Poor working climates are costing the UK financial services industry as much as £8.5 billion per year in lost profits, new research from global management consultancy Hay Group recently revealed.
 
Finance industry managers are damaging the sector’s performance by creating negative working climates: the study finds that almost two thirds of senior managers in the sector are failing to generate a high performance environment.
 
Hay Group’s study, Climate Change?, is based on research among over 580 financial services managers. The findings are based on a gap analysis of employees’ ideal working climate, compared to that which they actually experience.
 
Hay Group research reveals:

• As much as one third of an organisation’s business performance is dependent on a positive working climate. 
 
• The study concludes that just one fifth (20%) of finance executives create a high-performance climate according to employees, while less still (17%) manage to generate an energising working atmosphere. 
 
• By contrast, close to half (46%) create a de-motivating climate for staff, with a further 17% only managing to generate a neutral environment – a total of close to two thirds (63%) failing to bring about a positive working climate.
 
Chris Watkin, UK head of talent management at Hay Group, comments:

“Up to 30% of business performance is dependent on a motivational working climate. And in times of economic uncertainty, maximising staff motivation and discretionary effort will be more critical than ever. Yet our research demonstrates that business leaders in the financial sector are struggling to create the right climate to motivate employees and drive high performance. The industry urgently needs a climate change.”
 
Leadership styles 

At the heart of this ‘climate crisis’ lies an inability among finance industry leaders to adopt the right leadership approach – one that, according to Hay Group, fosters team performance. Hay Group’s research identifies six main leadership styles managers employ: directive, visionary, affiliative, participative, pacesetting and coaching. 

• Directive: emphasis on immediate compliance from employees.
• Visionary: emphasis on providing long-term vision and direction.
• Affiliative: emphasis on creating harmony.
• Participative: emphasis on group consensus and generating new ideas.
• Pacesetting: emphasis on accomplishing tasks to high standards.
• Coaching: emphasis on professional growth of employees.
 
• Hay Group found that the broader the range of styles a leader uses, the more likely he or she is to create a high performance climate. More effective leaders are better at adapting their leadership styles to the specific needs of a particular situation or team member. 
 
• Among those senior managers who generate a high performance climate, three quarters (72%) regularly utilise three or more leadership styles. Of those generating negative climates, the same proportion (75%) use two or less leadership styles. 
 
Watkin continues:

“You wouldn’t go round a golf course armed only with a putter. A player needs a whole set of clubs in order to adapt to whatever situation the golf course may throw at him. In the same way, financial sector leaders need to rely on a range of approaches, and to be able to adapt them to each team member or business situation.”
 
Team-based approach

The study also identifies some revealing trends in terms of which leadership styles make for better team performance. Finance executives who create high performance climates tend to use the more ‘collaborative’ or team-based approaches – i.e. the affiliative, participative and coaching leadership styles. Over 70% use a combination of these three and the visionary approach.
 
By contrast, those generating de-motivating climates tend towards more ‘individualistic’ styles – i.e. directive and pacesetting. Over half (53%) rely predominantly on these two. 
 
Watkins concludes:

“Every leadership style has its place – each can be effective in different circumstances. However, our research suggests that the more collaborative styles win out when it comes to creating a high performance workplace. The message for managers would seem to be: teams respond better to support than to coercion.” 

ABOUT CLIMATES

• A high performance climate is one that makes optimal use of everyone's abilities. This climate suggests that employees are fully engaged and exerting the greatest amount of discretionary effort and organisational commitment.  
 
• An energising climate is one that facilitates a high degree of discretionary effort and organisational commitment from employees. 
 
• Employees experiencing neutral climates are unlikely to be exerting their full degree of discretionary effort or commitment.
 
• De-motivating climates are likely to result in high turnover and frequent absences. This climate is likely to inhibit discretionary effort, leading employees to perform significantly below their optimal levels.

About Hay Group

Hay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 86 offices in 47 countries, we work with over 7,000 clients across the world. Our clients are from the public and private sector, across every major industry, and represent diverse business challenges.  Our focus is on making change happen and helping organisations realise their potential. For more information, please visit www.haygroup.com