Banks must deal with ‘prickly issues’ to avoid headline shame

The banking inquiry has put the culture of banks into the spotlight and provided unequivocal proof culture drives financial performance – but not how you might think, according to Marcus Crow, co-founder at Sydney-based professional coaching firm 10,000 Hours.

“We have been trying in vain to show how good culture drives financial performance up. But now, with the regulator muscling in on the inner workings of our financial institutions, we definitely know bad culture drives financial performance down,” Mr Crow said.

He believes fines, sanctions, enforceable undertakings and many more financial penalties and reputational losses, which take money and business away from these organisations, finally provides the proof linking culture to financial performance.

“Note that the regulators have no interest in ping-pong tables, pizza day or height-adjustable desks. Questions like how well does your institution detect and remove poor behaviour? shows regulators are looking beyond whether there is a positive culture in banks. They want to know how problematic conduct is surfaced and prevented. This is about the disclosure and candour colleagues are able to create between themselves in real time with real issues.”

However, if a middle manager is going to be able to surface a shonky deal or decision to a leader two or three levels higher in the organisation they need the interpersonal muscle to do it, argues Mr Crow.

“This requires better training and coaching on how to deal with complexity and uncertainty. It’s not something that will be fixed by creating a ‘pleasant working atmosphere’. It’s challenging these leaders and their colleagues everyday on the issues that test moral fibre and leadership mettle,” he said.

“It’s about understanding how to navigate the complexities of these issues, stay with knotty conflict long enough to arrive through to a workable outcome for all stakeholders.”

Mr Crow believes the lessons from the banking inquiry are for all businesses, not just banks.

“As well as equipping your leaders with yoga classes at lunchtime, consider also building in them the strength and stamina to raise the heat on prickly issues that might save you a ban, a fine, or a nasty front-page story,” he said.

“The cause of culture does effect financial performance – just not in the direction we have been looking. And we are witnessing the banks experiencing that right now."

[Related: CBA pays out $7.6m in compensation]