The incredible culture of the All Blacks.

Imagine owning a sports business that continued for well over 100 years and during that time had a winning record against all comers of over 83%?

In the Test arena – playing only against the best teams that all the other nations in the world can put up against them – that winning percentage is over 75%.  That is winning three quarters of the games played for over a century against the best the world can throw against them.

It is a phenomenal record, and arguably makes the New Zealand All Blacks the most successful sports team in the world ever.  As with any incredibly successful organisation there are lessons for anyone else who aspires to achieve excellence.

A quick disclaimer at the front end if I may: I am not an All Blacks supporter. Unfortunately they repetitively beat my team….but I know true excellence when I see it, and have long been intrigued with the culture that can produce such lasting success.

With well over 1,000 players having represented the All Blacks during that time, it cannot simply be about having some good players.

It is about culture.

Rugby has become THE sport in New Zealand…but in part that is because the All Blacks give New Zealanders such a strong sense of pride and national identity.  It follows that the culture and pattern of success attracts new talent to it, with the inevitable dream on the part of the many young males to be an All Black.  So the culture that has bred success also perpetuates the ongoing success of itself – the sport attracts the majority of the best playing talent in the country.

From a business perspective this highlights the importance of building the right culture in an organization.  The right high performance culture in itself attracts the talent required to perpetuate the dominance and prevalent culture.

Understanding the values that the All Blacks have built that culture around is where the real lessons are for us as business owners.  Ultimately this is an organisation that values high performance and success.  Winning is not an aspiration – it is an expectation.  Commitment is fully committed.  Like the chicken and the pig in bacon and eggs for breakfast – the hen is involved….but the pig is totally committed.

Do you doubt the commitment of these guys as they line up and perform the haka at the beginning of a game?

The team is far more important than any individual star.  Any individual star must reflect the team values, or the team itself manages the individual – long before management have to intervene the players themselves are working to protect their collective identity and reputation.  It is perhaps not surprising that this is continually the most disciplined and well drilled rugby team in the world.  They have an incredible work ethic….and practice, practice, practice in the pursuit of perfecting their business.

The culture is built upon some very simple, but core values, that are unshakeable.  Those that do not reflect the values do not get to stay – no matter how talented they are.

The culture has its rituals – many of which will never be known by distant outsiders like myself.  But one particular ritual intrigues me enormously.

The All Blacks are famous for performing a traditional Maori challenge – The Haka.  They do it against all comers before a game – lay down the challenge openly and aggressively.

But when a new member of the team joins the All Blacks, the incumbent team members welcome the new member with a personal Haka apparently.  Think about the power of that.

All of the history, the culture, the kudos and mana that the All Blacks have is thrown down in a welcoming gesture to their newest member – yet it is also a challenge to the new addition to the team.  It is something that would be highly honoured for a newly selected All Black, but it is also an act that establishes immediately the highest of expectations.

The culture is worked on deliberately and passed on continually.  And within that culture is a recognition and acceptance that change and constant innovation are required to stay on top.  Every All Black team enters a new “business season” with a clear plan about how they will innovate and perform better than the year before.  They know that what worked yesterday is probably not going to be good enough tomorrow.

The All Blacks are not just a sports team, they are big business.  Their commitment to maintaining a culture of excellence, performance, innovation and respect is evident.  Their commitment to the culture first though is even more evident.

That is the key lesson for any service business that wants to build lasting success.

www.financialadvisercoach.com

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Things haven’t changed since the 1960s. The Sex Discrimination Act might have been enacted in 1984 but not a great deal had changed since then.

And smart, savvy women wanted to know how they could encourage change in their own businesses. On Wednesday FINSIA held a managing your career session for women in business and on Friday Sphinxx held its fourth Ascend day also focused on promoting women in business.

Why is it so difficult? Because men and women speak different languages in the workplace.

Financial services is dominated by men, and as a result, the business culture has adopted the male forms of communication. Women need to translate their communication to one that is easily understood by the male mind.

While it was agreed there was no need to emulate men – and discard their femininity there was a message that men do business in their way and women do it theirs but when most of the decision makers in management remain in male hands then women need to be aware of “playing the game” in the same way.

Top tips

• Be visible. Too often, women remain invisible in the organisation. Many focus on their work and getting the job done to the exclusion of promoting themselves and the contribution they are making to a business. This can easily be rectified by working a little less and promoting a little more. It’s the way men have been doing business for some time.
• Take risks. They were afraid of taking risks. Whether this was to do a new job in which there were aspects they had not taken before, or leaving a company when they were not receiving the promotions they believed they deserved. According to Sphinxx Ascend guest speaker and managing director of Cameron Ralph Lynn Ralph, we shouldn’t worry so much about what could go wrong because, chances are, they won’t.
• Ask for what you want. Women are largely not demanding pay rises and promotions the way their male counterparts are. Sphinxx principal Jen Dalitz said, we should approach what we want like children focused on the Christmas presents that they want. Be tenacious. Don’t stop asking.
• Focus on return on effort. Women do not pay enough attention to the ROE (return on effort) when they strive for perfection in their work. Is the extra 20 per cent worthwhile when 80 per cent was already working to achieve your work needs so you could spend the additional 20 per cent focused on other business goals – like having yourself move up the corporate ladder.

Australian business seen as macho

According to business coach and researcher Dr Margaret Byrne, anthropologists around the world are agreed that Australia is between 10-12 of the countries rated the most masculine in the world. Japan ranks top of the lists.

We can see this translated into business by the use of language that is used. It is often based on sporting analogies, such as “track record”, “runs on the board”, “let that one go through to the keeper” and many more. As women we do not make a contribution that other people listen to? How impactful are you in a meeting setting?

“You are judged more and more in that than other parts of the job where you work alone.”

“As women, we are not yet at the starting line. It’s not Denmark or Norway,” Byrne said.

“If you can’t deal with meetings in Australian workplace culture you will never make it past the top of the middle,” Byrne said.

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If this is a myth, then let’s try it from another angle and consider the sheer cost to organisations of a lapse in organisational integrity in terms of money, distraction and reputation, as evidenced recently with the failure of organisations such as the Storm Financial Group.

The stakes are high. Poor ethical decision-making and unethical behaviour can be a function of a lack of organisational commitment or structure to establish an effective culture, where boundaries surrounding appropriate behaviour are well understood. This structure is only found in part in a traditional legal compliance framework, partly because its focus is on minimum behavioural boundaries, usually those set by the law.

Whilst compliance with the law is a necessary corporate motivator, history has shown it does not seek to improve general human excellence and distinction, nor does it guarantee business integrity and protection from all risks1.

Indeed compliance with the law represents a minimum standard of corporate performance that may fail to respond to key stakeholder expectations, such as Regulators and clients2. For example, whilst there is a legal requirement to disclose commissions and alternative remuneration payments made by third party financial product providers to financial advisers for the commercial sale of financial products to clients, the current view of some stakeholders is that these payments represent an inherent conflict of interest that should be
avoided by banning such payments.3

Promoting an ethical culture by rewarding ethical activities and by giving signals to employees/advisers that the organisation expects certain types of behaviour in certain situations, can be a positive force on individual behaviour and decision-making.4 It may also go some way to reducing the organisational costs of an integrity lapse and move organisations beyond compliance towards that new social mantra I spoke of earlier.

The importance of Ethical Culture to an effective business model

So what is ethical culture in theory and how can organisations influence that culture to achieve positive ethical outcomes within their organisations in reality.

I define the ethical culture of an organisation as a sub set of organisational culture. Theoretically, the ethical culture of an organisation is often articulated in the formal and informal systems of an organisation that are capable of promoting ethical or unethical behaviour.5 These formal systems include policies and procedures such as codes of ethics, authority and reporting structures, performance management systems, training and induction programs. Informal systems include expectations and perceptions about obedience to legitimate authority, peer behaviour and other ethical norms.6

These formal and informal systems define acceptable and unacceptable ethical behaviour for staff, agents and stakeholders of the organisation and can either promote a healthy or unhealthy ethical culture. Research7 has indicated that ethical behaviour should be higher in organisations where leaders and norms encourage, support and reward ethical conduct and discourage and punish unethical conduct through these systems.

Organisations which focus on a legal compliance framework to ensure they meet legal and ethical obligations also run the risk they will be viewed by stakeholders in the future as implicitly endorsing a code of moral mediocrity for their organisations. Enter again my proposition of a new social mantra. Even so, the failure to integrate compliance and ethical obligations into an organisational culture can be significant.8

Implementing the Right Systems and Procedures

So what kinds of systems and procedures should an organisation implement in order to make a difference? The Australian Standard on Fraud and Corruption Control9 8001-2003 and Appendix B of AS 8000 Good Governance Principles are a good start. These documents discuss eleven elements required for a sound ethical culture including an ethical framework, codes of behaviour, allocation of responsibilities, the establishment of ethics committees, communication, training, reinforcement and benchmarking, reporting of complaints and leadership and role modelling from the senior management group.

These are similar elements to those measured by the Ethics Resource Centre, EthicsCulture Survey (2003) and are also found in the Corporate Governance Principles of the Australian Stock Exchange.10

Whilst these Australian standards are not mandatory, they provide significant guidance and assistance concerning the establishment, operation and maintenance of such systems in an Australian context.

My recent PhD research on ethical decision-making within financial services organisations asked both financial planners and compliance officers to indicate the systems and procedures currently in place within their AFS Licensee that were related to ethical culture.

The Table below highlights nine ethical cultural systems and procedures required by the Australian Standard on Fraud and Corruption Control. Column three documents the percentage of respondents who positively identified their AFS Licensee as having that system. Column 4 shows the percentage of respondents who either answered “No” or “Don’t Know” to the question posed.

Table: Response rates concerning ethical culture systems and procedures within Australian Financial Services Organisations.

This data suggests that the financial services organisations that were the subject of the PhD survey appear to have traditional and overt ethical culture mechanisms in place, such as internal codes of ethics/conduct (81.8%); published sets of organisational values (78.2%); adviser training in ethics (73.9%) and whistleblower policies (77.0%).

Yet less than 50% of respondents believed their AFS Licensee referred to the ethical standards expected of staff in their performance systems (Q.7 – 47.9%); had regular reporting on ethical matters within the organisation (Q.5 – 47.9%) and had implemented formal reward systems for ethical conduct (Q.9 – 21.2%). There was also a very low “yes” response rate of 51.5% to Question 6 (Does the Licensee have enforcement mechanisms such as a staff /adviser disciplinary policy?).

The table reflects a 60.2% range between the highest score of 81.8% for the presence of an internal Code of Ethics/ Code of Conduct (Q1) within AFS Licensees, to 21.2% for the presence of formal reward systems for ethical conduct (Q.9).

Given the presence of all nine systems and procedures within an organisation at a minimum and their enforcement through action and leadership can reduce the occurrence of unethical behaviour and poor decision-making, the results outlined in the table are surprising and suggest that there is a current gap in this area.

The question that remains is how effective are the systems and procedures in instilling the organisation’s ethical values and conduct standards into every day practice even when they are in place? The answer may lie in whether the values and standards are communicated, reinforced and upheld. It may also depend on whether those values and standards are exercised by those in positions of authority or whether other organisational norms are allowed to send inconsistent messages.

The data from the survey seems to answer these questions in the negative. Within the financial services organisations studied, the regular reporting of ethical matters was very low (Q.5 – 46.7%). Further, nearly 40% of respondents did not believe or did not know whether their AFS Licensee even had enforcement mechanisms, such as a staff /adviser disciplinary policy (Q.6 – 39.4% No or Don’t know).

If these results are representative of a lack of enforcement mechanisms across organisations, this may be compounding the ability of compliance officers and management to take enforcement action against unethical staff. However, even when such systems are in place, a focus group of respondents conducted as part of the PhD study, perceived that a lack of organisational will to use enforcement mechanisms was one of the top five ethical dilemmas facing management.

These results also demonstrate that some conventional mechanisms, which may assist management and compliance officers in instilling and enforcing a strong organisational ethical culture, may be lacking within organisations. This includes systems and procedures linking ethical behaviour with performance and reward systems.

Further, it can be inferred from the results that the communication and reinforcement of ethical values and behaviour within organisations may be lacking. It is difficult otherwise to reconcile that 71.5% of respondents answered either “No” or “Don’t Know” to question 9, concerning whether people who achieve high levels of ethical conduct within financial services organisations are rewarded.

Whilst offering rewards for ethical behaviour does not necessarily increase that behaviour11, a lack of mechanisms for rewarding ethical conduct in circumstances where there are rewards for reaching pecuniary targets, may send ambiguous messages to an organisation’s staff and agents as to which behaviour is valued more highly, with bonuses and other rewards for meeting sales and finance targets thought to adversely influence ethical decision-making.

The Australian Standard on Fraud and Corruption is not mandatory and its application is subject to size and turnover requirements, amongst other conditions. However, ASIC Regulatory Guide 164 (ASIC 2002a) envisages that AFS Licensees should use such standards as a guide to assist them to meet licensing obligations and to promote a culture of compliance. In addition, the Australian Standard on Compliance Systems 3806-200612 expects organisations to commit to full compliance with laws, industry standards and ethical obligations. Accordingly, the finding of such low rates of compliance with this Australian
Standard amongst the AFS Licensees that were the subject of the PhD study was surprising.

So Lets Recap

There may be a significant gap between the types of formal and informal systems that are in place within financial services organisations related to ethical culture and those that would be expected to be in place pursuant to the relevant Australian corporate standards.

My suggestion: take my test and answer the nine questions used in the PhD survey. Then ask yourself:

1. Does our current compliance framework include these systems and procedures?
2. How do we communicate the organization’s values to staff and report on ethical risk?
3. Have we linked outcomes from compliance audits to performance management systems and do those audits include reference to key indicators concerning ethicalconduct and citizenship?
4. Are we able to effectively use enforcement mechanisms to discipline those who engage in unethical conduct?

The implementation of the formal and informal systems and procedures identified in this article will influence ethical behavior and decision-making within your organization. It will assist you to build organizational resilience to ethical risk within your business and to establish behavioural and decision-making boundaries required for staff and agents alike.

FOOTNOTES

1 Petrick, J. A. & Quinn, J. F. 1997, Management Ethics: Integrity at Work, Sage Series on Business Ethics, Sage Publications Inc, Newbury Park, California
2Etkind, S. 2005, ‘Global round up’, Financial Services Newsletter, vol. 4 no. 2, Lexis Nexis, Sydney, p. 28
3 Taylor, M. 2005, ‘ACA reopens commissions debate’, 6 October, viewed http://www.superreview.com.au/articles, on 7 October
4 Weber J. 1993, ‘Institutionalising ethics into business organisations: A model and research agenda ‘, Business Ethics Quarterly, vol.3, issue 4, pp. 419-436

5 Trevino L. K. & Youngblood, S. A. 1990, ‘Bad apples in bad barrels: A causal analysis of ethical decision making behaviours’, Journal of Applied Psychology, vol.75, pp. 378-385.
6 Trevino, Butterfield and McCabe, 1998, ‘The ethical context in organisations: Influences on employee attitudes and behaviors’, Business Ethics Quarterly, vol.8, issue 3, pp. 447-476.
7 Ethics Resource Center 2005, ‘The 2005 National Business Ethics Survey’, Ethics Resource Centre, Arlington, Virginia, May 21, p 78; p 80.
8 Owen, N. 2003, Final Report: Royal Commission into HIH Insurance Group, Government Printer, Canberra
9 Standards Australia, 2003a, AS 8000-2000: Australian Standard on Good Governance Principles, 23 June, Standards Australia International, Sydney. Standards Australia, 2003b, AS 8001-2003: Australian Standard:
Fraud and Corruption Control, 23 June, Standards Australia International, Sydney.
10 Australian Stock Exchange Corporate Governance Council, 2007, Corporate Governance Principles and
Recommendations, 2nd edition, ASX Corporate Governance Council, Sydney

11 Trevino & Youngblood 1990, op cit.
12 Standards Australia, 2006, Compliance Programs AS3806-2006, March, Standards Australia, Sydney.

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These could be the words of the big players NAB, AXA, AMP or it could be a smaller dealer group, or some boutique financial planners, but they weren’t.

They were the words of Virgin Blue’s CEO John Borghetti, who addressed the Financial Services Council in Sydney earlier this month. The rest of the sentence was – “we have a formidable weapon not available to our competitors – the people and culture of Virgin Blue.” But this can also be true of many other businesses – in many industries including financial services.

Facing similar issues as financial services businesses – Borghetti said that the only thing constant in the industry is that nothing stays the same and challenges are always present – dressed in many different forms – from high fuel prices to SARS and more recently with the GFC. Financial services might swap thee aviation industry’s issues with greater regulation, shaky markets, and government reform. However, the way that smart leaders face these challenges is to recognise the strengths of their business.

To highlight the people and culture is something not often heard in financial services. It is important for a strong culture to have a strong leader. When Virgin took flight in Australia for the first time – just over 10 years ago – its larger than life leader Richard Branson stamped his personal brand over their airline. It was attractive young hip staff. The airline was a low-cost carrier – unique in the market.  Today the market has changed. There is greater competition, cheaper fares and expanded markets.

Borghetti took the reins of the company just four months ago and already looks different  from the jeans-wearing management of old– he wears Zegna ties and suits. But he says that it’s not a contrast to the culture of the staff  – instead he says it’s an evolution. “The staff knows they have to evolve to keep the culture and be ready for something new,” Borghetti said. “You have to bring people with you and they have to be willing to come with you.”

Looking at the challenges ahead – Borghetti says, in the past 10 years the size of the domestic market has doubled. Meanwhile, general consumer prices are up 36 per cent, but commonly available domestic fares have dropped 15 per cent and in nominal terms 23 per cent (excluding GST). It’s an environment not unlike financial planning.

Borghetti said Virgin Blue would use its strengths to meet the challenges of the 21st century – its timing, hunger and people and “we don’t know what was impossible “. Who will be the financial services’ Virgin Blue?

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