What to do when regulators take action on culture

There are two questions HR needs to answer when it comes to regulators and culture

There are two important questions HR needs to answer in averting – or potentially responding to – regulator intervention on organisational culture problems, writes Jerome Parisse-Brassens

On the back of recent cultural disasters linked to the widespread display of inappropriate behaviours (think Wells Fargo and the creation of loan and credit accounts for customers who were unaware of it), a number of regulators have decided to take action.

They are elevating the discussion to board and executive level and are pushing for regulation of culture. This is particularly true in the financial services industry, where recent “bad” behaviour has led to unethical practices and a significant financial impact on customers.

Lack of integrity and its associated behaviours, such as not speaking up when you see something wrong, are a prime target for regulators. However, they all agree that the issue goes way beyond a simple lack of integrity to reach other elements such as bullying, pressure, lack of respect, and ineffective collaboration.

Many HR executives are concerned by the regulators’ pressure and want to know what they can do about it. The two questions they need to answer are: What can we do to prevent the issues that regulators are trying to fix? and: How can we demonstrate that change is happening?

A preventative approach
If the organisation is doing well and is not the target of the regulators, it may be wise to adopt a “preventative” approach to make sure that everything is in place to mitigate the risks that wrong behaviours can trigger.

“Lack of integrity and its associated behaviours, such as not speaking up when you see something wrong, are a prime target for regulators”

Beyond raising awareness of the problem in the business, this means taking a number of the following actions:

  • Ensuring a target culture has been defined. The target needs to be identified based on the business imperative and describes the behaviours that are expected from staff. It is best led from the top. Desired behaviours will be reinforced and driven through all levels of the organisation.
  • In-depth assessment of the culture. Conducting a culture assessment should result in a detailed description of the culture and of the reasons behind how people behave. This will give you the data you need to start planning for change, and will demonstrate to the regulators that you are across any issue. A culture audit focussing on systems and symbols will complement your behavioural assessment; it will contribute to the identification of cultural risks and their triggers. For example, an excessive focus on results at any cost may drive people to prioritise short-term – and sometimes unethical – gains.
  • Developing a culture plan. The plan will address the risks identified in the assessment and will align actions towards the target behaviours. HR executives often end up with the responsibility for developing this plan, which is a key element for demonstrating to the regulators that culture is “under control.”
  • Focus on the leadership cohorts, including the top team, and equip them with the tools to manage their “shadow”. HR teams often conduct a 360 degree feedback process on key behaviours; they can use the data for individual and group coaching and help people shift their behaviours.
  • Tracking the culture. You want to see change and want to show the regulators the data that proves it. Use a combination of pulse survey and 360 data to demonstrate shifts in behaviour, in particular for the leadership cohorts.

“HR teams should not only role model appropriate behaviours, but they should coach leaders on how to lead by example”

In case of emergency
Sometimes it is too late, and some behavioural patterns may have already created issues. Or the assessment has highlighted serious risks that need to be quickly mitigated. In this case, the work will focus on the one or two behaviours that need to shift.

  • Realign organisational systems and symbols so that the messages they send to staff reinforce appropriate behaviours. Communicate to leaders and employees the expected behaviours and show public commitment. This needs to come from the business, supported by HR.
  • Work closely with management to demonstrate that change is taking place. Help them to stop tolerating the behaviours that are creating the problems. Tolerating inappropriate behaviours make them acceptable and is often what leads to the culture disasters you see in the news. One of the most important skills your leaders need to learn is to not tolerate undesired behaviours – HR are well placed to support management in this process.
  • Build a culture index or a behavioural shift index, and measure it on a regular basis to demonstrate improvement.

I don’t believe culture can be regulated, but HR teams need to be across the issue. At the end of the day, the most important thing that organisations can do to avoid being the regulator’s target is to manage their culture. HR plays a critical role in supporting the top team and management in doing so. HR teams should not only role model appropriate behaviours, but they should coach leaders on how to lead by example.

“The most important thing that organisations can do to avoid being the regulator’s target is to manage their culture”

Regulatory pressure on culture: What can you do?
The two questions that HR executives concerned by the regulators’ pressure on culture need to answer are: What can we do to prevent the issues that regulators are trying to fix? and: How can we demonstrate that change is happening? Beyond raising awareness of the problem in the business, HR can trigger and/or lead a small number of specific actions:

  • Ensure a target culture has been defined, based on the business imperative and describing the behaviours that are expected from staff.
  • Assess the culture. Conducting a culture assessment should result in a detailed description of the culture and of the reasons behind how people behave. This will give you the data you need to start planning for change, and will demonstrate to the regulators that you are across any issues.
  • Develop a culture plan. The plan will address the risks identified in the assessment and will align actions towards the target behaviours.
  • Focus on the leadership cohorts, including the top team, and equip them with the tools to manage their “shadow”. Help them to stop tolerating the behaviours that are creating the issues.
  • Track the culture. Use a combination of pulse survey and 360 data to demonstrate shifts in behaviour, in particular for the leadership cohorts.

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