Late May in 2015, high above the sparkling waters of Darling Harbour, the CEO of the Commonwealth Bank Of Australia, Ian Narev and one of his Group Executives, Matt Comyn were catching up for their regular one-on-one meeting. Mr Comyn ran the Retail Bank for the CBA. The Retail Bank was the largest division within the most valuable listed company in Australia at the time. With close to 10 million customers, the Retail Bank dwarfed much of the rest of the organisation. On its own, the Retail Bank would have been the 5th biggest organisation in the country, touching almost 50% of all financial transactions occurring each day and raking in $4b in annual earnings for the big yellow bank. Matt Comyn’s team consisted of some 30,000 employees distributing home loans, credit cards and savings accounts through more than 1,000 physical branches and their massive network of call centres across the country.
The discussion reportedly turned to a recent audit finding. Internal risk assessments had identified a problem with over 150,000 customers who had been sold insurance on credit cards or loans. The problem was that none of these people were actually able to receive benefits from them. These products, like many other insurance products, included exclusions. Specifically, these products excluded certain types of people from making a claim, such as full time students or the unemployed. Despite this, 150,000 people who were categorised as excluded, had been sold these insurance products and had paid a total of $45m in insurance premiums. Mr Comyn brought this finding to Mr Narev and wanted his CEO to support his proposal to suspend the sale of these products immediately.
While selling an insurance product that can never be claimed on is highly profitable, much like a rigged game at a small-town carnival, Mr Comyn thought it was wrong to continue this practice. He felt it best to shelve the product until the risks that had been identified in the audit process could be fully worked through. CBA’s values in 2015 included Integrity, Accountability and Service and selling people a product that they were actually excluded from being able to use wouldn’t pass many regulatory or consumer integrity tests. Now that the audit process had picked it up, it was a no brainer to stop selling it and to fix the problems.
Sadly, Mr Narev disagreed. The decision was made in this meeting and in subsequent discussion on the topic that the organisation didn’t really want to question how it was making money. The focus was on making as much as possible. Actually, Mr Narev reportedly told Matt Comyn to “temper your sense of justice”. On that day, Ian Narev sent a clear signal to his right-hand man: Put performance before purpose.
On the back of Royal Commissions and constant subsequent scandals, it has never before been so clear, so obvious and so public, that businesses are delivering results in unethical ways. Sometimes these are small, isolated challenges. Sometimes, they are massive. Such as Westpac’s 23 million breaches of important anti-money laundering and counter-terrorism laws. The investigation by AUSTRAC identified that nearly 3,000 transactions were linked to child exploitation and child trafficking. This was despite Senior Management at Westpac being warned of the risks of their systems more than 18 months earlier. Like CBA, Westpac made a decision to keep the money flowing despite clear ethical red-flags. These are not isolated incidences. There was negligent financial advice given to thousands of customers. Millions of illegal fees charged, even to people who had passed away, misleading the regulator and destroying people’s lives. All the while, the profits kept flowing in.
As Clare O’Neil MP so elegantly put it:
“If you steal from a bank, you go to jail. Yet it seems that if a banker steals from you, they get a bonus at the end of the year and a gold watch when they retire.”
The banks are not alone. Directors sitting on the Boards of many large organisations are finding themselves seemingly unable to ensure they deliver the performance their shareholders require without straying outside the boundaries of ethical behaviour. This is not to say the Boards, nor even the Senior Executives of these organisations are nefariously plotting and scheming to find ways to break the law. But it is happening on their watch, so how does this happen?
This is something we have observed externally working with clients and internally with experience within such organisations. A gap seems to emerge between what we set out and intended to deliver and what actually occurs. While the performance metrics have been closely scrutinised and managed to hit the target, the grand vision and purpose we aspired toward has become distorted or destroyed. Why do we make the numbers but miss the meaning?
One of the biggest reasons for this is due to the Two Worlds of Business. One of these worlds is the Tangible World. The world of real and measurable things. Reporting on how many widgets you sold, the margin you made, the dollars you spent and the people you employed are all objective measurements. They can be calculated, documented and objectively agreed upon. We can report these numbers to others and use them to compare our organisation to other organisations.
We can make clear comparisons: “We sold 5,000,000 widgets at a $2 margin and made $10,000,000 allowing us to return $1.85 per share to each of our shareholders this year. Well done us!”
Due to the objective and comparable nature of the Tangible World, many organisations rely on these numbers to report their Performance. The tangible report of success or failure. But when it comes to the Intangible World, measurement and objectivity become much more difficult. The Intangible World consists of more abstract drivers such as values, feelings, emotions, culture and relationships. These intangible forces are equally, if not more, powerful when compared with the tangible counterparts. They impact on what, how and why we do what we do. Values can guide us through complex and challenging decisions. Emotions, such as love and fear, can drive us to make choices that are seemingly irrational to others. The unspoken power of culture can steer good people to do terrible things to ensure they ‘fit in’ to an abstract social construct. This Intangible World is incredibly powerful and impactful in our lives.
Businesses know this is important, that is why they have spent millions on culture surveys. Many run pulse checks to ask people how they are feeling. Employee Net Promoter scores to see if their employees would recommend this as a place to work. Organisations across the globe have worked to try to measure and report on their culture and values. They have endeavoured to take the Intangible world and turn it into a Tangible measure they can track, compare and report on to their Board. Clearly this has failed.
The objective measures for the Commonwealth Bank in 2008, amid the realisation of possibly the worst transgressions by employees, was ranked amongst the Best Practice globally on Gallup’s Worldwide Benchmark. It took a shock of the Royal Commission to drop CBA’s employee engagement score from close to the Top 10% globally at 78% in March 2017, to a low of 72% by March 2018. Not surprising given the negative reports and scandalous admissions that fronted newspapers across the country. However, this also clearly shows that they are measuring the wrong things. The culture that created, allowed or simply tolerated the highly unethical behaviour was objectively measured as nearing global best practice!
What is clear from our experience and research is that the complex and abstract nature of the Intangible World means we cannot rely on metrics and measures to understand it. We cannot hope a survey will tell us about our culture any more than we can expect a spreadsheet to tell a love story, or a set of numbers to illuminate the subjective beauty of a piece of art. You cannot understand the Intangible World using a Tangible language. What businesses need is a greater understanding spread throughout their organisation of what this world is, why it is important, and most of all, how to effectively support and provide leadership in this space. They need people leaders who are monitoring, interrogating and influencing the Intangible World as equally proficiently as they are doing with spreadsheets and operational changes on the Tangible World.
This is where we need Leadership, Empathy and Clarity embedded throughout our organisation that is able to ensure that on the path from planning to outcomes, we execute in a way that delivers Purposeful Performance.
- Without Clarity of the vision, values and strategic intent of the organisation, people within the business have no compass to guide them through complex, challenging and ambiguous times.
- Without Empathy and understanding of the true impacts the organisation has on people’s lives inside and outside the business, it is easy for business to become a game based on rules instead of the moral and ethical obligation to do what is right.
- Without Leadership, the ability for people to step into the tensions that arise and be empowered to constantly identify, question and challenge the decisions and behaviours of the organisation at all levels, small issues become the new norm and quickly fester into larger problems.
Sadly, too many Boards and Executive Teams are developing world class strategic plans combined with beautifully scripted vision statements full of emotive language and inspiring possibility. Yet without clarity, empathy and leadership embedded throughout their businesses even the best plans can quickly become distorted. We need these skills in everyday execution. Many people deep in the belly of the business who are hearing the small murmurs that become rumbling earthquakes. People that are staring into the eyes of customers and understanding the human impact.
We need your businesses to deliver Purposeful Performance. Meaning the people within your business need clarity of purpose, empathy & human understanding, and most of all, they need to be empowered with ethical & moral leadership.
For more information on the author please see danielmurrayspeaker.com