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Annual Review 2018/2019

CHIEF EXECUTIVE’S FOREWORD

Every organisation has its own culture (and some may have several); a continually evolving product of leadership, people, environment and history. The question for boards and  leadership teams of UK banks and building societies – and indeed for firms in any sector, in any jurisdiction – is not why they should care about culture. The implications of not doing so – for customers, clients, members, employees, the economy and society as a whole – have made headlines on all too many occasions. The question is how to create and maintain a good culture.

Our annual Assessment examines the extent to which characteristics that we would expect to be associated with any type of good organisational culture, are demonstrated by and within firms. Over the three years that the BSB has been open for membership, we have seen member firms across the banking sector invest considerable time and resource in efforts to understand and manage their cultures. That our Survey scores in 2018 showed, on aggregate, little change, may therefore seem surprising as well as disappointing. This makes it all the more important that we understand developments over the past year; not in order to ignore the sideways move or pretend it does not matter, but so as to interpret it correctly and act on it effectively. Three observations may be helpful here.

  • First, on the data itself. While Survey scores across firms in aggregate showed little change in 2018, movement was more evident within and between firms and business areas, and the overall sideways pattern followed broad-based increases in 2017. Taking 2016 to 2018 as a whole, the picture is one of improvement but with the gains concentrated in the earlier part of the period and then maintained but not extended. 2019 will help us see which year was the more representative of the direction of travel.
  • Second, on causality. We cannot infer from these results that firms ‘tried harder’ in 2017 or took culture less seriously in 2018. Changing an organisation’s culture takes time and progress is likely to be uneven. The more positive picture of 2017 will have reflected in part initiatives that began well before that year, and the sideways pattern in 2018 could be consistent with firms having taken effective action, but with more time needed before the results are felt. Or, of course, neither of these may be the case. The effectiveness of what firms are doing (or could do) to manage their culture is, however, a question that we hope to cast light on both as our evidence base grows over successive time periods, and through our newly established Insights team.
  • Third, on context. UK firms are operating in an environment of considerable change – domestic, global, technological and competitive – bringing its own uncertainty and pressure for employees at all levels. This is not to say that more improvement should not have been seen in 2018, or to excuse the lack of it. It is, rather, to consider whether firms may have been running hard simply to stand still. If so, this makes it all the more important that ongoing efforts are carefully targeted, and that outcomes are appraised and learn from so that more substantive progress can be achieved.

To help us analyse the Assessment data, translate it into practical information and work with firms to test the effectiveness of specific interventions, we have increased the BSB’s capability and capacity in behavioural economics and behavioural science. This is enabling us both to work with a wider range of experts and partners globally, and to learn more from the BSB’s unique and rapidly growing data set. 72,024 employees at 26 firms responded to the Survey in 2018. This followed 36,268 respondents in 2017 and 28,113 in 2016. Nine firms also took part in 2018 in the qualitative Assessment exercise, during which we listened to 837 employees in 89 focus groups around the UK and interviewed 59 senior executives and 12 non-executive directors.

The 2018 Assessment saw us undertake the Survey outside the UK banking sector for the first time. This included both the non-UK banking operations of some member firms, and member-firm non-banking operations in the UK. We also ran the Survey in autumn last year for a number of banks in Ireland, providing a set of baseline data for these firms and for the newly established Irish Banking Culture Board. While this Annual Review focuses only on results drawn from UK banking sector members, the underlying approach — one in which firms take responsibility for managing culture, are prepared to ask themselves difficult questions and invite independent scrutiny, and focus on outcomes — has application beyond the UK and beyond the banking sector.

We are grateful to all those employees, executives and board members who participated in the 2018 Assessment or helped with the practicalities of running the exercise at their firm. We would also like to thank the members of our Certification Regime Working Group (whose experience has underpinned the publication of a set of widely shared good practice guidance on this topic). Thank you also to everyone who has attended, hosted or spoken at BSB events and workshops through the year, sharing experiences and perspectives on issues ranging from wellbeing to what research tells us about ethical behaviour, and from disruptive technology to the role of general counsel in banking.

For banks and building societies, raising standards of behaviour and competence across the sector is a collective as well as an individual challenge. More than this, it is a responsibility and an opportunity. In an environment of ongoing change, having the right culture – a culture that promotes high standards, and produces good outcomes for customers, clients, members, employees, the economy and society as a whole on a sustainable basis – becomes all the more important. Even standing still, in such a context, may take considerable effort. Simply standing still, however, is not enough.

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