Why this matters
Not every choice that employees make can be regulated ex ante. Rules cannot prescribe the way that staff should respond to every situation or dilemma; nor can they keep up with changing technology, circumstances, needs and human inventiveness. Furthermore, the more complex and prescriptive the regulatory structure, the greater the risk of inconsistency or confusion, and – if the motives of those regulated are not aligned with their actions – of regulation being gamed.
Banking sector employees need to have the skills required to exercise their professional judgement and the autonomy to do so in a way that meets not simply the letter of regulation, but also its spirit. Compliance is clearly a basic requirement of any bank or building society. Concentrating solely on avoiding breaches, however, can create a culture in which employees avoid taking responsibility for decisions (in order to avoid blame), and delegate responsibility for managing risk to Risk and Compliance teams. They may also see little benefit in exploring or suggesting new ways of improving the service the firm provides, when the blame attached to mistakes or the barriers to trying anything unfamiliar are seen as too high. A ‘no mistakes’ environment is detrimental both for the customer or client, who receives a poorer service focused not on their needs but on meeting minimum regulatory requirements to the letter, and for employees themselves, with decisions being inappropriately escalated and job satisfaction eroded.
The challenge for the banking sector is to foster a culture in which each employee takes personal responsibility not only for complying with regulation but also for serving their customer honestly, reliably and competently. This requires looking beyond the regulatory minimum or the scope of regulation to address what ‘good’ looks like in any context. It implies an environment in which deliberate breaches, incidents of incompetence or actions that go against the customer’s interests incur clear consequences, and where accountabilities are clear. It also, however, entails a culture in which mistakes are identified, remedied and regarded as a source of learning rather than of blame.
Personal responsibility and accountability, both central to the recommendations by the Parliamentary Commission on Banking Standards, are together key to a banking sector culture that serves the interests of customers and clients. Research in the medicine and aviation sectors has linked a ‘blame culture’ to a greater incidence of error and employees being less likely to own up to their mistakes, thereby undermining honesty and openness and leading to lessons not being learned. The fear of criticism can leave employees unwilling to take ownership and preferring to pass on responsibility to others (including those less qualified); while those on whom blame is laid may be left feeling inadequate, undermined or treated unfairly.
What our evidence suggests
Almost all employees (96%) in banks and building societies say that they understand the behaviour that is expected of them, and a significant majority in some firms see senior leaders taking responsibility, including when things go wrong.
Many executives and non-executive directors discussed the positive benefits of key regulatory developments such as the Senior Managers and Certification Regime in helping to change their firm’s culture, clarify roles and introduce greater levels of personal accountability. Many of the firms we assessed in 2016 recognised the importance of responsibility and accountability and were investing in developing systems and processes that encouraged people to speak up, challenge and admit mistakes.
Notwithstanding this positive context, employees across many firms noted concerns over speaking up (a theme that emerged also in the pilot 2015 Assessment), responsibility and accountability. Overall, nearly three in ten employees across firms said that they would be worried about the negative consequences for them if they raised concerns at work. Over a third said that people got defensive when their views were challenged by colleagues, and one in seven did not feel comfortable challenging a decision made by their manager.
Focus group participants who observed elements of a blame culture in their firm tended to associate this with a less open environment. In some firms, employees identified hierarchy and a reluctance to upset line managers or senior colleagues as factors; in others, a highly supportive and consensus-based culture was seen as discouraging the raising of concerns or mistakes.
Many employees linked a fear of making mistakes with a reluctance to assume responsibility. Over a third saw people try to avoid responsibility by passing it on to others in case things went wrong, with this proportion generally being higher among larger, more complex firms. A lack of clarity over roles and responsibilities, particularly (but not exclusively) in larger organisations was also said to exacerbate the situation, making it unclear where ultimate responsibility lay.
What we are going to do in 2017
Over the coming year we plan to:
- develop Statements of Good Practice on implementation of the Certification Regime;
- examine where further cross-sector work on issues such as Regulatory References and the Individual Conduct Rules can help firms establish a consistent approach and support employees to take responsibility and challenge the behaviours of others through the work of both the existing Certification Regime Working Group and the new Professionalism Forum;
- also through the Professionalism Forum, explore the roles of professional bodies and educational bodies providing qualifications in supporting constructive challenge and professional judgement (through e.g. the development of critical thinking skills, the provision of well-developed and supported codes of ethics, or advice lines) and promoting competence at all levels, including through apprenticeships;
- refine our Survey questions to enable us to explore this theme in more detail in 2017; and
- support the Lending Standards Board in its development of standards on business lending, helping promote responsibility and accountability in this area.
Given the strong links between well-being, autonomy and a culture that promotes accountability and responsibility, work on this theme will also draw on and inform work undertaken under Theme 3 (Identifying practical steps to help promote employee well-being and resilience) below.