How to get financial services companies to combine human purposes with commercial imperatives?
I’ve spent the last twenty-five years arguing that a focus on purpose, values and relationships is the key to a company’s success, and opens the door to it making a valuable contribution to society.
So, I was pleased to accept an invitation from Jonathan Davidson, a director of the Financial Conduct Authority, the UK’s regulator of financial services companies. He has set up a ‘Purpose Working Group’. The introductory meeting took place last week. The group included CEOs and leaders from banking, insurance, stock exchanges and professional bodies.
To me the point is not simply to have a purpose, any purpose. It is to have a purpose that meets the real needs of human beings. Participants readily agreed with this. This wasn’t surprising with the combined forces of Blueprint for Better Business, the Purposeful Company Project and Tomorrow’s Company in the room! Jo Garner of Nationwide Building Society was also there, and that reminded me of what he had said in a lecture for Tomorrow’s Company and CIMA back in 2011 when he was at HSBC. He had described the dedication of Vandeleur Grayburn, the Chief Manager of HSBC in Hong Kong. The British and Allied forces surrendered to the Japanese in December 1941. Grayburn stayed at his post, doing all he could to help his clients and their community. He was in due course arrested, interrogated, imprisoned and, as a result died within the year.
In that lecture in 2011 Jo made his plea for a return to ‘courageous integrity’,
‘His decision to remain in Hong Kong was a decision of great courage and great integrity. There was no corporate manual or code that could have guided him to make that decision. It was a decision of loyalty, of love. A decision from the heart. How, as a community of business leaders, have we evolved from a world where there is evidence of such principled and distinguished behaviour, to a world where business is so mistrusted?’
This lecture demonstrated the belief, which was reaffirmed by the FCA meeting, that purpose is not something a company plucks from a textbook or management awayday. It needs to be discovered in the life and history of an organisation.
Several participants acknowledged that too often the financial services industry had collectively denied its customers the best or fairest deal. They argued that such behaviour might seem to help the industry in the short term but harm it in the long term.
I wanted to hear examples that demonstrated a willingness of companies to stand up to the pressures from short-termist fund managers and quarterly capitalism. I was told about two insurance companies – Hiscox and Zurich – who had in different ways demonstrated a commitment to put customers’ needs first and achieve longer term success by serving those needs.
Jo Causon of the Institute for Customer Service gave us evidence that linked the highest levels of customer service with vastly improved profitability. She also linked improved customer service with the quality of leadership, confirming the old truth that your people will earn loyalty from your customers if you have earned loyalty from them. (In the days of the 1995 Tomorrow’s Company report on business purpose, the evidence we quoted came from Frederick Reicheld’s work on ’loyalty based management’)
Yet still I didn’t feel our discussion had nailed the relationship between purpose and customer service. Then one of the CEO’s in the room said what was on my mind. There is a hierarchy of purpose just as there is a hierarchy of needs. From serving ourselves through serving the team, through serving shareholders and other stakeholders, through to wanting to be a force for good in society. Many companies may seek to get more engaged employees and better customer service, but when the going gets tough how many are willing to stay true the higher levels of purpose and make human needs the priority ahead of immediate business pressures?
Later that day I was reminded of this by a customer experience of my own. I had a proactive, helpful-sounding call from my software provider warning me that someone might be trying to seize control of my computer.
Hang on – this just felt too proactive. I asked a few questions. The answers were glib. It was a scam.
This took me back to our FCA discussion. There is nothing to be admired if slick customer service is achieved in pursuit of dubious purposes or to quote a former FSA chair, socially useless purposes. There are still too many companies in financial services which may be very good at motivating their employees but may have dubious purposes and values. Which human or social needs do today’s stock exchanges serve with their prioritisation of high frequency trading? I fear they incite short-termism and the casino economy and through this reward people whose motivation is to disrupt wealth creation and undermine stewardship. Yet their employees may be highly motivated to serve their customers.
The substance of one’s purpose matters and so does the ownership of one’s organisation. (Why did government’s allow stock exchanges to demutualise in the first place?) Towards the end of the afternoon I went to pick up new spectacles from my local family business. I paid about 20% more to deal with a family business that was trustworthy, agile and empathetic, and on my doorstep. In an age of FinTech, financial services companies, especially the established ones, need to learn how to combine technical competence with empathy and accessibility. Otherwise they will be swept away by the new generation of companies like Atom Bank, whose example is quoted in The Courage of Their Convictions: how purposeful companies can prosper in an uncertain world – the recent Tomorrow’s Company study which is full of positive examples of companies which seek to affirm the human purposes of their business.
Ownership and proximity are two aspects of purpose that deserve more discussion in this work. A regional stock exchange might retain greater interest in the human purpose of its client savers and invested businesses. Smaller enterprises don’t allow themselves the blatant hypocrisy of the big companies who claim to be socially responsible but have so organised their payment systems that they take rigidly four months to pay small businesses.
If we are ever to win back trust in financial services, we will need to see real devolution not just of authority but also of ownership and decision-making.