Banking scandals: do corporate values mean anything? Can they?
Sir Mervyn King: “Something went very wrong with the UK banking industry and we need to put it right” (29th June 2012).
In the last 10 days the Financial Services sector has again been rocked by scandal driven by individual and corporate greed. This latest chapter started with Barclays Bank being fined £290m for fixing the Libor interest rate, with a number of other banks still under investigation. This comes soon after a series of damaging revelations, including the mis-selling of personal payment insurance and financial products to small businesses, all in a period of economic recession that has been directly attributed to activities of the financial services sector.
This led yesterday to the resignation of Bob Diamond, Barclays CEO, while Sir Mervyn King, Governor of the Bank of England, has called for a wholesale change in banking culture.
In response to widespread criticism of the banking industry, Mr Diamond said he was “sorry that some people acted in a manner not consistent with our culture and values”. But what are corporate values and do they bear any relation to the values of highly paid, powerful and driven Bankers?
What are Values?
In recent years most major companies globally have developed and adopted formal policies of corporate values and have tried to ensure these become tangible and meaningful in the way the organisation’s people behave. However, there is no ‘one size fits all’ – every organisation has created their own value-set to reflect their specific environment, agenda and goals. This can create challenges, especially as the research suggests there are significant differences between what businesses and individuals regard as core values.
Corporate Values can be defined as the company’s institutional standards of behaviour. They’re about what the company stands for and how its employees should behave. Often they take a framing role for the business that gives it a purpose beyond profit.
While there are significant differences between the frameworks of individual businesses, a survey of 9,500 Senior Executives within 365 companies across 30 countries by The Aspen institute and Booz Allen Hamilton (2005), highlighted some clear and consistent themes and interestingly, ethical behaviour/integrity was the most common(see below).
Why have Corporate values frameworks become more prevalent?
The recent high profile cases of ethical breaches and non-compliance with regulatory standards and legal frameworks have resulted in billion-dollar fines, protracted lawsuits, criminal convictions of executives, bankruptcies and severely tarnished corporate reputations. When surveyed, 90% of senior executives agreed that a strong corporate statement addressing ethical values is critical to encouraging individual employees to take appropriate actions and report inappropriate behaviour (Aspen/Booz Allen Hamilton, 2005).
However, the benefits of corporate values transcend legal and regulatory compliance. Research by Collins and Porras (2005) revealed that the key factor common to those companies that had been enduringly great performers – at the top of their market for 100 years or more – was because their base of values was strong enough to provide the employees of the company with a common bond. It seems clear therefore, that corporate values can become embedded in an organisation and drive organisational performance.
Values at an individual level have been defined as “desirable, trans-situational goals that vary in importance as guiding principles in people’s lives” (Ros, Schwarz & Sukis 1999). The most common framework used to understand individual values is the model developed by Schwarz (1994). Supported by research conducted across 55 countries, it specifies 10 distinct types of values that are seen to be common across most societies and cultures (see Fig 2 below).
Figure 2. Schwarz (1994) model of individual values
Work values for the individual relate to desirable end-states in the work environment, such as high pay & promotions (Power/Achievement), or working with people (Benevolence).
Perhaps most interestingly, Schwarz’s research suggests that facets of the model that are seemingly linked to ethical elements of corporate frameworks (e.g. Tradition & Conformity) are defined in terms of behaviour in respect to the prevailing culture and norms. However the question then turns to whether individuals align to a corporate culture, a corporate sub-culture, or an alternative culture related to wider groups, such as nationality or religion.
Evidence emerging from the recent Libor scandal suggests that the corporate sub-culture may be key; groups of individuals with common roles, goals and shared values, operating outside of the espoused corporate value framework.
How can recruitment and assessment change a sub-culture?
Clearly there is a recognised need to ensure that all parts of the banking sector are aligned to their company’s formalised value framework. While there are a number of ways to change a sub-culture, serious situations, especially those where there is evidence of criminality, often begin with a series of resignations or dismissals of key perpetrators. This creates an immediate opportunity to begin the process of culture change through bringing in new employees with a different value-set, more closely aligned to the wider corporate framework.
But how should values be assessed in candidates? As values are intended to apply to all employees equally, measures are required that transcend the role-level criteria that normally guides the assessment process – i.e. competencies, technical knowledge, experience etc.
Values assessment in a Recruitment Interview
Typically selection for all roles, regardless of level or location, will involve an interview at some point in the process. This therefore provides a consistent and cross-culturally acceptable way to further probe an individual’s congruence with the organisation’s values.
While the focus of the interview should still continue to be based on specific behaviours exhibited in past situations to ensure that the predictiveness of the process is not impacted, a greater focus on why individuals behaved in a particular way can provide a clear insight into the value-set underpinning specific actions.
In order to facilitate this process, competency-based question banks should be redesigned to ensure there is an opportunity to elicit evidence of underlying values, particularly in terms of a value focus to follow-up probing. Ensuring this approach is adopted across the organisation is essential and here tools such as on-line interview guide generators can be key in enabling consistency of approach, as well as saving time and resources.
- Ros, M, Schwartz, S.H and Surkis, S (1999) Basic Individual Values, Work Values, and the Meaning of Work
- Chris Kelly, Paul Kocourek, Nancy McGaw, and Judith Samuelson. 2005. Deriving Value from Corporate Values.
- The Aspen Institute and Booz Allen Hamilton.
- Collins and Porras (Built to Last: Successful habits of visionary companies, 2005)
- Schwarz S.H. (1992). Universals in the content and structure of values: Theoretical advances and empirical tests in 20 countries. In M. Zanna (Ed.), Advances in experiential Social Psychology Vol. 2.5 (pp.l-6S). New York: Academic Press. Schwarz S.H. (1994). Are there universal aspects in the structure and contents of human values? Journal of Social Issues. 50. 1945. Schwarz, S.H. (1996). Value priorities and behavior: Applying a theory of integrated value systems. In Seligman.1.M. Olson. & M.P. Zanna (Eds.).Values: The Oiirario, symposium, Vol. 8 (pp.1-15).Hillsdale. NJ: LawrcnccErlhaum Associates Inc.
Jonathan Brown, Director EMEA RPO Solutions Architecture