<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Mis-selling: 'The fault lies not with individuals, but with management processes that encourage wrongful behaviour.'
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->ST MONEY editor Ignatius Low wrote a constructive article on Monday, "Tougher Action on Mis-selling". I would like to build on his thoughts and give a suggestion from a slightly different angle.
As someone who works in industrial-organisational psychology (specifically in the area of motivation), I wish to share that organisational reward systems can be powerful motivators of individual behaviour. Simply put: Individuals will do what they know they will be rewarded to do.
Suppose that a bank sets only monetary goals for their relationship managers - that is, within the next 12 months to sell X dollar amount of High Notes 5 - then any human psychology will very naturally focus on that goal. Goal-focused people may not see the ethical subtleties that accompany their actions.
The question to ask then, is whether or not banks set specific goals related to the ethical treatment of customers.
Suppose next a bank distributes bonuses, commissions and other monetary rewards according to how relationship managers perform at their goal targets of X amount of dollars; then you would understand that even the least goal-focused person by nature, would focus on that target. The question to ask next is whether or not banks reward employees for the ethical treatment of customers, or merely for selling enough High 5 Notes.
Depending on whether expectations of one, the other, or both are built into the reward systems, individual behaviours would greatly differ.
My point is that the fault lies not with individuals, but with management processes that encourage the wrong behaviour. As long as these reward processes remain, the same pitiful stories will be heard again and again. Hence, one way of ensuring that retirement funds are not jeopardised every time a recession hits is to redesign the banks' motivation levers so that individuals working within the system are motivated to do the right thing.
As employees, each relationship manager's actions and behaviour is shaped by organisational expectations. They may be at fault, but not entirely. The larger fault lies with the organisation for design flaws in their reward systems. Relationship managers are merely scapegoats whose motives are simple - draw my salary, meet my targets and get myself promoted. There is nothing wrong with that. We all do that.
What is more important is to examine the motives of the bank. Did these motives include ethics? While it is difficult to assess the motives of individuals because their minds are not open to scrutiny, the motives of organisations are relatively easier to evaluate. One need only examine the reward systems put in place to coordinate the direction, intensity and persistence of employees. If an audit of the banks' reward systems reveal only monetary targets and no ethical targets, then the motives of the bank are clear. Profit to the exclusion of morals. Madam Kay Ren Tse
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->ST MONEY editor Ignatius Low wrote a constructive article on Monday, "Tougher Action on Mis-selling". I would like to build on his thoughts and give a suggestion from a slightly different angle.
As someone who works in industrial-organisational psychology (specifically in the area of motivation), I wish to share that organisational reward systems can be powerful motivators of individual behaviour. Simply put: Individuals will do what they know they will be rewarded to do.
Suppose that a bank sets only monetary goals for their relationship managers - that is, within the next 12 months to sell X dollar amount of High Notes 5 - then any human psychology will very naturally focus on that goal. Goal-focused people may not see the ethical subtleties that accompany their actions.
The question to ask then, is whether or not banks set specific goals related to the ethical treatment of customers.
Suppose next a bank distributes bonuses, commissions and other monetary rewards according to how relationship managers perform at their goal targets of X amount of dollars; then you would understand that even the least goal-focused person by nature, would focus on that target. The question to ask next is whether or not banks reward employees for the ethical treatment of customers, or merely for selling enough High 5 Notes.
Depending on whether expectations of one, the other, or both are built into the reward systems, individual behaviours would greatly differ.
My point is that the fault lies not with individuals, but with management processes that encourage the wrong behaviour. As long as these reward processes remain, the same pitiful stories will be heard again and again. Hence, one way of ensuring that retirement funds are not jeopardised every time a recession hits is to redesign the banks' motivation levers so that individuals working within the system are motivated to do the right thing.
As employees, each relationship manager's actions and behaviour is shaped by organisational expectations. They may be at fault, but not entirely. The larger fault lies with the organisation for design flaws in their reward systems. Relationship managers are merely scapegoats whose motives are simple - draw my salary, meet my targets and get myself promoted. There is nothing wrong with that. We all do that.
What is more important is to examine the motives of the bank. Did these motives include ethics? While it is difficult to assess the motives of individuals because their minds are not open to scrutiny, the motives of organisations are relatively easier to evaluate. One need only examine the reward systems put in place to coordinate the direction, intensity and persistence of employees. If an audit of the banks' reward systems reveal only monetary targets and no ethical targets, then the motives of the bank are clear. Profit to the exclusion of morals. Madam Kay Ren Tse
