Other parts of this series:
The solution to the ethical crisis that’s plaguing the financial industry does not lay in creating more and stricter organisational rules and regulations; it lays in transforming the financial services culture—firm by firm. In my previous post, I shared a brief overview of the impacts and causes of this ethical crisis, and hinted at the strategic opportunity financial services firms have in front of them if they can take the right steps toward transforming their cultures. Now I’d like to tell you more about that opportunity, and what you should be aware of as you take steps to address unethical behaviour within your business.
Values (versus rules) lead to better decisions
If rules were all it took to drive ethical behaviour, there’d be no ethical crisis within the financial services industry; it’s an industry rife with rules and regulations. Rather, the missing piece in addressing the ethical crisis in financial services is a culture based on shared ethical values that are reinforced through behaviours, from the highest to the lowest levels of the organisation.
Only when all employees embrace the same ethical values and principles, and are empowered in their everyday responsibilities to make decisions that align with those values and principles, can firms begin to experience responsible growth. That type of growth comes from faster, more informed, and more agile decision-making that’s based on long term, shared objectives rather than short term gain.
Barriers to change
Unfortunately, financial firms often get in their own way when addressing the ethical crisis. If any of these common barriers to success sound familiar, it’s time to take a good look at your organisational culture:
- An over-reliance on rules and regulations
- Denial of past failures, or a tendency to blame unethical situations on “a few bad apples”
- A fragmented, tactical approach to ethical infractions—which indicates a fundamental misunderstanding of root cause
- The lack of a positive vision, with a focus on blame
- A tendency to view ethics as “someone else’s job”
- Misaligned incentives, where revenue generation takes precedence over ethical behaviour
- A simplistic reliance on the “goodness” of employees
Underpinning these common barriers to change are some commonly held myths, including the beliefs that:
- Ethics should come naturally—all you have to do is hire good people
- Most employees will behave ethically regardless of the situation; only a few might cause problems
- If you compensate people to be ethical, they will be
- Unethical behaviour only takes place on the trading floor
This is why a fundamental cultural transformation must take place to address and resolve the ethical crisis in financial services, long term. In my next post, I’ll tell you how to help drive that transformation within your firm.
To learn more about creating an ethical culture, please see: