people risks, compliance motivation and culture part 2 ve 20090818

People Risks, Compliance Motivation and CulturePART 2: Solutions

Keryl Egan Stormont Consulting

Presented at the 6th Annual Financial Services and Compliance Conference, Sydney, February 9-11, 2009

Copyright 2009 Keryl Egan and Stormont Consulting

Applying Influencer to Compliance Motivation and Culture

Influencer is a Vitalsmarts programme which provides amethodology for bringing about behavioural and cultural change. Inthis presentation Influencer is applied to culture change at thehypothetical Blue Sky Bank.

Keryl Egan is a Vitalsmarts certified trainer for Influencer and CrucialConversations.


Navigating Change

with Influencer

InfluencerThe Power to Change Anything


Problems with Compliance MotivationMeasures of the current culture on the trading floor atBlue Sky Bank indicate that 55% of traders regardcompliance as obstructing their trading objectives andtherefore seek ways of circumventing or ignoringregulations.

Blue Sky Bank is seeking to develop effective internal selfregulation and to preserve its reputation as a sociallyresponsible corporate citizen.

Setting the Sails for ChangeBlue Sky Clarifies is Current Position


Setting the Sails for Change with Influencer


Applying the Influencer Model Clarify Blue Sky Bank’s outcomes:

Why does compliance matter and what has to change? Research the context and problem.

Find Vital Behaviours: What would people have to do to obtain the Bank’s desired compliance

outcomes? Who does it well and what can be learned from them?

Crucial Moments: When do the vital behaviours matter the most?

Use Influencer Six Sources of influence to promote selected vital behaviours


Clarifying Outcomes: More external regulation or more internal motivation

The National Australia Bank solution: Excessive focus on process, documentation and procedure manuals rather than on understanding the substance of issues, taking responsibility and resolving matters.

A Carapace: Measures external to human motivation do not have the flexibility, judgment and balance necessary for human systems.


DESIRABLE OUTCOMESInternal Values and Grace in Execution Personal and Social Values Develop

an internal backbone & core strength in the company through shared and stated values

A Framework provides Safety Regulations and compliance are used to provide a framework for good judgment, initiative and informed risk taking

Compliance and Freedom An agile, motivated culture provides security and strength but also allows for boldness, skill and degrees of freedom.


Blue Sky Bank Develops a Desirable Outcome

Outcome Statement

“Within 12 months, by July 1st 2010, there will be a70% measurable improvement in traders’ ability toreach their trading goals whilst working within currentregulatory requirements.”


Design a Setting for Pro-social Growth

Arrange a hierarchy of experiences

Start with a single, small act of responsibility or acknowledgement

Gradually escalate these acts of responsibility or acknowledgement


INFLUENCER: Find the first Vital behaviours

Find specific and measurable behaviours which demonstratethat traders are actively pursuing their trading objectives andobserving current regulatory requirements.

What would you see the person actually do which shows this?

What would be the impact if they did this? How can you measure it and its impact?


Derive Vital Behaviours from General Principles for Pro-social Growth (Zimbardo)

Encourage admission of mistakes

Encourage personal responsibility - prevent diffused responsibility

Reduce anonymity by acknowledgment of self worth

Support critical thinking - discourage blind conformity to the norm Discourage small transgressions which can escalate

Reward moral behaviour


Examples of Vital Behaviours at Blue Sky Bank

Speak up about violations of compliance rules and challenge each other on the spot

Admit to mistakes without fear of reprisal

Encourage challenge, problem-solving and discovery of innovative solutions


INFLUENCER MODEL: Define Crucial Moments

When are these behaviours critical to success?

At what time of day, month, year does it matter most?

Which conditions make it a crucial moment?


Examples of Crucial Moments When someone has just ignored or by-passed a

regulation

When business is brisk and time is short

You have made a mistake and you are tempted to hide this


Putting It All Together

Research and Diagnosis: The reason for by-passing regulations No time Poor systems and access to daily changes in regulations Pressure from clients or upper management Inexperienced back office staff Compliance regulations don’t make sense or have no real meaning

Vital Behaviours: Start small and add more behaviours over time. Blue Sky Bank starts with Traders speak up and say ‘no’ to clients even when they may lose the

client for doing so Middle and back office say ‘no’ to traders who ignore compliance All check regulatory changes consistently and often


Sources of Influence to Promote Compliance & Achieve Desired Outcomes Research shows

most people apply only one source of influence at a time when they want to change behaviour

People who use multiple sources of influence achieve better results X 10

Designing an influence strategy takes time, skill and courage BUT…..it makes success inevitable!!


Six Sources of Influence for 3 Vital BehavioursSpeaking Up, Admitting Mistakes, Volunteering Ideas

Motivation AbilityPersonal Connect the person to their own

values. Create a crisis ofconscience by expecting people tospeak up.

Provide training to enable the vitalbehaviours e.g. Crucial Conversationstraining for speaking up in high stakes situations

Social Find role models and opinionleaders to help others to speak up, admit mistakes and volunteer ideas

Seek support of senior management who are willing to provide resources or knowledge and problem-solving

Structural Design incentives and rewards forspeaking up, admitting mistakes and innovating

Use office design, data and cues plus IT tools to keep the vital behaviours in mind


Creating an Influencing Strategy

Source of Influence 1: Managers describe socially responsible reasons for compliance and speaking up & admitting mistakes: give stories and examples

Source of Influence 2 : Training in communication provides skills for speaking up

Source of Influence 3: Engage opinion leaders to lead the way

Source of Influence 4: Upper management provides resources and removes technical obstructions to compliance and problem-solving

Source of Influence 5: Public acknowledgements and rewards for speaking up, admitting mistakes and finding solutions.

Source of Influence 6: Place reminders, data and cues in easy to see places


Measuring Success Measures compliance incidents, reporting and handling over

the year to July 1st 2010.

Criteria for team performance and productivity includes behavioural measurements and ratings

Measure pro-social engagement, collaboration and job satisfaction over one year from base measure

Analyse and evaluate results to determine next steps


Continuous Improvement Define the next set of desirable outcomes

Develop the next set of vital behaviours

Construct the next influencing strategy


P.O. Box 327, Leichhardt NSW 2040Ph: 02 9564 0425Mobile: 0414 734 840Email: [email protected]: www.stormontconsulting.com

Thank you


References

APRA, March 2004: Report into Irregular Currency Options Trading at the National Australia Bank Bullen, D: Fake : My Life as a Rogue Trader. Publ. by Wiley 2004 Calavita, K and Pontell, H: Heads I win, Tails you lose: Deregulation, Crime and Crisis in the Savings and Loan Industry 1990 Enron: The Smartest Guys in the Room HDNet Films 2005, Dendy DVD Heimer, C. “Thinking About How to Avoid Thought: Deep Norms, Shallow Rules, and the Structure of Attention” in

Regulation & Governance (2008) 2, 30–47 Miller, A. The Sociology of Good and Evil, Guildford Press, NY, 2004 Parker, C. The Open Corporation: Effective Self Regulation and Democracy, Cambridge University Press, 2002. Patterson K, Grenny, J, McMillan, R, Switzler,A “Crucial Conversations: Tools for Talking when Stakes are High” NY 2002 Patterson K, Grenny, J, McMillan, R, Switzler,A. “Influencer” McGraw Hill, NY 2008 Price Waterhouse Coopers. Investigation into foreign exchange losses at the National Australia Bank 12 March 2004 Sheedy, E “ Applying an Agency Framework to Operational Risk Management” CMBF Papers No.22 Applied Finance

Centre, Macquarie University, August 1999 Steare, R “ What’s wrong with business: Integrating Profitability, Responsibility and Ethicability”® Price Waterhouse

Coopers Stevens, Glen: “Education, Integrity and Common Sense.” MAFC Issues Paper, 2003 Thompson, Dianne: “Accountability and Board Functionality: National Australia Bank’s Experience”. Paper for presentation

at the 11th Finsia - Melbourne Centre for Financial Studies Banking and Finance Conference, “Banking and Securities Markets: Convergence, Innovation and Regulation” 2006

Zimbardo. P: “A Situationist Perspective on the Psychology of Evil: Understanding How Good People Are Transformed into Perpetrators” in A. Miller, The Social Psychology of Good and Evil. Guildford Press, NY, 2004

people risks, compliance motivation and culture part 2 ve 20090818

Documents

compliance matter

compliance conference

culture influencer

traders regard compliance

examples of vital behaviours

hypothetical blue sky

blue sky banks outcomes

blue sky bankstarts