Why HR must come to the rescue of the FS sector
June 18, 2012
Yesterday I made a rare visit to a bank branch and left after a lady in her 70s attacked the security screen in frustration at receiving a “computer says no” answer to a query that would have been child’s play to the former staff of that branch.
That evening, I witnessed at least half of a very mixed cinema audience jeer and slow hand clap an expensive advertisement for an insurance brand which was cynically seeking to capitalise on the recent banking collapse. The mocking laughter reached a peak when the actors promised values like integrity and honesty on behalf of an organisation they probably never heard of before receiving the casting call .
Almost five years since the start of the collapse it was apparent that the brand promises and the reality were still poles apart and I couldn’t help feeling that the FS sector should be much further forward than it appears to be right now. This view was endorsed by new CIPD chief Peter Cheese, in his very first public address as he can plainly see the need for urgent change within the sector and the role that HR should be playing to bring change about.
Watching the too numerous public debating forums however, the apparent paucity of basic knowledge amongst pundits and public alike about the key issues which recently sent world financial markets and economies into a tailspin is worrying. Most still blame the regulators and national governments for the crash. But the implosion had very little to do with regulation. It was predominantly caused by cultural schizophrenia conveyed via individual brands responding to the demands of the markets, and much of that schizophrenia sadly has its origins in HR.
That’s a fairly punchy statement, so let me deconstruct it.
Many of the more informed critics and commentators of the sector typified by Will Hutton who has been a leading writer on matters financial for over 30 years, and Richard Edelman (of Edelman Trust Barometer fame) point to a fundamental breakdown in trust between:
- the institutions and customers
- institutions and shareholders
- the institutions and other institutions
but most importantly in my view, the institutions and their employees. It continues to baffle me how so many informed analysts miss this fundamental issue.
Governments rather belatedly appear to have “rumbled” the core structural cause, namely the convenient blending of the high risk investment banking operations with the steady cash cow of retail operations. It’s going to be tough disentangling them. But even as the structural wrecking crews move in, they are missing a more insidious issue. Deep seated culture management issues are at the core of the financial services brand management problem.
The media in the main has targeted the once heroic and now infamous senior leaders. But if we allow ourselves to obsess about hunting tabloid scapegoat caricatures of “Fred the shred” and his peer group we’re in grave danger of very much missing the point. The shortcomings of the directors/lapsed hero leaders themselves and problems the City faces are merely the symptoms of a much more invidious infection – the notion of the so-called performance culture tied into quarterly stock market reporting.
Not so long ago finance was a relationship business. Customers expected to retain a relationship with their manager for many years. Staff expected to remain loyal to one brand for most if not all of their careers and relied on fostering internal relationships and networks. Even in the corporate sphere, commerce conducted business to business was largely relationship based. Investors including pension fund managers had a stable relationship with banking stocks, the steady and guaranteed incremental performers.
These relationship patterns all changed after Big Bang.
But as the financial institutions evolved rapidly in many respects to reflect the increasing demands of investors; the march of process automation (including people processes within HR) ; cost saving outsourcing and off-shoring and what I believe to be the mis-interpretation of the performance culture concept caused cultural schizophrenia.
The core problem is that the brands failed to evolve to reflect their operational reality. They still promised values like listening; integrity and stability to staff and customers yet were acting very differently both in the markets and arguably more importantly within their own offices.
Employees who were accustomed to five-year strategies and three-year plans became tied into the life cycle of executives with 18 month bouts of tenure. They were encouraged to take risks pursuing incremental rises in targets despite market conditions heading in the opposite direction and we’re now witnessing some of the consequences as the OFT and FSA belatedly show their teeth.
Notions of customer service were subverted in part by apparent exploitation of customer inertia. HR had nearly all of its developmental edge undermined by process re-design. Six monthly performance contracts replaced annual reviews and increasingly locum and short-term contracts began to phase out loyalty bonuses and expensive benefits packages.
None of the factors like these would be sufficient on its own to unilaterally bring about a catastrophe of such scale. But together these elements have slowly poisoned the well of goodwill, often through internal communication that is essentially disingenuous at source. Increasingly the words and figures failed to add up for staff and customers alike summed up in increasing spin like the ABBEY re-brand which, let’s face it, was never going to turn banking on its head. I describe this phenomenon as” behavioural brand creep” in Brand Engagement (2008), my first book.
Now, even the hitherto untouchable Masters of the Universe like Goldman Sachs, are witnessing unprecedented levels of market criticism and scandal. When the premier brands are tarnished, the financial services sector really is running on empty.
So what’s to be done?
This is a case where the “hair of the dog that bit you” isn’t going to put things right. The FS companies have to change the way they manage their brands and to place HR (yes, HR), at the core of that process.
These steps may help:
- Leadership teams should take a back to basics approach to stakeholder engagement, look beyond shareholders, regain control of the core narrative of the business and ensure that the story of the evolution of their vision; mission and strategy and brand development approach are all in harmony. The power of giving customers and employees a real voice, listening hard and then acting should not be underestimated
- The link between culture and brand needs to be recognised and so-called EVP/employer and commercial brand brought sharply back into single focus
- A brand valuation should be prioritized and current and requisite culture analysis undertaken to start to develop a future organisation culture that is fit for purpose
- Brand coalitions need to be created consisting of at least Marketing/HR and the CEO’s office to ensure that the brand promised is the brand employees are capable and willing to deliver
- Internal communication needs to be professionalized and encouraged to shift from push communication, technical gimmicks and director led Town Halls to encourage more intimate, local, face to face, engagement, up down and across the organisation
- Measurement: The annual employee survey should be discontinued and replaced with regular pulse takes and a suite of measurement tied into a balanced scorecard for which all leaders are accountable
- Performance management has to refocus on accountability over the medium term rather than encouraging short term “win at all costs”
- Training and development and organisation development strategies must embrace the values and behaviours stemming from the brand rather than re-inventing them
- Line managers and first line supervisors are undoubtedly the modern pivots around which the organisations revolve. They should be recognised and rewarded as such and development support provided accordingly
- The FS organisations need to take a long and hard look at the consultancy and professional services supertankers who have been advising them about how to put right problems which they arguably played a large part in creating. Are they flexible, fleet of foot and even impartial enough to help facilitate the engagement levels to bring about the necessary change?
It’s not entirely doom and gloom out there for the sector. Performance figures seem to suggest that, although much damage has been done, the worst is over – for now. There are some leading lights including brands like First Direct, which was remarkably ahead of its time and innovators like Virgin who are influencing the sector from within. Increasing competition from the retail sector may help.
Interestingly, the hitherto unfashionable mutuals who value prudence and place great stock on values and behaviours are leading the way with their values based management approaches and word on the street is that even some of the investment banks are attempting to simplify and synchronise their organisation development; brand development and communication functions.
But when you consider the adverse impact that the global financial services brand meltdown has had on world economies, it’s a worrying time. As profits bounce back, will the fresh finances fuel much-needed investment in the brand infrastructure and investment in managing the organisation culture that underpins brand? Or will the budgets continue to be squandered on bonuses, thereby rewarding the behaviour that brought about boom and bust in the first place fuelling advertising to entice customers and investors back through the doors, lured by false rhetoric about a performance culture that is ultimately unsustainable?
Not only are the critics asking which brands will bounce back the fastest but surely the fund managers underpinning so many pensions have to be asking serious questions about sustainability, don’t they? And will we ever see a financial services brand topping the FTSE; brand charts and employment leagues by keeping the promises made to its own people and the market?
Whatever happens next, it’s undeniably time for some joined up and fresh thinking within this critical sector. As someone who knows financial services very well, I know how much people want to restore the pride bank into the term banker and I have little doubt that HR functions are uniquely placed to come to the rescue of their organisations by leading the transformation charge and arguably have greater motive, support and opportunity than they have ever had before. But until then, the cat-calling and slow hand-clapping seems destined to continue…..