Annual Review 2016/2017


1. Understanding and helping to address an apparent mismatch between the values espoused by a firm and the way that some employees see business being done

Why this matters

The values espoused by a firm state what it deems to be important and what it expects to be reflected in the behaviours of all who work there. As such, they should guide decision-making and influence hiring, advancement and reward, and should underpin the culture of the firm. To do this, they need not only to be consistent with the firm’s purpose, clearly communicated, and identified with by staff, but also credible. A firm’s values should be demonstrated in what it does as well as what it says. If the two differ, the values displayed by its actions are likely to be perceived as the more convincing.

Demonstrating values in actions as well as words is important both externally (in terms of the relationship with customers, clients, regulators, investors or members, and society as a whole) and internally. If staff see a mismatch between what their firm says and the way that it actually does business, this may undermine the credibility of what leaders say more generally and have implications for employee engagement, motivation and well-being[1] and for the reputation, cohesion and effectiveness of the organisation as a whole.

What our evidence suggests

The BSB Survey results showed that more than 80% of employees thought that their firm’s purpose and values were meaningful. Only 65%, however, saw no conflict between these values and how business was done, and 14% did see such a conflict (with the remainder neither agreeing nor disagreeing). Of these 14% who identified a conflict, almost half did not believe that senior leaders in their organisation meant what they said (compared to 19% of employees in general).

Many focus group participants said that they understood and appreciated the purpose and values of their firm. The values were cited frequently, and examples often given of colleagues acting in accordance with or contrary to them. Boards and executives also emphasised the importance that they attached to how people in their firm behaved, and that they actively refer to corporate values to encourage and incentivise this.

When considering the mismatch between a firm’s values and the way that business was done, staff gave examples relating to customers (such as products or incentive systems) that they did not think conformed to their firm’s purpose or met customer needs, and to ongoing organisational change making elements that might be espoused by or implicit in the values (such as flexibility or simplicity) difficult. In firms that were small but growing, concerns often centred on maintaining the firms’ original purpose and values. In some larger or more complex organisations, corporate silos were seen as one factor inhibiting a sense of shared purpose.

What we are going to do in 2017

Over the coming year we plan to:

  • consider how we can develop our understanding of this issue through the 2017 Assessment, and in particular through the qualitative elements of this exercise;
  • explore the alignment of values and strategy, including issues relating to remuneration and reward (and picking up themes that emerged also from the 2015 pilot assessment around sales targets and incentives); and
  • work with the Institute for Business Ethics on relevant issues including those relating to reward strategy.

Given the suggested links between values being demonstrated in actions, work being meaningful, and wellbeing, work on this theme will also draw on and inform work undertaken under theme 3 below. (Identifying practical steps to help promote employee resilience and well-being).

[1] See, for example, Antonovsky, A (1979), Health, Stress and Coping; (1987), Unraveling the Mystery of Health. How people manage stress and stay well; Kotter, J and Heskett, J (1992), Corporate Culture and Performance; Collins, J and Porras, J (1994), Built to Last: Successful Habits of Visionary Companies; Guiso, L et al (2013), The Value of Corporate Culture; Lo, A W (2016), The Gordon Gekko Effect: The Role of Culture in the Financial Industry

2. Helping to develop a culture within the banking sector of responsibility and accountability rather than of blame

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[1]. 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[2] and aviation[3] 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[4]); 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.

[1] The three aspects of ‘trustworthiness’ identified by Onora O’Neill

[2] Gorini, Alessandra, Massimio Miglioretti, and Gabriella Pravetonni (2012), A new perspective on blame culture: an experimental study, Journal of Evaluation in Clinical Practice, 18, pp. 671-675

[3] Syed, Matthew (2015) Black Box Thinking: The Surprising Truth About Success, Hachette UK

[4] Steffel, Mary, Elanor F. Williams, and Jaclyn Perrmann-Graham (2016) Passing the buck: Delegating choices to others to avoid responsibility and blame, Organizational Behaviour and Human Decision Processes, Vol. 135, pp. 32-44

3. Identifying practical steps to help promote employee well-being and resilience

Why this matters

The effects of poor physical or mental health deriving from the workplace are, for the employee concerned, both direct (managing the health problem itself) and indirect (the loss of or reduced ability to develop skills, knowledge, networks and experience). The effects and costs are also, felt more widely; among colleagues, customers, clients, and – where the problem is such as to lead to higher absenteeism or staff turnover – the firm as a whole.[1]

An increasing body of evidence drawn from across sectors and countries points, however, not simply to the importance of avoiding workplace-related physical or mental stresses, but to the positive links between employee well-being and productivity.[2] ‘Well-being’ as a concept embraces, of course, many aspects of the way individuals feel about their lives at any one time. In a workplace context it generally refers not only to work-related influences on physical and mental health, but also to job satisfaction (which may be influenced by factors such as skills and training, resources, stress, autonomy, motivation and purpose, management, fair treatment, communication).

We would expect individuals and workforces characterised by high levels of well-being, to be more resilient, i.e. better equipped to deal with change (whether responding to shocks, identifying opportunities or managing problems at an early stage).

What our evidence suggests

Resilience at both a personal and organisational level, is one of the nine characteristics of our Assessment framework. In our 2016 Assessment it was the lowest scoring characteristic for almost all 22 firms and across all of the three high level business areas (Retail, Investment Banking and Functions).

Almost 60% of bank and building society employees said that they often felt under considerable pressure to perform in their work, and more than a quarter that working in their organisation was having a negative impact on their health and well-being. Among the issues that employees said contributed to the sense of pressure were organisational change and restructuring, a lack of resource, pressure resulting from poor systems and processes, and the considerable scrutiny they came under to avoid mistakes. In some firms, employees talked about the consequences of work pressure in terms of long-term sick leave, mental health (e.g. increased anxiety) and people leaving their firms. Many felt that they could not control or manage these pressures, and in particular those relating to deadlines, the volume of work and the decisions they could take or influence.

Many of the firms we assessed in 2016 have programmes in place to support employee well-being, both physical and mental. While employees value such programmes and resources, they tend however to see these as addressing primarily the symptoms rather than the cause, with daily work pressures continuing to affect their health and well-being.

What we are going to do in 2017

Over the coming year we plan to:

  • work in partnership with the Bank Worker’s Charity, as well as with other subject matter experts and organisations including the Trades Unions, to explore in particular:
    • the relationship between motivation and well-being at work, and
    • how to create an environment that is both supportive and promotes autonomy.

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 2 above. Given the links between employees perceiving their work as meaningful and their wellbeing[3], our work on well-being and resilience will also draw on and inform that undertaken in Theme 1 above.

[1] The Marmot Review: Fair Society, Healthy Lives (2010)

[2] Argyle (1989), Do happy workers work harder? The effect of job satisfaction on job performance; Robertson, I. and Cooper, C. (2011), Wellbeing: Productivity and happiness at work; Edmans, A. (2012), The link between job satisfaction and firm value, with implications for corporate social responsibility; Bryson, A., Forth, J., and Stokes, L. (2014), Does Worker Wellbeing Affect Workplace Performance?; RAND Europe (2015) Health, Wellbeing and Productivity in the Workplace; The Bank on Your People Partnership (2015), Wellbeing and productivity in the financial sector; Sgroi, Daniel, Thomas Hill, Gus O’Donnell, Andrew Oswald and Eugenio Proto (2017), Understanding Happiness: A CAGE Policy Report

[3] Antonovsky, A (1979), Health, Stress and Coping; (1987), Unraveling the Mystery of Health. How people manage stress and stay well; Kotter, J and Heskett, J (1992), Corporate Culture and Performance; Collins, J and Porras, J (1994), Built to Last: Successful Habits of Visionary Companies; Guiso, L et al (2013), The Value of Corporate Culture; Lo, A W (2016), The Gordon Gekko Effect: The Role of Culture in the Financial Industry