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Company Loyalty Could be the Problem

October 25, 2019

 

 

 

An employee’s loyalty to their organisation could lead to poor consumer outcomes. 

 

These are the findings that Macquarie Professor Elizabeth shared with the attended of the Lighthouse Series Lecture at the Macquarie City Campus earlier this week.

 

Risk culture is about staff perceptions of the Behavioural norms to do with managing risk. Risk culture is not just the policy documents or on the website it is not is much the formal statements that the senior of the leaders. It’s much more about the daily practices—what’s enacted in the workplace rather than what is espoused in the glossy brochures.”

 

She said that in theory risk culture should address all types of culture including, misconduct but so far it seems risk culture in banks has not been particularly successful in stamping out misconduct. 

 

She said that the royal commission highlighted lots of incidents of misconduct, and that is because financial institutions have not yet been able to implement a good risk culture and the other potential problem is ‘that we are barking up the wrong tree.’

 

This was one of the big drivers of the project which had 7000 respondents. 

 

Misguided loyalty 

“In the last ten years or so academic researchers have identified a concept called the unethical pro organisational behaviour or (UPB),” she explained.

 

She highlighted that the behaviours under this category are quite complexed since these behaviours can be detrimental to consumers but help the firm out of what Professor Sheedy calls a ‘false sense of loyalty’ to the organisation.  

 

“Now sometimes survey research is criticised because of concerns of biased reporting, these particular survey items actually work quite well from the viewpoint of social desirability bias because there is justification built into them—that people might feel more willing to admit to bad behaviour if there is some justification –it’s for the good of the organisation,” she explained. 

 

The study controlled for what is referred to as impression management which is the tendency for some to try to get others to think well of them.

 

Their focus was on the construct of a self-interested culture which seems to the factor that is likely to breed poor conduct. 

 

“So, as we expected, a more self-interested culture was associated with higher unethical poor organisational behaviour, and that was true in each of the samples we studied—it was a very consistent finding. “

 

She continued that “Higher avoidance was also associated with increased UPB as we predicted. The other risk culture factors-proactive and manager were significant in some but not all of the samples.”

 

She highlighted that that self-interested culture moderates the behaviour between risk culture and UPB. 

 

She said that the optimum environment that leaders should be striving for is one that is low in self- interest. 

She said that risk culture alone is probably not enough. 

 

The problem with Avoidance 

On the Macquarie risk culture scale, she highlighted avoidance as a partial strong measure of predicting bad behaviour. 

 

“So, in a culture that has avoidance—the perception that risk issues and policy breaches are ignored, downplayed or excused—so you want to have low scores on this one. It captures the idea that senior leaders don’t want to hear about any issues. 

 

Top performers can get away with anything. People feel that they can report issues, but no one seems to take any notice. Short term profits always seem to trump the risk management agenda.” She explained.

 

She said that one of the things that the researchers have noticed through the 17 assessments of risk culture that they have done over the years is that senior leaders have a ‘very rosy view’ of their company’s culture. 

 

“There is often a massive disconnect between the scores of the senior leadership team and the scores of staff generally, especially in large organisations.”

 

 

What can leaders do?

Professor Sheedy suggested steps based on the study for leaders to take into consideration:

  • Leaders should promote the concern for the customer as an end and not just because of consequences 

  • Leaders should risk issues are never tolerated or ignored or avoided

  • Staff should be coached in how to raise issues and coach managers how to listen

  • Throughout the organisation, managers must be effective role models and advocates 

  • Performance measurement and report mechanisms must be reconsidered 

  • Pretty policies are a start, but the real work is making sure that they get implemented consistently throughout the organisation

 

 

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