CEO of Cognisco, a human capital risk solutions company, looks at how the banking sector could minimise its exposure to risk and help change public perceptions.

The banking sector came under great scrutiny last year with several high profile cases such as HSBC fined a record £1.2bn in the USA for failing to implement anti-money laundering controls and Barclays fined £290m in the UK for breaches of the Libor and Euribor rates. These are just some of the many examples in the global banking sector demonstrating what can happen if companies fail to manage the risks posed by employee behaviour within their organisation.

All companies gather accurate information about their financial performance but few apply the same level of scrutiny to their workforce performance. Understanding an employees’ competence, skills, knowledge and experience, as well as how they actually behave on the job and their attitude to risk, is paramount for all businesses, but even more so for the banking sector where the commercial stakes are so high.

Employee misunderstanding and/or inappropriate attitude to risk may result in significant fines and loss of shareholder value. Analysts IDC say that 23% of employees misunderstand at least one aspect of their jobs and that the cost of employee mistakes to UK businesses is estimated at £19bn annually. Apply this globally and the amount of money wasted because businesses have been complacent about employee competence is astronomical.

According to Oracle[i], financial crime costs an estimated $20 billion in losses annually, and the operational costs of compliance are growing substantially year on year. Furthermore, recent events and high-profile cases have put the sector under an even higher level of scrutiny.

 

Increased regulations and expectations

Some may say that many of the large global banks have got so big that is difficult to ‘know’ every individual, however, with an ever increasing regulatory environment and a damaged reputation to turn around, the sector has a responsibility to ensure all their employees are competent to do their jobs and if they aren’t, put procedures, training coaching and mentoring in place to address any skills and knowledge gaps.

Compliance Officers are recognising that processes and controls alone are not enough and that if they are to provide Board Assurance and therefore mitigate risk, their approach to compliance will have to extend to include how individuals actually behave in their work.

There is now a growing realisation that successful risk management outcomes depend on understanding the behaviours of employees and what is influencing or driving those behaviours. In reality, most companies have poor insight into the drivers of employee behaviour in relation to risk management and it is not effectively embedded into their business operations.

 

What can be done?


Most companies adopt a robust approach to the recruitment process and put new recruits through their paces using psychometric and competency assessments. However, this is often the first and last time employees are ever assessed in this way, with annual reviews and appraisals being measures of how an individual is performing, rather than competency. Typically, employees will move through the ranks in a company, without their competency and knowledge ever being tested again, a factor which inevitably places the company at risk.

This lack of insight can lead to other problems. If managers don’t know how competent their employees are, they won’t understand their training and development needs and they won’t identify potential risk factors within the organisation. Managers might also overlook star performers who are able to take on greater responsibility or who could be used in other areas of the business. Worse, they may fail to spot weaker individuals who may misunderstand key aspects of their role or may not even be fit to practice, increasing the risk still further.

One way that companies can gain a better understanding of their workforce is by putting in place Competency Frameworks for each role in the business. Such frameworks can be mapped against national and global standards and internal strategic and operational requirements. They define the core competencies needed for each role as well as the desired level of knowledge, motivation, behaviour and experience.

Defining a Competency Framework is ultimately business critical. As well as providing a guide and structure for Human Capital planning it creates a direct link between the individual employee and the over-arching business strategy.

 

Measuring employee development


The next step is how to accurately measure employee development against these frameworks. One solution is introducing customised assessments that can help achieve these measurements because they provide accurate, factual and objective results.

The assessments that tend to produce the most accurate results are those with well-designed questions which are validated by occupational psychologists and meet international/national standards. The questions are mapped against the ‘ideal’ competencies for every job role within a company and based on realistic scenarios that an employee would encounter in their job. That way the results are meaningful and highlight accurately how well a person understands aspects of their role, how they apply knowledge, their decision making and their attitude or behavior.

Customised employee assessments work best if they test employees in work-based scenarios asking them a series of multiple response style questions that can’t be guessed. Assessments that measure a combination of competency, knowledge and confidence will also identify quickly any knowledge gaps, areas of misunderstanding or employees with low confidence which could impact their decision making.

The results provide rich data for managers and a rounded picture of an individual. They will reveal not only how competent a person is but their likely behaviour and attitude when performing their role. Managers will be able to see where additional and specific training and support is needed and this information could also form the basis of a future training and development plan.

What can often be the worst risk factor for a business, especially in the banking sector is someone who is overly confident, but lacks the knowledge and skills to do the job properly. Without an assessment this potential issue is easily overlooked because they have the confidence, but they can pose a significant risk to the business if they don’t have the correct knowledge and skills.

By gaining such insights into their employees, organisations are able to deliver more tailored and cost effective training programmes and better manage their employee career progression. It can also help managers address and eradicate any unacceptable employee behaviour by providing targeted interventions that improve individual performance. Managers will also understand their workforce better – how they perform, behave on the job and what makes them tick.

 

To conclude

The spotlight will no doubt remain on the banking and financial sector for some time and it is more important than ever that the sector ensures across the enterprise that their employees are compliant and competent to do their jobs. Not just to avoid record fines, but to start to build up its reputation again. Employee assessments are one way of finding out how people actually behave in their roles and how confident people are doing their jobs. Skills and knowledge gaps and potential risk areas can then be identified and the right training programmes put in place.

Risk inside an organisation does not sit in one easy to define central function. Rather it exists in a myriad of behaviours and habits of individuals spread across all levels of the operation. Ensuring that the drivers of employee behaviour in relation to risk management are effectively embedded into the operations of the business, will go some way to ensuring illegal practices such as money laundering on the scale of what has just happened at HSBC, couldn’t happen in the future.

 

Let’s put a stop to ‘should never happen’ blunders in NHS hospitals

The BBC recently revealed that over 750 patients have suffered unnecessarily from preventable mistakes in England’s hospitals over the past four years – incidences deemed so serious they are described as ‘never events’ by the Department of Health.

‘Never events’ include people having operations on the wrong body part or surgical instruments being left inside them post operations. According to the report, there were 322 cases of foreign objects left inside patients, 214 cases of the surgery on the wrong body part, 73 cases of tubes used for feeding and medication being inserted into patients’ lungs and 58 cases of the wrong implants or prostheses being fitted.

Dr Mike Durkin, Director of Patient Safety for NHS England has conceded that the 750 ‘never events’ reported is too high. Other experts have pointed out there are actually hundreds of thousand other adverse events that aren’t published and a much wider problem exists.

The costs of these catastrophic mistakes are huge. Last year, there were 111 ‘never events’ in hospitals around the country, costing the tax payer £3.9 million, the equivalent of £35,000 for each incident.

This report follows recent high profile scandals involving Mid-Staffordshire hospital and widespread publication of the poor care received by patients on NHS wards up and down the UK. It is clear that the NHS needs to take major steps to address and eradicate incidences of incompetency that are affecting patients’ lives and resulting in hefty compensation claims.

It is critical that these organisations identify and address their risks – particularly their People Risks – by uncovering critical skills and knowledge gaps at all levels and addressing them using targeted interventions to improve performance and mitigate risks.

 

 

Could the NHS save itself from more scandal and spiralling negligence costs?

Mary Clarke, CEO, Cognisco

News that Mid Staffordshire NHS Foundation Trust will be put into administration after one of the worst scandals in recent years is another blow for the NHS. Health watchdog Monitor has appointed two special administrators who will start work to “safeguard the future of health services” at the NHS Foundation Trust. It was said that Mid Staffs, which was at the centre of a three-year public inquiry into “appalling standards” of care, was “neither clinically nor financially sustainable in its current form.”

This announcement follows a report last week from MPs which revealed that the NHS is facing a growing mountain of legal claims and has had to set aside £17.5 billion to pay compensation to thousands of people making clinical negligence claims. The number of claims has risen by 11 per cent in just one year, and MPs warned that the ‘inexorable rise’ may be spinning ‘out of control’.

At a time when the NHS faces severe funding issues, a significant increase in clinical negligence claims highlights the need for the NHS to reform its culture and approach to managing ‘People Risks’.  We all know that an organisation’s people can be its greatest asset or its biggest risk and we have seen all too clearly that medical blunders resulting from human errors can have devastating consequences – from minor injuries to deaths, as well as potentially leading to millions of pounds in compensation.

 

For the past three years we have worked with one of the UK’s largest NHS Trusts to help eliminate the risks of serious case incidents and deaths in Obstetrics. Last year, the NHS paid £400m in obstetrics damages. Improving patient care and eliminating the risk of serious case incidents or deaths is a priority for every NHS Trust and our project has made major progress in a specific area of risk through the introduction of a multidisciplinary assessment and training programme for midwives and clinical staff. We have shown how significant improvements can be obtained by measuring and correlating confidence with competence and then adapting existing interventions such as ‘Skills & Drills’ training to focus on the area of greatest need or risk, particularly where it relates to the behaviour of staff.

The programme used occupational psychologists to help improve the performance of clinical teams when handling emergency situations. It also benefitted patient care and, since the programme was initiated, there has been a reduction in serious incidents. Ensuring that midwives and obstetricians are competent in the handling of complex cases and emergencies is a top priority for all NHS Trusts.

 

The reports on Mid Staffordshire should be a call to action for the NHS. As Robert Francis QC and Inquiry Chairman at Mid Staffs said, “the extent of the failure of the system shown in this report suggests that a fundamental cultural change is needed. This does not require a root and branch reorganisation – the system has had many of those – but it requires changes which can largely be implemented within the system that has now been created by the new reforms”.

We now need prompt action to mitigate People Risk if we are to improve the NHS’s reputation.  At the same time we need to integrate the essential shared values of a common culture into the education, training and support of the key contributors to the provision of healthcare if we are to change behaviour. After all, it is far more effective to learn than to punish if we are to create a sense of collective responsibility for ensuring quality health care is delivered.