Can HR save off-track corporate business ethics?

Written by
Tejal Fatania

21 Apr 2016

21 Apr 2016 • by Tejal Fatania

How is misconduct being managed?

Almost every month we continue to hear of some sort of corporate ethical issue or scandal. Even though financial services regulators have flexed their muscles, organisations such as Barclays, UBS and Deutsche Bank have recently received multimillion pound fines.

Financial services regulators continue to impose larger and larger fines on organisations deemed guilty of wrongdoing. Recently-published data from the professional services firm EY states that fines have risen by 271% in the last two years, to £2.25 billion – and that criminal prosecutions against organisations and individuals have also increased, with the amount of prison time for misconduct increasing 124%.

We are familiar with the debate surrounding some of the purported causes such as hubris, lack of internal compliance, regulatory failure and of course the culture of organisations.

Even though organisations have been taking steps, much remains to be done. For example, the efforts of former Barclays CEO, Anthony Jenkins, nicknamed the ‘saint’, are well documented. For example, value statements in lifts at Barclays headquarters in Canary Wharf. It will be interesting to see the approach of new Barclays CEO, James ‘Jes’ Staley.

Can change ever overpower culture?

Are sub and counter cultures in certain financial services organisations so embedded that they are immune to real change? Do HR functions lack real power and influence to make any meaningful dent?

HR functions have traditionally responded by bolstering policy statements, facilitating appropriate internal courses and supporting cultural change initiatives.

The reality is that some HR functions do lack real influence. This is not necessarily the result of HR not making concerted efforts. Senior managers sometimes wield so much real power that the efforts of HR are undermined or sidestepped. Certain sub cultures are so well protected that even asserted attempts by CEOs are thwarted.

Facilitating real behavioural change will clearly always remain a challenge due to complex personality characteristics and individual differences.

John Kotter, Professor of leadership and change at Harvard University, once said that those who refuse to change should be ‘removed’. Whilst some organisations have certainly done this, some have understandably baulked at this primarily due to the fee earning power of the individual/s concerned, client reaction and high-profile litigation concerns.

The role of HR

Organisations must root out and dismiss maverick managers and leaders. HR must take the lead and be more assertive in persuading decision makers to take difficult and unpalatable steps in driving out unacceptable behaviour. Whilst maverick managers may bring unique or unconventional insights which clearly can be positive, their long-term corrosive effect is the salient issue here.

We can talk about soft cultural change initiatives but the catalyst must sometimes be ‘hard’ action in order to clear the decks so that new cultural approaches have half a chance of success. Research evidence continues to indicate that the vast majority of change initiatives fail and that ‘culture does eat strategy and change for breakfast’.