Monthly Archives: August 2014

Why are banks not learning from their mistakes?

Many of the world’s largest banks have been in the headlines for all the wrong reasons over the past few years. They have faced huge fines over a series of high profile scandals including PPI mis-selling, Libor interest rate fixing and money laundering. However many still don’t seem to be learning their lesson and it begs the question if fines are really part of the solution for changing banking behaviour for the better.

Last month British bank Standard Chartered agreed to pay $300m (£180m) to New York’s top regulator for failing to improve its money laundering controls, after it was found the bank had failed to fix problems identified in 2012. Back in 2012 the bank was fined $340 million by the New York State Department of Financial Services after it was accused of hiding $250 bn of transactions with Iran.

 

Also last month it was reported Bank of America agreed to pay a record $16.7bn (£10bn) to US authorities for misleading investors about the quality of loans it sold. Tony West, the associate attorney general said after this announcement “no institution is either too big or too powerful to escape” punishment.

Mr West also likened the actions of the bank to going into a grocery store to buy milk advertised as fresh only to discover that store employees knew the milk you were buying had been left out on the loading dock, unrefrigerated, the entire day before, yet they never told you. Banks have been misleading investors and customers for years and despite many being pulled up for it, it seems they just don’t seem to be getting the message.

What is clear though is that these record fines do not seem to be having the desired effect and preventing something similar happening again or changing banking culture for the better. Indeed Standard Chartered appears to have failed to take any notice of their earlier fine and improve their money laundering controls, and was reported to have simply “accepted” the findings of the New York State Department of Financial Services.

These headline grabbing fines though are seriously damaging the reputation of the banking sector, and despite the banks promising to clean up their act and more regulations promising tighter controls nothing much seems to be changing. Or at least not very fast. Whilst fines and regulations have their place, at the heart of the banking sector are the banks employees.

 

Banks need to ensure employees are acting in the banks best interest and encourage the right kinds of behaviour, first and foremost. They need to develop a banking culture that is no longer based on greed and excessive risk taking, and create the right balance between competitive risk-taking and playing it safe. Only by addressing People Risk will banks have any hope of learning from their past mistakes and creating a banking industry we can once again be proud of.

Are fines having the desired effect to change the behaviour of  individuals within banking culture? How will banks control and monitor risk taking? Will we see a sudden risk averse culture or will the banking industry find a balance between risk aversion and calculated risks?  Please comment and share via your social media networks using the hashtag #bankingculture

 

Should companies be measuring their risks as well as their talent?

Only by assessing People Risk as well as talent within an organisation can business performance be greatly improved, Mary Clarke says

Should companies be measuring their risk images

 

A new survey from Right Management, the career and talent division of Manpower Group[i], found that almost half (45 per cent) of UK HR professionals and senior leaders anticipate increased spending on talent management initiatives for the rest of the year.

The research also highlighted that there is growing optimism amongst HR professionals – a focus on investing in talent rather than undertake cutbacks or restructuring.

The focus on talent management is clearly good news. However, experience tells us that it is not enough for companies to focus purely on developing talent, they also need to understand the risks that can arise from people not fully understanding their job roles or where their skills gaps lie.

Understanding employee competency

Not everyone in an organisation will be competent in their roles. We work with companies around the world in various industry sectors and typically find that 30 per cent of any workforce misunderstand at least one aspect of their role – something which if left unaddressed can pose a substantial risk.

For a talent management programme to be successful it must start with a talent assessment, and an understanding of the skills, behaviours and challenges that already exist in the business. Once this is done, companies that are facing talent shortages, skills mismatches and weak leadership pipelines will have a clearer idea of the core competencies needed to build the business.

Right Management suggests that no business strategy can be successfully executed without a talent strategy that looks at what skills are needed to move the business forward. They say organisations can seek out talent with individual and team assessments that provide an in-depth assessment, based on competencies and behaviours that assess a person’s current ability and future potential, a key step in identifying high-potential individuals.

One thing to note as well is that assessments can also play a key role in highlighting areas of People Risk – which stem from knowledge gaps or from people misunderstanding certain aspects of the role or even if they are displaying the wrong kinds of behaviour at work and shouldn’t be ignored with the desire to implement talent management initiatives.

All too often companies are in the dark about these risks. While they might have formal processes in place to assess competency – many are failing to measure the human factors – such as how people behave at work, the decisions they are likely to make and how confident they are. As such, they are failing to understand where their risks lie.

Human factors

There are many factors that encompass People Risk in organisations from employees not following procedures, systems, process and rules of the organisation to individual and organisation human factors. One of the unpredictable areas of being human is that we can at times deviate from expected behaviours, deliberately or not. For many organisations understanding human behaviour is a huge challenge, and can often been ignored as they strive to find the ‘best’ talent.

Measuring how people perform and behave across an organisation is crucial, especially in sectors such as utilities and transport where it can affect health and safety compliance, and in highly regulated industries such as financial services and banking, where wrongdoing can lead to a toxic culture of excessive risk-taking and poor decision-making. Even in customer service sectors or sales environments wrong behaviours can lead to companies losing customers, sales, and reputation.

Whatever the business sector, if employees fail to behave in accordance with standards or regulation there can be severe consequences that could lead to death or personal injury, severe legal or financial penalties or customer defection due to damaged brand reputation.

One only has to consider the many banking scandals that have resulted in huge fines and damaged reputations or safety breaches in the NHS that have led to unnecessary deaths to realise understanding your People Risk is as crucial part of your business as ensuring you have the right talent at the top.

So whilst talent management initiatives are clearly an important part of any business strategy, a more holistic approach needs to be taken that also incorporates risk analysis. Only by assessing People Risk as well as talent within an organisation can business performance be greatly improved.

 

 

We must pay attention to how we behave and act in our roles

A recent survey highlighted the importance of “human factors” in the business world – the individual characteristics of employees that influence behaviour at work and how people perform in their jobs.

Nearly two-thirds of executives surveyed by the Fortune Knowledge Group and gyro for the ‘Only Human: The Emotional Logic of Business Decisions’ study, said that subjective issues, which can’t be quantified – such as company culture and corporate values, increasingly make a difference when weighing up two different business proposals.

The research also found that 70% of respondents said that reputation is the most influential factor when choosing a company to do business with; and 61% of executives agreed that human insights was more important than hard analytics when making these decisions.

 

How people behave at work, the so called human factors, are increasingly being given more prominence in the business world. One only needs to look at the banking industry to see how a number of high profile scandals caused by the risky behaviour of individuals has tarnished the entire sector’s reputation. The banking industry is now working hard to turn this around and change its culture and improve standards to rebuild trust.  But the damage is done and it will take time.

How people act and behave at work is also becoming a focus for the NHS as it seeks to improve patient safety and care after a number of tragic incidents over the past few years. The Royal College of Nursing defines “human factors’ as the theory of the relationship between human behaviour, system design and safety that is becoming increasingly influential in helping us understand the causation of errors, accidents and failures in health care systems.

 

According to Martin Bromiley, the founder and director of the Clinical Human Factors Group, the NHS is starting to see the value in understanding people’s behaviour in order to improve safety.

Mr Bromiley is a former airline pilot and set up the Clinical Human factors Group following his wife’s death. He believes that the NHS could learn valuable lessons from the airline industry, where it’s widely recognised 75% of all aviation accidents are caused by human factors.

Mr Bromiley suggests the NHS needs to take a closer look at people’s attitude and behaviour to improve safety standards. The NHS, like the banking sector needs to change its culture and ensure patient safety is the number one priority, not budgets and targets.

 

How important do you think the understanding and appreciation of human factors are in the health service or the business world? What can organisations do to better understand human factors?

Please comment and share via your social media networks using the hashtag #humanfactors

 

A year on from the Berwick Report and what developments have been made?

The catastrophic failings in care at Mid Staffordshire NHS Foundation Trust prompted a detailed report from Sir Robert Francis into what went wrong that was released in August 2013.

A year on, an article published in a pharmaceutical journal entitled, ‘Commitment to Learn’ said that “treating patients with dignity and respect should be considered a hallmark of health and that the lessons learnt from the Mid Staffs failings should resonate beyond England and more widely than hospital care.”

The Berwick report into patient safety found that NHS staff was not to blame for what went wrong, and in the vast majority of cases it is the systems, procedures, conditions, environment and constraints they face that lead to patient safety problems.

 

What happened at Mid Staffs highlighted what happens when budgets and targets are given priority over patient care, and was a wakeup call that urgent action was needed to improve patient safety and care across all NHS Trusts to avoid similar mistakes.

The Berwick report made 290 recommendations on how the NHS could make improvements in culture of care and patient safety, but perhaps the most important single change suggested was the need to develop systems devoted to continual learning and improvement of patient care, top to bottom and end to end.

Despite the demise of the Mid Staffordshire NHS Foundation Trust a senior pharmacist quoted in the ‘Commitment to Learn’ article said “there’s a little bit of Mid Staffs in every trust.”

So what progress has been made a year on?

Earlier this year, the Department of Health launched its ‘Sign up to Safety’ campaign to improve patient safety and crack down on preventable deaths, which aims to save up to 6,000 lives over the next three years.

The campaign followed a review by the Department of Health, which found that 29 out of 141 NHS trusts could be under-reporting incidents to the National Reporting and Learning System. This is clearly a step in the right direction; however, whilst reporting on safety levels in hospitals is a good way for hospital trusts to become more accountable, it’s as important to encourage a culture of learning across the whole of the NHS.

 

There is little doubt the NHS continues to face huge challenges. One of these is how to implement systems and procedures to ensure people are competent to perform in their roles, and service levels are excellent in every part of the health service.

Many NHS trusts don’t know how to go about this and therefore can’t understand the root causes of their problems. Unless the correct assessment procedures are put in place that regularly measure knowledge and how this is applied on the job, then managers cannot be confident their staff are competent. Only with this knowledge has the NHS any hope in meeting the recommendations set out by the Berwick report.

 

Has anything really changed in the NHS as a result of the Berwick report? What do you think needs to be done to improve patient safety and care?

Please comment and share via your social media networks using the hashtag #Berwickreport

 

 

Would a ‘Banking Oath’ help stop reckless behaviour in banks?

 

The global banking industry has been heavily criticised in the past few years and its reputation has suffered greatly. Banks were blamed for causing the global recession and there have been several high profile scandals involving PPI mis-selling and interest rate fixing, which have resulted in huge fines. The latest bank to be hit with a fine was the Lloyds Banking Group, which was fined £218m for “serious misconduct” over Libor interest rate rigging in July by the UK-based Financial Conduct Authority (FCA) and a US-based trading commission. Lloyds is the third bank to be fined for Libor-rigging, after both Barclays and RBS have already settled claims.

Lloyds Bank was also fined £28m for “serious failings” in relation to a bonus scheme for staff at the end of 2013, the largest fine the Financial Conduct Authority has given for retail conduct failings.

 

These incidents highlight that a ‘toxic’ culture still exists in the sector is continuing to damage customer confidence. Trust in banks is at an all-time low according to the Edelman Global Trust Survey[i] 2014 – which found banks and financial institutions are the least trusted sectors in the whole global economy .It is clear that the sector has its work cut out to rebuild its reputation and regain consumer trust.

Many of the recent scandals have been caused by human error or rogue behaviour that banks have allowed to happen – either consciously or not. The reality is that the behaviour of many people within financial institutions has remained unchecked for decades. Now, in order to drive change, it is essential that banks seek to gain a better understanding of their people and how they behave at work to reduce risk.

 

Changing banking culture for good

Last year, several recommendations were put forward in the UK’s Parliamentary Commission on Banking Standards report into the culture and failure of the UK’s banking sector, ‘Changing Banking for Good’. These included making it easier to send top bankers to jail for “reckless misconduct” and a wholesale shake-up of the current approval regime for bankers after finding just 156,000 individuals on the current register – which would allow regulators to take action against them.

Last month, think tank ResPublica, called for an oath for bankers to “fulfil their proper moral and economic purpose,” suggesting this could raise accountability and standards in banking and help restore public trust. They suggested that the British Bankers’ Association, Building Societies Association and the new Banking Standards Review Council should adopt the oath for their members.

British Bankers Association executive director for financial policy and operations, Paul Chisnall, said: “Restoring trust and confidence is the banking industry’s number one priority. But meaningful cultural change in an industry as complex and diverse as banking takes time.”

 

Understanding employee behaviour

Stamping out risky behaviour will also take time and it won’t be simple. Organisational risk does not sit neatly in one central function. Risks exist in a myriad of behaviours and habits of individuals spread across all levels of the operation. So understanding how individuals behave, how competent they are and the decisions they are likely to make on a daily basis is vital for reducing People Risk.

One effective way of doing this is to introduce situational judgement assessments based on realistic work scenarios to measure combination of employee competence, knowledge and confidence. Such assessments not only reveal what people know and how they use their knowledge, but also how they are likely to act in certain situations and the decisions they are likely to make. Assessing people’s competency and confidence together, enables companies to spot areas of misunderstanding and risk – where an employee’s knowledge of a certain aspect of their role might be low but their confidence is still high. Unchecked this kind of situation could lead to serious errors being made or costly mistakes.

 

Regular employee assessments can give banks complete insight into how individuals are performing across the business. This could help them identify star performers and leaders, as well as those in need of specific training and development that will improve performance.

Assessments that examine employees’ behaviour and likely decision making should be part and parcel of working life – allowing managers to spot and address risky behaviour and deal with it, before serious problems arise. Only by addressing human behaviour will banks be able to drive a positive culture change, which will help them regain public trust and restore their damaged reputations.

 

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Are companies measuring their People Risk as well as talent?

A new survey from Right Management, the career and talent division of Manpower Group, reports that almost half (45%) of UK HR professionals and senior leaders anticipate increased spending on talent management initiatives for the rest of the year.

There is also a growing optimism amongst HR professionals – a focus on investing in talent rather than undertake cutbacks or restructuring. However, there are still some challenges ahead, with 15% of HRs claiming their senior management team is pressing for more rigorous measurement on the business impact of any talent management initiatives.

 

The success of any talent management programme starts with a talent assessment, and an understanding of the skills, behaviours and challenges that already exist in the business. The company points out that with so many companies facing talent shortages, skills mismatches and weak leadership pipelines, there is a pressing need for businesses to now assess the competencies they need to develop today to build the business of tomorrow.

They suggest ways that organisations can assess their talent including competency modelling, and individual and team assessments that provide an in-depth assessment, based on competencies and behaviours that assess a person’s current ability and future potential, a key step in identifying high-potential individuals.

One thing to note is that assessments can also play a key role in highlighting areas of People Risk – which stem from knowledge gaps or from people misunderstanding certain aspects of the role or even displaying the wrong kinds of behaviour at work.

All too often companies are in the dark about these risks. Whilst they might have formal processes in place to assess competency – many are neglecting to measure the human factors – such as how people behave at work, the decisions they are likely to make and how confident they are. As such, they are failing to understand where their risks lie.

 

Whatever the business sector, if employees fail to behave in accordance with standards or regulation there can be severe consequences that could lead to death or personal injury, severe legal or financial penalties or customer defection due to damaged brand reputation.

One only has to consider the many banking scandals that have resulted in huge fines and damaged reputations or safety breaches in the NHS that have led to unnecessary deaths to realise understanding your People Risk is as crucial part of your business as ensuring you have the right talent at the top.

 

How do you evaluate talent within your organisation whilst mitigating potential risk?

Please comment and share via your social media networks using the hashtag #PeopleRisk