Trust is a Competitive Advantage | Inc Magazine

Starling Team

In one of the larger studies we’ve seen on this subject, Accenture has published an analysis of over 7,000 firms on the factors that drive revenue and profitability. The study focused on key dimensions related to agility, the ability of the firm to respond to external challenges and adapt to new markets and challenges. AFter analyzing over 4 million data points, the study found that metrics related to Trust impacted the outcomes disproportionately.

In this review by Greg Satell, author of the book Mapping Innovation, Satell points to a number of interesting nuances in the report’s findings. Above all, events leading to a loss of trust can be devastating to a firm. The author points out that these impacts extend well beyond the firm’s customers to include other stakeholders such as employees, investors, and regulators – a point we’ve made ourselves here.

This damage impacts firms differently depending on their industry but at least as important is how a firm responds. The difference comes down to having a well planned and disciplined response as well as a strong foundation of trust built up ahead of time.

Read the article: New Accenture Strategy Report Shows How Trust Can be a Competitive Advantage

Read the Accenture Report: The Bottom Line on Trust


Absorbing the Lessons Learned from Lehman | Financial Times

Starling Team

The 10th anniversary of the failure of Lehman Brothers has inspired a lot of soul searching as to what went wrong and, more importantly, whehter we’ve done enough to prevent such a crisis from happening again.

In this article Michelle Scrimgeour, CEO of EMEA for Columbia Threadneedle Investments, argues that unless firms have addressed their culture, they can’t really be confident that they’ve addressed the fundamental problems that led up to the crisis in the first place. Regulators have taken some initial steps in this direction through initiatives like the UK Financial Conduct Authority’s conduct regime which applies personal liability to all employee for bank misconduct.

However, regulation, particularly top-down rules-based approaches, are not ideally suited to improving culture. Management must be committed to encouraging the right behaviors and to setting the correct priorities.

Read the article here (paywall): Lessons since Lehman about corporate culture


Banks Must Focus More on Culture to Mitigate Conduct Risk | Irish Central Bank

Starling Team

Derville Rowland, the Director General of the Irish Central Bank gave a speech recently at the Conference on Culture, Diversity and the Way Forward for Corporate Governance, held at Trinity College in Dublin. In the speech Ms Rowland described how traditional regulation has failed to fully address or mitigate ongoing scandals in the banking industry.

As she points out, the traditional approach of seeking out ‘bad apples’ is flawed. As she points out, studies have shown that approximately 7% of US financial advisors had some form of misconduct on their records, and yet, the distribution of these advisors across the industry is not even. Clearly, some firms are better at managing misconduct so as to root out such behavior. The difference, Ms Rowland points out, is culture.

Given this challenge, it is critically important for bank leadership to set the appropriate tone and for Boards to take full responsibility for establishing the right culture. Firms must establish accountability for misconduct and look beyond general indicators like ‘Net Promoter Scores’ to identify behavioral problems that ultimately lead to misconduct.

Read the full speech: Bad Apples or Bad Barrels? How Effective Culture Mitigates Conduct Risk


The Solution to Australian Bank Crisis? Focus on Culture and Employee Conduct | Accenture

Starling Team

Virtually every corner of the Australian Banking sector has experienced the glare of the Hayne Commission. Formed to investigate alleged misdeeds by bankers, the Commission has since exposed widespread abuse, forcing banks to reevaluate their operations and a new Banking Code of Practice.

In an insightful blog post by Accenture Managing Director San Retna, San argues that banks can address the impact on their firm reputation as well as increased regulatory oversight through an aggressive focus on culture and conduct. Key to this shift, San argues, is to move from exclusively rewarding sales targets and incorporate a greater focus on customer experience. Doing so will both reduce the most aggressive sales tactics while also reinforcing employee compliance with regulations that are designed to protect consumers.

While such a strategy makes sense, it can be very difficult to execute properly. Doing so requires understanding the current cultural and behavioral influencers within the firm and an ability to measure and monitor how these factors change over time in reaction to change initiatives.

This is where tools such as Starling’s AI-powered Predictive Behavioral Analytics platform can help. Our intuitive dashboards reveal the hidden Trust networks that influence conduct and which enable behavior to spread, contagion-like, across a firm. Quantitative metrics empower managers to actively manage firm culture to balance customer experience against profit seeking goals.

Read the full blog post: How Addressing Conduct in Australian Banks Can Kill Two Birds with One Stone


Understanding root causes of immoral behavior in organisations | Volkswagon

Starling Team

When Volkswagen’s emissions test scandal erupted, it was quite clear that such activity could not have taken place without coordination among many individuals across the organization. While clearly not all would have been directly complicit, it is fair to ask “why did no one speak up?” This challenge is explored in this thoughtful article in the Financial Times by Bernd Irlenbusch, professor of business ethics at the Business School of University of Cologne.

The problem is that most corporate non-financial risk strategies start from the premise that employees are rational. With this assumption, managers can rely on employee engagement surveys and corporate ethics policies in order to manage conduct risk. As the author argues, this is simply not the case. Elements such as intuition, emotion, and biases have a powerful influence on behavior.

Research shows, in fact, that over time, employees will adapt their ethical and moral compass to match that of their environment. Our own experience at Starling has shown that employees are highly influenced by their peers – particularly those peers whom they trust most deeply. The result is that employees can become desensitized to unethical behavior – particularly when their peers actively exhibit such behavior. These biases are only amplified when outside pressures come into play. “Research shows that moral biases … are moderated by situational factors such as time pressure, monetary incentive structures, the influence of a leader and social norms that shape the corporate culture.”

Given that employees can not be relied upon to act rationally and behavior is clearly social in nature, Starling has developed tools that allow managers to identify behaviors and predict how they are likely to spread, contagion-like through their firms. Armed with this information, managers can identify where potential risks are most likely to occur and develop targeted solutions to mitigate the imact.

Read the article here (paywall): Volkswagen and the moral business behaviour lessons