The Federal Reserve Bank of New York’s hosted its annual culture conference last week ‘Building Cultural Capital in the Financial Services Industry: Emerging Practices, Risks and Opportunities’. As always, the New York Fed brings together a stellar line up of speakers together with industry participants to provoke discussion, new ideas and exchange of practice.
The conference this year took us down a different path – a timely one in the Australian context. Post Royal Commission, the focus has been on assessment, or ‘diagnosis’ of cultural norms; and while that is absolutely a worthwhile exercise, there is a risk in being purely responsive. Our attention was shifted to the horizon, to explore the emerging trends, opportunities, and also risks.
In a post GFC, post Royal Commission world it’s natural that our frame of reference is poor behaviour, and ‘what not to do’. While that focus is inarguable, it does mean that a more subtle nuance is being overlooked, that is, weak (not poor) outcomes at the organisational level. We need to extend our frame of reference beyond ‘right’ or ‘wrong’, beyond malintent, to consider potential weaknesses and challenge our own blindspots.
- Ethical illusions – aka ‘I care and I know about ethics……so my actions will of course be ethical.’ We create an ethical blind spot large enough to conceal conflicts of interest or unconscious biases when making a decision.
- Ethical fading – aka ‘framing’…… ‘it’s a business decision, it’s a finance decision’…and within that construct, of course the decision makes sense. We can neglect the ethical (or risk) implications of a decision because we are focused on the elements of the choice in front of us.
- The dark side of rewards……aka ‘it’s what you wanted me to do’ (in the context of both monetary rewards and social rewards, which both generate the same positive brain chemistry!)
- Motivated blindness…… we might overlook certain behaviour if it’s not in our interest to uncover it. We see what we want to see and easily miss contradictory information when it’s in our interest to remain ignorant.
These blindspots are difficult to identify and challenge internally. The introduction of BEAR and individual accountabilities also has a high potential to contribute to ‘compartmentalisation’ (a type of ethical fading), because it sets a frame for particular activities as being someone else’s accountability. So how do you identify blindspots? How does this impact decision-making, as well as behaviour? The first meaningful step is realising and acknowledging that they exist in both individuals, and groups, who act as decision-makers – it’s all of us.
Risks in technology
Wouldn’t it be great if there was a technology solution that could measure culture for us? Surely in these days of AI, machine learning and incredible advances in the technology that supports organisational network analysis, it is here already, right? Of course, there are solutions out there but they require conscious decision-making too and are not the panacea. Data is always going to be inaccurate and incomplete and for any complex situation, there are an infinite number of possible solutions. At the end of the day, this is a cautionary note. Technology can give us information, but we remain the ones making decisions and judgement calls on the basis of that information. Our blindspots can apply equally as much to our interpretation of data and we need mechanisms to safeguard against that.
Consistent with the focus on emerging challenges in the culture space a stark reminder was tabled about the issues that come with the emergence of new generational norms. To date, so much emphasis and attention has been given to fostering constructive debate and dialogue within companies and encouraging diversity of perspectives. But the clear message? Forget about the millennials and start thinking about how on earth you are going to manage Gen Z. Vast overprotection and the amplification that comes from growing up on social media has created huge levels of anxiety. This is a generation primed for confrontation, in a ‘call out’ culture – which destroys cooperation and collaboration. Yet, now there is an emerging workforce that literally does not have the skills, capability or experience to deal with critical (yet positive) questioning. When combined with a ‘call out’ culture this shuts down productive discussion and debate and is a real sleeper issue, the impacts of which will emerge over the next 5 to 10 years as this generation enters the workforce. Managing for this issue needs to be on the radar now, before detrimental effects are given the chance to emerge.
So, what is the gold standard?
Those that think they have the answer to this question almost certainly do not have the answer. The focus needs to shift to what is really relevant for you and your institution. Unfortunately there is no end state perfection that can be attained, not least because that will just give rise to new blindspots! A real challenge here is to maintain the urgency of action when there’s no finish line. Responsibility lies with leaders – to keep pushing, exploring new ideas and greater depth, trying things that are different and really reflecting on what is actually happening and how that influences decision making. Having ‘the answer’ is insufficient and also probably spurious. It’s more important to make the right connections, to teach the skill and capability around asking questions and evidence this as a leadership team to really drive change. With Gen Z on the horizon, this is now more of an imperative than ever before.
We all need time to pause, reflect and take stock. It’s easy in the moment to be consumed with a focus on actions rather than the objective and gravitate to solutions that offer certainty in a complex, messy world. But as we go about the day-to-day of responding to the immediate post Royal Commission environment, we also need to make sure we’re positioning ourselves for what is coming – at a very rapid rate.
This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information.