Last month, APRA demanded the big banks set aside $500 million in capital to deal with internal culture issues, ranging from overly complex bureaucracy to failing to allow staff to speak up.
AustralianSuper is the first superannuation fund to release their self-assessment, finding areas of improvement at varying levels including the need to introduce a chief risk officer.
“Although the self-assessments raised no concerns about financial soundness, they confirmed our observation that industry is grappling to manage non-financial risks, such as culture and accountability,” APRA Deputy Chair John Lonsdale said in May this year.
But culture is still a fuzzy phenomenon. Over the last 30 years the onus on culture to solve non-financial risk has increased.
At a recent ASFA event, Spotlight on Leadership, Avril Henry managing director of ahaa! (Avril Henry and Associates) shared a personal story that highlighted how the value we place on culture today has evolved. She recounted a time (back in the 1980/90s) when she presented to a board/executive team which included newly-appointed, very first female senior executive at Westpac, Ann Sherry. At its completion, Sherry invited Henry to consider working for her in “policy, cultural change, and HR.” Henry replied:”I don’t mean to be rude, but that’s not a real job.”
Henry took the job with Westpac, and she and Ann Sherry have worked together 20 years across a number of projects.
One of Henry’s first tasks in the world of workplace culture, being an accountant and economist at the time, was to look at the numbers. She provided these numbers to the executive board to show the cost of replacing women who went on maternity leave, the cost recovery of workers who left and then returned to work. She was able to put a dollar figure to culture.
Since the 90s, there have been a number of reports about the positive correlation between culture and risk. It is becoming increasingly accepted that happy workers are busy workers.
Culture, crises and the Royal Commission
If there was one takeaway from the Hayne Royal Commission (and there were many more than that), it is that culture is important. The demands on culture are growing in all industries.
“Over the past 15 years, I’ve interviewed over 500 leaders in Australia of all ages, of all generations, and more recently in 10 countries,” said Henry at ASFA’s recent Leadership event.
“What I have found consistently is that what made for inclusive and collaborative leadership did not change regardless of circumstances. On the contrary, in a crisis, the characteristics became more important.”
What principles did the boards of those before the Royal Commission have to fall back on? Hopefully, some. But if the damning media reports are to be believed there was a lot lacking in internal culture.
Moving forward, Hayne gave six ethical principles that will become the bedrock for boards to build their governance culture:
- Obey the law
- Do not mislead or deceive
- Be fair
- Provide services that are fit for purpose
- Deliver services with reasonable care and skill
- When acting for another, act in the best interests of that other
So, we must turn to culture to fix our broken systems and rectify unconscionable activity. As we should. Studies have shown, the harder your job gets and the more the pressure ramps up, the more you rely on culture.
If you want ethical principles to permeate your company, you need to have culture in place. It is not as foreboding as “obey the law”, or as obscure as “be fair”. What it boils down to, Henry believes, are these leadership skills:
- communication
- active listening
- diversity and inclusion
- giving feedback
It’s almost too simple.
Avril Henry, in one of her many roles today, coaches the leadership team for the Australian Army.
“Generals, brigadiers, and the colonels… I’ve literally coached all of them, so my husband jokingly refers to them as, ‘Avril’s Army’. And I’ve become a verb in the army. People say, ‘Have you been Avriled yet?’”
“I’ll always remember what Angus Houston said when I interviewed him for my book on leading in a crisis,” she said.
“He was the chief of defence who took us into Afghanistan and Iraq [and] he said, ‘As a leader, I have learned far more by listening and asking good questions than I ever learned by telling or talking.’”
Culture, with its prevalence in our lives and the countless examples of how important it is, needs to get taken off the back-burner. Board members now have a mandate to cut through the decades of bureaucracy because when the battered banking industry looks around at what remains, culture will still be standing.
