It’s of no surprise to many the superannuation industry is facing its own fork in the road. The Hayne Royal Commission, the Productivity Commission into Efficiency and Competitiveness, the APRA Capability Review. More reviews and more data.
More recommendations on improving integration across the Age Pension, compulsory superannuation and other savings. As this article goes live, the Government’s review of the retirement income system is gearing up.
How many enquiries, assessments and reviews does the industry actually need to understand the heart of the matter is that organisational cultural changes are needed to put the member first?
The science behind enhancing cultural and governance outcomes
There are two driving factors for super funds today – improving the transactional elements that drive better member outcomes; and improving organisation culture and governance.
To date, most superannuation funds have focused on the transactional elements to improve member outcomes through greater net investment returns, reducing fees and costs, improving service and meeting insurance needs fairly. This essential work must continue.
However, the more difficult action, improving culture and governance, needs to become a priority – and the challenge is for fund trustees and executives to proactively lead this effort.
Improving an organisation’s culture also improves member outcomes. A deeper understanding of an organisation leads to earlier identification of the consequences (good and bad) of any changes. Risk is reduced and opportunities can be recognised and assessed better. When there is greater operational efficiency team members feel a deeper sense of personal agency or empowerment and the end result is improved member outcomes.
The role of the trustee and how they lead is crucial. The successful relationship between the trustee and senior executives and taking aligned actions in service of members is also crucial.
How to ensure culture enables best member outcomes
The cultural aspirations needed to produce best member outcomes must consider if people are genuinely focusing on best member outcomes in each and every interaction. If they are, how would they be viewing compliance requirements versus best member outcomes; efficiency and effectiveness versus best member outcomes; talking about member outcomes and advocating for all stakeholders, with the member first.
From the CEO and the executive team perspective, are they genuinely focusing on best member outcomes? How they are communicating member outcomes to the organisation; how they are advocating for best member outcomes in strategic and risk planning sessions; how they are partnering with the trustee on removing impediments. Key factors including how they are structuring the organisation to best serve the member and are executives working across all functions to have collective ownership of member outcomes need to be noted. Are management freeing up people to focus on and advocate for best member outcomes? Finally, do the leaders demonstrate openness to constructive criticism to lead differently to enable best member outcomes?
When it comes to trustees and their focus on best member outcomes, it is imperative to consider whether they are demonstrating their support for best member outcomes in every action and communication. Are trustees ruthlessly challenging anything that gets in the way of best member outcomes? It’s important to monitor how they respond positively to the regulator and industry guidance in service of best member outcomes.
To enable such a culture requires an evolution of how the industry thinks, what it believes about its purpose and most important function – best member outcomes. Superannuation is a complex environment. It is challenging to effectively meet compliance standards and evolve the business model to adapt to the rapidly changing industry and continually focus on best member outcomes.
This is why culture is so important.
Accelerating the culture and governance journey roadmap for best member outcomes
Improved organisational culture will improve a fund’s performance and its ability to convince APRA it does indeed understand how important culture is to improving member outcomes.
The trustee chairperson needs to take responsibility for their fund’s Culture & Governance Initiative as a standing item at board meetings. And the fund CEO also needs to take responsibility for development of a comprehensive Culture & Governance Initiative. The tune from the middle must be in harmony with the tone from the top to tailor the initiative, based on shared values and put members first. Additionally, if the executive team is to foster trust, creativity and innovation, it must improve the working environment to be collaborative, open, transparent, inclusive and diversified environment. People are adaptable to changes in member needs. Finally, there should be a genuine partnership with members.
The industry doesn’t need another review to spell this out.