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The Competition and Markets Authority’s (CMA) retail banking market investigation published in August calls for wide-reaching reforms that could shake up the banking sector for many years to come. It wants to ensure that customers get a better deal from their banks and benefit from technological advances.
Reforms include requiring banks to publish “trustworthy and objective” information on quality of service on their websites and sending out periodic and event-based prompts when appropriate to inform customers of, for instance, a branch closure or increase in charges. The CMA also wants to make it easier for customers to “search and switch” their bank accounts.
The reforms demand that banks are far more transparent in their actions and make some fundamental changes to their relationship with customers. For this to happen, there is little doubt that it will require deep-rooted culture change at many financial organisations.
Banks should not fear such change though but see it as an opportunity. Evidence continues to mount demonstrating the correlation between business success and corporate culture. The Financial Reporting Council’s Corporate Culture and the Role of Boards report published in July stressed the link between a healthy corporate culture and long-term success. Meanwhile, a report from professional services firm EY found that culture is fundamental to business performance.
In its study of 100 board members from FTSE 350 companies, more than half (55 per cent) of respondents stated that investing in culture has increased their operating profits by 10 per cent or more. More than a quarter (27 per cent) said they had invested over £1 million in shaping and defining their culture and this rose to half (48 per cent) among FTSE 100 companies. Among the positive outcomes were reduction in breaches of organisational standards by three-fifths (61 per cent) while the same number reported improved employee performance.
There is also evidence to back-up the view that investors are increasingly demanding more information on organisational culture to support long-term business performance.
After years of being a rather nebulous concept, culture has become a key organisational asset that is starting to be properly understood and its importance recognised. As Kevin Hills, head of integrity and compliance at EY in the UK, points out these are the kind of improvements that make shareholders and potential investors “sit up and take notice”. The EY report also found, however, that the majority of boards still need to take greater responsibility for the “oversight, shaping and monitoring of culture”.
Culture change does not happen overnight and can take years to effect. And even when culture changes are achieved inwardly, it can take time for it to be perceived outwardly by customers. Often, it relies on fundamental behaviour change. Before an organisation can begin, it needs to delve deep into the psyche of its workforce to discover what is wrong with its current culture if, indeed, it has an identifiable one at all.
All of this requires, time, resource, knowledge and significant investment but as EY’s survey shows, it can be money well spent if organisations get it right. Time is rapidly running out for those leaders who turn a blind eye to the importance of organisational culture. It may still be invisible and intangible but its effect is there for all to see. And the message is clear: if your organisation fails to invest in its culture, you’ll soon find that people won’t invest in you.
Read more by Richard Chiumento,here
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