Picture this: a celebrity has just bought a brand new, unfamiliar supercar and driven it out of the showroom. On the way home, they push it too hard and have a high speed crash (hopefully no-one is seriously hurt, by the way). The imaginary response to this hypothetical event is not that the celebrity is to blame for driving too fast, but in fact there’s a huge outcry about the roles of the car dealership (for selling it irresponsibly), the manufacturer (for making a dangerous car) and the highway authorities (for poor road conditions).

Perhaps there is a little substance to this but it is worth noting that there’s nothing new or changed about the role of any of these parties. They are doing familiar jobs in a way which enables most motorists to stay safe most of the time. It stands to reason that it is the celebrity who has created their personal changed circumstances, through buying a powerful new car and driving it too hard when they’re not familiar with it.

What’s the point? It’s not about the rule-makers. It’s about the drivers. In other words, the regulatory response is not the route to stopping this happening. I’m not saying that it’s a waste of time to look at the role of regulation, but fundamentally regulation is, and always will be, at least one step behind the bankers at the front line.

Reducing the risk of similar events occurring again, and again, means getting to the root cause, to understand and change the culture in organisations which leads to over-exposure and unsustainable risk. Fundamentally, there are four major issues involved in this. We have four practical steps to help you change your organisation and position it better to avoid the next bump in the road. Or you could just blame the regulators...

This is the one issue we do keep hearing about. Naturally, people behave in a way that will maximize their earnings. If the earnings at stake are telephone-number annual bonuses, that is a pretty powerful force and will lead people to behave in some fairly extreme ways, with little consideration of the longer term, or indeed of anything beyond the next bonus round.

What can you do about it?

Well the answer is pretty apparent – but difficult to do. Modify bonuses paid to traders so that they reflect longer term (not just annual) performance, so that they will realistically reflect failure as well as success. And maybe they have got, in some cases, a little bit too big…

Always, digging beneath the surface, we find that plenty of people close to the action knew that things weren’t right or weren’t sustainable. But, the culture actively discourages people from speaking up about issues that they’ve spotted. Particularly when the main players are clearly viewed as, and rewarded as, the ‘superstars’ of the organisation.

What can you do here?

Leaders need to create a culture of openness where it is okay for people to step forward and speak up. We see this kind of behaviour more in partnership organisations. Create an ethos where people feel more like owners of the organisation. This again, among other things, points to a more equitable distribution of rewards which reflects both successes and failures, and where so-called ‘back office’ people (even the name is faintly stigmatising) feel as much a part of success as the people doing the deals.

Based on our consulting experiences, we have found that financial services organisations are woefully bad at managing performance properly. Few managers differentiate good and bad performance properly and consequentially. This is particularly the case when we look at the ‘superstar’ traders of investment banking, and indeed the prevailing view that we experience from managers in the industry is a fear of losing their people – this leads to a virtual “paralysis” of performance management – again, this is about an unwillingness to penalise people for poor performance.

What can you do?

You have to be strong enough to recognise poor performance – whoever it comes from. If that means losing some people, well frankly, that ought to be okay if the performance was poor. You should concentrate more on developing people to fill any gaps rather than desperately trying to hold on to the poor performers, at any cost.

This is the ‘umbrella’ issue for all of the above. Leaders need to have the strength, credibility and authority to create and manage accountability and performance. They need to lead a change in culture and perception about the relative contribution of different types of jobs. Sadly, in our experience, leadership is almost invariably seen as a ‘sideline’ in financial services organisations. Something you do if you haven’t got any ‘real work’ on. Cracking this particular nut will take some time and some investment in developing leadership capability.

What can you do?

Work with leaders to help them understand how they can add value to the organisation, the impact they currently have, and the impact they can have. It’s do-able but it takes a bit of time.