It’s Behaviour Stupid!

From the outside at least (1), the NAB story looks like a failing of business ethics driven by systemic leadership and cultural short-comings. Reading the full back-story I’m left wondering what lessons we’ve learned from the last decade! Andrew Thornburn (NAB’s former CEO) acknowledges that twenty years ago banking was about being a trusted advisor enabling customers financial lives, but that NAB “drifted” away from doing the right thing by its customers under the lure of shareholder appreciation for bigger profits. More worrying is the view that it may take another decade to rebuild NAB’s culture - society, customers and, indeed, shareholders deserve better! Of course, the two senior leaders (Andrew Thorburn and Chairman Ken Henry) set the tone from the top and had to resign, but its hard not to conclude that there are significant failings of Board oversight, HR policy and practice and other senior leaders’ behaviour for example, an inability to reduce the bonus culture. As with RBS in the UK (last financial crisis) doubtless stories of leaders who confronted the issues and paid the price will emerge.

We must stop blaming others; everything we do matters. We all have a responsibility to confront unethical behaviour. The moral failings of businesses are the summation of the collective shortcomings of all employees i.e. the collective shadow-personality of all the people who make up the organisational culture. It’s all too easy to ignore the interests of customer and societies when performance, reward and future potential are at stake simply by “not speaking up” when you disagree or focussing on the “profit” side of the scorecard to the relative exclusion of other critical metrics. In a modern business there are “no acceptable excuses” and accountability for ethical standards must rest with every individual. But change has to start with senior leaders who must role-model the way.

If we don’t want culture change to take a decade, then: structures, purpose, scorecards, talent processes, reward, story-telling and the myriad of other tools and processes at our disposal all need to reinforce the desired new cultural norms. But designing new processes is the easy stuff of transformation. The difficult stuff is developing the leadership/employee psychological maturity and associated behaviours/mindsets that underpin the new culture. Behaviour has to be at centre stage with “HR tools” taking a supporting role. A worthwhile goal for HR development processes is to replace the “process crutch” with “new behavioural norms’

Behavioural development starts with personal humility and recognition that in today’s VUCA (2) world none of us have much of a clue! If you don’t know what flaw you are “working on” and aren’t seeking the uninhibited guidance of all the talents at your disposal then you are “part of the permafrost” and you’ve completely missed the point of a decade of corporate ethical and leadership failings. Today’s ethical performance cultures are principle and practice based. Why do I say that? Firstly, most senior leaders have grown up in world where they are rewarded for loyalty, team-work, execution, minimising disruption and following their manager’s instruction (Socialised Mind (3)). The demands of the modern organisation necessitate that our leaders are required to be self-reliant; adopt principle-based decision frameworks, build new world views from outside their frame of reference, understand world views from others’ perspectives and have the courage to stick to their principles, even under the scrutiny of those more senior in the business (Self-Authoring Mind (3)). All the evidence shows that the majority of our employees and leaders are stuck at too low levels of psychological maturity to effectively deliver against today’s commercial and ethical demands (4). Simply put, without demanding greater psychological maturity from today’s leaders we don’t get the ethical performance cultures we all desire. Secondly, you don’t have to be a Taoist to understand that learning happens at the boundary of chaos (close to the edge). So, at work, development happens mainly in our jobs and at the limits of our competence. New neural pathways are wired through practice and feedback (5). Formal training can never cope with the novelty of experience or shifts in psychological maturity required for today’s successful business leaders (and employees). There are no other options: in the future “learning has to be work” and “work has to be learning”. This necessitates the creation of practice-oriented cultures where coaching/feedback is the norm; and just as importantly employees are open and accepting of the support they need (moving from hiding flaws to openly tackling flaws). This is another critical dimension of psychological maturity (3) and implies a necessary redefinition of a “performance-based” culture.

What I’m actually suggesting is greater accountability for performance; whilst acknowledging that high performing and ethical cultures start with honesty about personal capability and deliberately focuses on the life-long development of all employees to build their psychological maturity to more ably contribute to society. More specifically, performance and high ethical standards are driven by employees who can bring their “A-game” into every work situation; and as leaders we should be concerned about how we create a culture where we progressively maximise the chances of this happening. To this end, modern businesses need to cultivate psychologically mature employees (self-authoring) and tribe-like behaviour where all other members of the community routinely scrutinise each other’s contribution, behaviour and standards. Over time creating a virtuous performance cycle from the well intentioned feedback, ever deeper insight and maturity, greater openness and unwavering humility. Leadership in this context is about orchestration of relationships and much less reliance on formal power/status. Development in this context is continual, and focuses not just on the behaviours, but also on the mind-sets that drive our actions i.e. challenging frames of reference with the explicit goal of building psychological maturity.

So, where does this leave companies like NAB? One colleague recently said they will simply spend more money “redefining their purpose”, “encouraging employees to show integrity” and “telling employees to bring their whole-selves to work” (6). I hope this isn’t the case because the evidence is increasingly clear: In today’s business world rules-based bureaucratic cultures with a plethora of socialised leaders are failing to adapt and meet ethical and performance standards. Structures, tools and processes help, but its the psychological maturity of all employees that is the “secret sauce”. This culture change process starts with senior leaders acknowledging that they are the permafrost and taking steps to role-model a practice as performance culture.

End.

1 - The NAB story is illustrative. I claim no insight beyond a background in Financial Services and what i can read in the press. I understand enough to know the “problem” is always “someone else” (usually, further down the hierarchy) and that in HR we have an over-reliance on process fixes and tools (i.e. they hold the problem conveniently at arms- length). It’s time to address at the real problem!

2 - U.S. Army Heritage and Education Center (February 16, 2018). "Who first originated the term VUCA (Volatility, Uncertainty, Complexity and Ambiguity)?". USAHEC Ask Us a Question. The United States Army War College. Retrieved July 10, 2018.

3 - The Evolving Self: Problem and Process in Human Development 30 Jun 2009. Robert KEGAN

4 - Leader Effectiveness. A Constructive Developmental View & Investigation 1998. K Eigel. Quoted by Robert KEGAN in Immunity to Change.

5 - Neuroscience for Learning and Development: How to Apply Neuroscience and Psychology for Improved Learning and Training3 Nov 2015 by Stella Collins

6 - Thanks to Benn Dunn

7- Thanks to Andrew Fox, Andrew Cox, Pam Ryder and Nicholas Anderson for their speedy read through.

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