Time to reward the good behaviourFollow @PwC
Author: Jon Terry, Global Financial Services HR Consulting leader
In an attempt to change behaviours within the financial services industry, regulators, governments and firms have mostly focused their efforts on deterring the few that might behave inappropriately. Yet the industry continues to be plagued by scandal and foul play. Could it be time for a new approach?
Earlier this year, as part of the 18th Annual Global CEO Survey, we interviewed 410 financial services CEOs in 62 countries for our report, A new take on talent. It’s telling that 62% of Financial Services CEOs said they see lack of trust as a threat to growth, even higher than last year (59%).
CEOs have been striving to reshape culture and behaviour in the face of public disillusionment and continuing scandals within the industry. But perhaps a less 'heavy-handed' focus on punishment, which runs the risk of creating an environment of fear, and more attention on nurturing and instilling a culture that rewards good behaviour could be a far more effective way forward.
In fact, evidence shows such an approach has its merits, including the results of a recent joint PwC/London Business School study of 2,341 managers from UK financial services organisations, representing banking, insurance and wealth management.
Why you can’t scare people into doing the right thing, shows behaviours are more likely to be changed for the better by increasing the positive outcomes of good behaviour, as opposed to focusing on the negative outcomes of the poor behaviour they want to stamp out.
The study highlights that a tough approach to inappropriate behaviour risks creating a climate of fear and breeding more unethical conduct in financial services firms – the opposite of what the public, regulators and firms want.
The key to effective change is in being able to hone in on ‘the moments that matter’ - the interactions and decision points where behaviours have the most impact on outcomes such as dealings with customers, or how insurance claims are handled - and then adjusting the specific behaviours that need reinforcing within the firm. This helps set the right tone, direction and momentum for nurturing change, and building a strong culture within the organisation. As shown in another recent piece of PwC analysis, Forging a winning culture, having a strong culture is more correlated with sustainable high performance than strategy, operating model or product coverage.
Indeed, behavioural change is one component in creating a winning culture - which is essential if financial services firms around the world are to retain and attract talent, sustain profitability and flourish.
Jon Terry leads PwC’s global financial services HR consulting practice. Find out more