The Royal Commission into Financial Services has been sending shockwaves through Australia’s banking and finance sector. But it’s not just bankers who can learn some valuable lessons from the stories that have been emerging. Some of the key takeaways are just as relevant for human resources (HR) and business owners and managers too.
How the Royal Commission affects HR
The Commission has been unveiling some jaw-dropping revelations about bad business practices and the unethical treatment of customers. This has thrust into the spotlight human resources staff working for banks, insurers, super funds and financial advisers. There’s been some seriously bad stuff going on, and the resulting public relations nightmare is also an HR nightmare.
Spotlighting on financial services, it’s easy seeing how any industry could be similarly affected by unethical or underhanded practices. Take, for instance, the recent media reports in the food industry over fake honey, or the fashion industry’s struggle with ethical manufacturing.
Here are three key lessons for people from any industry.
At its most basic level, HR is all about managing people – and wherever people are involved, the art of communication is key. What the Royal Commission shows above pretty much anything else is a failure of financial institutions to communicate effectively — whether that’s within their organisations, with their staff or externally with customers.
Internally, a lack of communication around accountability has resulted in compliance issues and cultural problems, including permissiveness when it comes to overcharging customers. Externally, a failure to communicate effectively meant customers often signed up for products without knowing any of the terms and conditions of what they’ve signed up for.
And that, in turn, led to unacceptable risk in a sector that was supposed to be all about stability, sobriety and sensibleness.
When mistakes happen — and, in the banks, it seems they were happening all the time — sweeping them under the carpet or failing to acknowledge them only compounds them over the long term. The right ethical approach — and the best business one — is to admit to them with effective, prompt, proactive and timely communication with customers.
The shambolic state of compliance with many financial institutions has been another of the Royal Commission’s key themes. In short, many of the organisations under scrutiny preferred saving money or generating profits rather than following their obligations under the law.
From an HR perspective, nothing should be more important than operating on the right side of the rules and regulations. As a starting point, this means making sure those rules and regulations inform your organisation’s HR policies and procedures.
But it also means having gatekeepers who will actually enforce these HR policies and procedures too. That’s where the banks fell down. Too often their gatekeepers failed to raise red flags – or at least failed to wave them vigorously enough – when they saw bad things happening.
This is one of the more common issues we see among other businesses too. If your organisation has rules and regulations there needs to be accountability, escalation procedures and reporting around them. The buck has to stop somewhere. If it doesn’t you’re leaving yourself wide open to claims such as bullying, harassment, unfair dismissal and more. You’re also inviting, even courting, bad publicity. And that can hurt your bottom line more than any fine ever could.
Every business needs the right environment, or culture, for success. The Royal Commission has at times unveiled a culture of short-term gain – often at the customers’ expense – that’s deeply embedded within the culture and psyche of financial organisations.
Sometimes this culture has sprung up as a result of badly structured incentive schemes related to remuneration or performance; other times it has simply been a sales-driven, alpha culture that fails to place the customer first.
If your organisation doesn’t have the right culture right now to satisfy your customers and grow your business, what do you need to fix? Do your remuneration structures encourage a culture of risk-taking? Do they take into account the psychology behind your staff’s motivation and the long-term effect on your business? Are you in control of your workplace culture or is it controlling you? Do all your people engage wholeheartedly in what you do, and do it ethically and responsibly?
Remember, nothing is more important to your organisation’s success than its culture. And as an HR person or business owner/manager, you’re the one directly responsible for building it.
Want to build a healthier culture in your workplace?
If you’re looking to better your organisation, then speak with the team at Catalina Consultants. We’re the human resources experts and can put together a bespoke plan to improve your workplace’s culture. Talk to us today.