Colin Heath, the firm’s banking and capital markets leader, said banks will find it harder to assess staff based on more subjective attributes compared to the hard outcomes contained in many key performance indicators (KPIs) but they need to try. Digital literacy, global awareness and creativity will also become more important traits for budding bankers, who will need to display an ability to understand customers, ask probing questions and speak up when they see problems, he said.
Bank CEOs are trying to pre-empt the final report’s recommendations by highlighting the need for cultural changes to staff. For example, Westpac Banking Corp chief executive Brian Hartzer led a project, known internally as “Navigate”, in the second half of last year based on concerns bad news was not being communicated to senior management.
Westpac and the other big banks want to create safe environments for customer-facing staff to report poor practices and policies up the line. This is necessary to ensure senior executives and bank directors comply with the government’s Banking Executive Accountability Regime (BEAR), which gives the Australian Prudential Regulation Authority the power to levy fines and kick senior bankers out of the industry if they can’t grasp key risks and operations.
Hiring more staff from technology companies – which the majors are doing to lift capability in data analytics – will not provide the solution, PwC suggests. “Many bank insiders today believe their first priority is to recruit from companies like Google, Amazon, Apple and Microsoft,” the paper says, but “unfortunately, there are no super heroes that can fly in to save the industry”.
Advisers expect the final report of the royal commission to presage widespread changes to staff assessment processes in banks, including the introduction of team-based, rather than individual, financial targets for front-line staff and the possible removal of sales-based benchmarks. “The simplest and most comprehensive severance may be the adoption of a flat share of a variable pay pool that varies with overall entity performance,” the interim report suggested.
PwC points to the growing body of work in experimental psychology and behavioural economics demonstrating traditional performance assessment frameworks “can not only incentivise dysfunctional behaviour and organisational dynamics, but can also inhibit individual and team performance”.
It suggests “intrinsic rewards need to be more deliberately offered to foster a culture based on personal attributes, for example, providing employees with a sense of meaningfulness and purpose.”
Banks have also been accelerating cultural reform in the wake of the prudential inquiry into Commonwealth Bank of Australia’s governance, which followed revelations it didn’t do enough to prevent its ATM machines being used for money laundering. Anti-money laundering specialists have become some of the most sought after and highly paid compliance professionals in banking, PwC said.
But “at its core, AML is a job for the entire organisation and everyone in it, it’s not just the responsibility of the compliance analyst,” it said. “AML is the art and discipline of understanding customers, asking questions, connecting dots and speaking up.”