James Beck – Do You Have a Customer-Centric Culture?

Transcript

1. Effective Governance Part of the HopgoodGanim Advisory Group Level 8, Waterfront Place 1 Eagle Street Brisbane QLD 4000 T: 07 3024 0455 www.effectivegovernance.com.au Advisors Queensland, New South Wales, Victoria and Western Australia Do you have a customer-centric culture – do you know your people risk? James Beck
2. Topics •  How culture is cri-cal to the success of any organisa-on •  What is ‘people risk’ and what does it mean for your organisa-on •  How does the board know that people risk is being handled appropriately •  Strategies you can use to embed customer- centricity into your organisa-on and its culture Be?er Boards Conference 2018 2
3. Organisational culture
4. What is culture? ‘…culture is the shared assump-ons, beliefs, values and norms of the company insofar as these drive shared pa,erns of behaviour…’ Source: Egan, 1994a, ‘Cul-vate Your Culture’, p. 39 Be?er Boards Conference 2018 4
5. ‘Culture is the organiza1on’s immune system.’ Source: Watkins, 2013, HBR
6. Why culture matters Be?er Boards Conference 2018 6
7. Being customer-centric •  To be customer-centric, the organisa-on needs to put its customer at the centre of its business •  What is best for customers should drive: ‒  the organisa-on’s strategies and decision making, ‒  the ways its people and systems are designed, organised and managed Source: Galbraith, 2005 Be?er Boards Conference 2018 7
8. Customer-centric culture •  A truly customer-centric cultures come through in the aUtude and approach of your people •  The mission or purpose-driven nature of NFPs means the tradi-onal ‘customer’ includes ‒  Beneficiaries of the NFP’s mission, i.e. customers, clients ‒  Volunteers ‒  Funders ‒  Donors ‒  Others, e.g. event par-cipants Be?er Boards Conference 2018 8
9. Why culture matters: The regulators are watching… Corpora1ons can be liable for failing to ac1vely manage corporate culture / risk. •  Criminal Code Act 2001 (Cth), Part 2.5, Sec-on 12.3(2)(c)-(d). Increasing focus on culture, responsibility and accountability of directors: •  Changes have been made to the Fair Work Act 2009 (Cth) to ‘protect vulnerable workers’ •  Qld’s Work Health and Safety Act 2011 now includes the offence of ‘industrial manslaughter’ •  In 2015, ASIC suggested amendments to the Corpora@ons Act 2001 (Cth) to include Part 2.5 of the Criminal Code Act 2001 (Cth) and to provide for new offences that impose civil penal-es and Administra-ve sanc-ons on directors who are complicit in the contraven-on of a law Be?er Boards Conference 2018 9
10. High Performance Board Model Board Performance Organisational Performance CEO Performance Organisa-on Environment Organisa1onal Performance Work with and through the CEO and Execu1ve Board Environment Strategy CEO and Execu-ve Monitoring Risk Management Compliance Policy Framework Networking Stakeholder Communica-on Decision Making Board Competencies • Knowledge • Skills • Abili-es • Diversity • Size Board Structure • Roles • Processes • Procedures • Commi?ees Board Behaviour • Personality • Values • Norms • Rela-onships Board Dynamics Legal Framework Organisa1on Type Cons1tu1on History Strategy Board Roles Risk Management Be?er Boards Conference 2018 10
11. Governance and Culture – the link BOARD ROLES Understand Current State of… •  Strategy; •  Compliance; •  Risk management; •  CEO monitoring •  Policy framework; •  Etc… •  CULTURE: The way things are around here… DESIRED STATE OF… •  Strategy; •  Compliance •  Risk management; •  CEO monitoring •  Policy framework; •  Etc… •  CULTURE: The way we want things to be around here… GOVERNA NCE •  Understandi ng & oversight •  Guidance •  Monitoring Be?er Boards Conference 2018 11
12. Governance insights from the Royal Commission & APRA report into CBA Boards must: 1.  Do more to set the ‘tone from the top’ and monitor the culture 2.  Gather the necessary details to ‘know what they don’t know’ about what is going on in the organisa-on 3.  Know how quickly bad news rises to the board, and then how quickly does the board react 4.  Pay greater a?en-on to remunera-on prac-ces beyond the C-suite 5.  Consider the composi-on, mix of skills, exper-se and diversity of thought required to be successful 6.  Ensure that trust is con-nually validated through strong metrics 7.  Monitor the organisa-on’s dealing with regulators Be?er Boards Conference 2018 12
13. Governance insights (cont’d) Directors must a)  be more visibly engaged around opera-onal risk, customer complaints and feedback, and regulatory compliance •  But this does not mean becoming a quasi-execu-ve of the organisa-on b)  have the necessary -me to devote to their du-es, i.e. not commiUng to numerous boards c)  meet the community’s expecta-ons that stakeholder interests will be considered, while mee-ng the legal du-es to the organisa-on Be?er Boards Conference 2018 13
14. Current Expectations ScoA Morrison- Treasurer 30Apr2018 Be?er Boards Conference 2018 14
15. CORPORATE CULTURE AND THE ROLE OF THE BOARD RECOGNISE THE VALUE OF CULTURE DEMONSTRAT E LEADERSHIP BE OPEN AND ACCOUNTABL E EMBED AND INTEGRATE ASSESS, MEASURE AND ENGAGE ALIGN VALUES AND INCENTIVES EXERCISE STEWARDSHIP Source: FRC, 2016 The role of the board in culture Be?er Boards Conference 2018 15
16. The Tricker Model Conformance roles Performance roles Outward- looking Provide accountability Strategy formulation Inward-looking Monitoring and supervising Policymaking Past and present focused Future focused Approve and work with and through the CEO Adapted from Tricker, B 2012, Corporate Governance: Principles, Policies, and Practices, 2nd edn, pp. 45-46 The Tricker model is a well-recognised framework for analysing the board’s functions Be?er Boards Conference 2018 16
17. Role of the Board – what’s missing? Better Boards Conference 2018 17
18. Performance - Embedding a customer-centric culture •  Listen to your customers – internal and external •  Make customer-centricity part of your strategy and core values •  Communicate to embed customer-centricity – bring the customer to the forefront of everyone’s thinking •  Hire the right people •  Enter the right partnerships •  Recognise and reward the behaviour and thinking you want to encourage •  Measure your culture and customer sa-sfac-on •  Confront and measure your people risk Be?er Boards Conference 2018 18
19. What is people risk?
20. Why does people risk matter? Be?er Boards Conference 2018 20
21. Some definitions of people risk ‘…the risk of loss resul-ng from inadequate or failed internal processes, people and systems or from external events.’ Basel Commi?ee on Banking Supervision, 2011, p. 3 ‘…the risk of loss due to decisions and non decisions of people, inside or outside of the organiza-on.’ Blacker & McConnell, 2015, p. 19 Be?er Boards Conference 2018 21
22. Our definition of people risk We define people risk as the risk taking behaviours (decisions or ac1ons) of people either individually or in groups. It incorporates the concepts of: a)  whether such behaviours are deliberate or unintended (e.g. managed risk taking is onen desirable to achieve organisa-onal goals); b)  whether the behaviours can be monitored and/or controlled by organisa-onal mechanisms (i.e. structures, oversight systems, rules, procedures); and c)  the degree to which such behaviours are permi?ed or even reinforced by organisa-onal culture (i.e. the way things are done around here). Be?er Boards Conference 2018 22
23. Six elements of people risk Unethical and inappropriate behaviour Poor quality decision making Incompetence, over-confidence and poor performance Lack of capability or talent Poor recruitment or staffing levels Low morale or staff disengagement Be?er Boards Conference 2018 23
24. People risk and customer-centricity •  It is not the processes or procedures that deliver customer services, run facili-es or make decisions, it is the people tasked with following them that do that •  The board must ensure that the people it tasks with following the processes and procedures its puts in place: ‒  Understand the processes and procedures put in place ‒  Have the confidence and knowledge to know how and when to apply them Be?er Boards Conference 2018 24
25. People risk and customer-centricity •  Any failure in people risk management impacts: ‒  Customer services ‒  Customer health and wellbeing ‒  Workforce health and safety ‒  Security of the organisa-on’s funds and personal data Be?er Boards Conference 2018 25
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27. Board oversight options Better Boards Conference 2018 27
28. Governance of people risk Be?er Boards Conference 2018 28
29. The shadow side ‘consists of all those things that substan@ally and consistently affect the produc@vity and quality of the working life of a business, for beAer or worse, but which are not found on organisa@on charts, in company manuals or in the discussions that take place in formal mee@ngs’. Source: Egan, 1993, p. 33 Be?er Boards Conference 2018 29
30. Understanding where the risks lie Is… •  Independent and objec-ve •  Inclusive of management •  Provides immediate results •  Quan-fiable and pragma-c Is not… •  An engagement survey •  Part of a standard risk management framework •  A cultural change program •  Conceptual Measuring people risk requires a diagnos-c that: Be?er Boards Conference 2018 30
31. Filtering and Transparency How do you know…?
32. Filtering – the human condition Be?er Boards Conference 2018 32
33. The goal - transparent relationships Board Management People Risk Appe1te Statement Data analy1cs Be?er Boards Conference 2018 33
34. The Process
35. The process Be?er Boards Conference 2018 35
36. Our process - Phase 1 Gives Boards insight and tools to know what’s going on… Better Boards Conference 2018 36
37. High Risk Themes - example Areas iden1fied by the surveys and supported by interviews Board’s Opinion (No. of par1cipants=5) Management’s Opinion (No. of par1cipants=14) (Nil Execu1ves par1cipated) Employees’ Opinion (No. of par1cipants=40) Recruitment or Staffing Levels We lack the people to do our work Disagree Agree Strongly Agree Capability or Talent Loss of technical exper-se Agree Strongly Agree Morale or Staff Engagement The workload is overwhelming Strongly Agree Strongly Agree Workplace stress is a problem Agree Strongly Agree Ethical or Appropriate Behaviour Leaders don’t want to hear bad news Neutral Agree Quality of Decision Making Work is hampered by systems and bureaucracy Agree Agree Strongly Agree The risk of making poor decisions is growing Disagree Neutral Agree Be?er Boards Conference 2018 37
38. Phase 1 - People Risk Diagnostic outputs Be?er Boards Conference 2018 38
39. Caution
40. What the Board and CEO can expect during the process •  There may be ini-al disagreement with some of the Diagnos-c’s findings - because data previously provided to the Board on the People Risks iden-fied in the Diagnos-c will support an argument that the risks are under control; •  If ques-oned, Management will likely say that the iden-fied People Risks are known and either are under control, or plans are in place to address them (and Management will genuinely believe this); and •  There may be a desire to a?ack the process, rather than consider the Diagnos-c’s data, which may run contrary to current beliefs. Be?er Boards Conference 2018 40
41. APRA outlines pilot reviews of risk culture Regulation on the rise, and b behaviour’s th culprit ASIC tells banks to raise bar on culture Nazi scandal rocks elite private school Culture drives People Risk APRA warns insurers about, culture, governance, decision making Plagued by scandal, FOX struggles to change culture How criminal gangs ran rings around the Commonwealth Bank culture
42. Benefits of a people risk survey •  The benefits of conduc-ng a specific people risk survey include: ‒  Iden-fying any misalignment of the board’s expecta-ons of the organisa-onal culture and the staff culture in the workplace ‒  Establishing a clear and consistent repor-ng dashboard on people risk for the board ‒  Promo-ng transparent repor-ng rela-onships between management and the board ‒  Providing tailored informa-on and guidance on mi-ga-on of people risk ‒  Demonstrates the board’s proac-ve oversight of culture/risk Be?er Boards Conference 2018 42
43. Reporting and governance around people risk •  A people risk dashboard report: ‒  Graphs triangulate data to provide real insight ‒  Agreed and consistent people repor-ng framework ‒  Provides real transparency between management and the board ‒  Allows discussion to focus on strategic issues Be?er Boards Conference 2018 43
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45. James Beck Effective Governance Tel: (07) 3024 0455 James.Beck@effectivegovernance.com.a u
46. References Basel Commi?ee on Banking Supervision. (2011) Principles for the Sound Management of Opera@onal Risk and the Role of Supervision. Basel, Switzerland: Bank for Interna-onal Se?lements. Blacker K and McConnell P. (2015) People Risk Management: A Prac@cal Approach to Managing the Human Factors That Could Harm Your Business, London: Kogan Page. Egan G. (1993) Shadow side ‒ internal company poli-cs. Management Today, September: 33-38. Egan G. (1994a) Cul-vate your culture. Management Today, April: 39-42. Egan G. (1994b) Working the Shadow Side: A Guide to Posi@ve Behind-the-scenes Management, San Francisco: Jossey-Bass. Financial Repor-ng Council (FRC). (2016) Corporate Culture and the Role of Boards. London: FRC. Galbraith JR. (2005) Designing the Customer-Centric Organiza@on, San Francisco: Jossey-Bass. Hillson D and Murray-Webster R. (2007) Understanding and Managing Risk A\tude, Aldershot, Hampshire: Gower Publishing Limited. Be?er Boards Conference 2018 46
47. Connect with us Find us on Level 8, Waterfront Place 1 Eagle Street, Brisbane QLD 4000 T: 07 3045 0455 advisors@effectivegovernance.com. au www.effectivegovernance.com.au Advisors in Queensland, New South Wales, Victoria, and