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The value of kindness in the culture of banking

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Roger Lui

Partner

Hong Kong

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17 August 2022

Banks are at a critical turning point. Technology and the rise of private credit are opening up possibilities for disintermediation in the financial sector. Inflation is rising and the possibility of a global recession is looming. How they respond to these circumstances could define their future.

Banks have an opportunity to reframe and restate their principles and purpose. They have a chance to establish new ways of engaging with customers, stakeholders and regulators with more empathetic, holistic perspectives. They can build a more sensitive and responsive culture and a foundation for growth that will sustain them long into the future.

In recent times, ethical behaviour in banking has become a focus for regulators. But ethics cannot be improved simply by monitoring, oversight, or incentivisation. Culture in an organisation has a significant influence on ethics, and on the behaviour that employees at every level show and aspire to. As a result, banks are focusing more and more on building better corporate cultures, and there is evidence that such activities have an influence on economic outcomes, as well as organisational ones like staff retention and conduct.

Why kindness matters in banks’ organisational culture

A foundational aspect of organisational culture that is rare, extremely valuable, and currently under-priced is kindness. It is a commodity with the power to change outcomes for both banks and their customers. Kindness is a virtue that illustrates an organisation is responsive, empathetic and constructive. Kindness signals willingness to achieve more and create more value by focusing on what matters to every stakeholder.

Banks have an opportunity to set their own example. They can make it clear there is a values-driven, ethical dimension to their decision-making, culture and business practices. They can mark themselves out as doing more than their competitors. They can also demonstrate they are leading the market and setting themselves apart in a growing and diversifying field, amongst their direct competitors and the challengers that provide similar services and capital in different ways. This will help them capture attention and patronage, as well as driving loyalty and future success.

At a time of disruption and uncertainty, there is a powerful argument for kindness to take its place in the global economy. It has a role to play in the way that banks and financial institutions conduct their business. Kindness is not a sign of weakness, it is a mark of strength and confidence. It has both moral and commercial dimensions, a lever for achieving competitive advantage. There is a strategic business case for making kindness a key organisational behaviour. When you are kind and supportive, you make a difference beyond a purely transactional relationship. It helps to set you apart from those operating purely for profit.

When you are kind, people remember, and remember you. Acting with kindness promotes inclusivity and consideration within communities and organisations. It encourages more collaborative and productive ways of working. It demonstrates to stakeholders and customers that your business is more than profit-driven.

The value of non-financial values for banks

Acting ethically, empathetically, supportively in every interaction, consistently and authentically, can help banks win the hearts, the minds and the wallet share of the customers and communities they serve, and engages the next generation of business and political leaders.

Embracing non-financial values, including climate responsibility, have captured public attention. But this has not been without controversy. These ideas are a force for good, but have also been hijacked and abused. Investors, regulators and activists are savvy; token gestures and platitudes are quickly spotted. Genuine, authentic kindness, and its application in their operations could guide banks through a process of gradual change to arrive at what society, stakeholders, regulators and customers deem most important.

The world has gone through profound changes because of the pandemic. As we come back together, we have more empathy, care and consideration for people in our communities and in different parts of the world who face more significant challenges than we do.

This is also spilling over into the corporate world. Sharper and more pronounced contrasts in ideologies are forcing us to question how we conduct business, where we conduct business, with whom we conduct business, and how goods and services are made and delivered. Kindness helps guide us to make sound choices, and to address what our stakeholders want out of our organisations.

How conduct can help banks under scrutiny

Banks have an obligation to ensure that their activities serve the communities they work in, the stakeholders they serve and the economy as a whole.

However, they are under siege. Large profits have been registered against a long period of low interest rates and growth in asset values – but we are entering an entirely different paradigm. There is a trend towards disintermediation. There is relentless competition in a high-intensity deal-making environment, and economic growth may well be slowing. There is a new, heightened level of scrutiny and scepticism about how banks, and those who make the decisions and set strategy within them, approach their work and their clients. Societal expectations of organisations, and in particular those whose success and remuneration packages appear disproportionate to those they serve, are at an all-time high.

Regulators are watching. Banks are responding, and kindness is a demonstration that they are more predisposed to doing the right thing. If banks can show that they are willing to work for the greater good, they have an opportunity to change the attitudes of those who make the rules. In return, they might be more predisposed to making the regulations fit for purpose as opposed to strict and restrictive.

But there is a wider expectation that they need to go above and beyond what is mandated by laws and regulations. Banks may meet codified external standards, but what more have they done? What more can they do?

At an operational level, banks need to consider the place of the following:

  • Eradicating unnecessary complexity
  • Responsible lending and investments
  • Treating customers fairly
  • Inclusion, internally and externally
  • Transparency in all dealings and behaviours

Kindness radiates and underscores sound operational behaviour

Kindness is a competitive differentiator that operates on many levels. It conveys from the inside out the values that are driving and underpinning the culture and operation of an organisation. To maintain those most precious of banking commodities - customer trust and loyalty, executing exceptional work and growing business in the future - banks need to look beyond profits alone. There is a moral dimension and context to decision making in banks that has been present in their operations since their very inception. There is no reason that they should ever have forgotten or foregone those principles.

Demonstrating kindness shows a bank is not only aware of its place in being a conduit for commerce. It shows that it understands its place in the community and its place in supporting individuals and businesses to reach their personal and commercial financial goals. Banks traditionally had a role from cradle to grave, being present at all the important points in a life – for individuals: first bank account, first house, savings and lending to make dreams happen, wealth management for the next generation. For corporates and funds: cash flow management, working capital support, capital raising, risk hedging, acquisition and divestment advisory, and supporting loyal customers through financial difficulties. Banks were sympathetic while at the same time being fiscally responsible. Not always was it just about the bottom line.

There is no reason for banks not to reflect and reembrace those values and behaviours. Doing so has the potential to set them significantly apart from their competitors, and build trust and loyalty that lasts in an impermanent world.

Banks are a human business. Many are using technology and AI to improve efficiency and delivery. Technological solutions are proving useful in allowing banks to be more transparent in their activities, creating personalised communication channels and opportunities to build back trust. But people are at the heart of what banks do. The impact employees at every level can deliver to clients with thoughtfulness and kindness will enable them to win, and continue to win into the future.

Operating with kindness and compassion is a significant asset in banks' competitive arsenal. They can boost any bank's value proposition, and act as a catalyst for better values and better performance. Banks that bring kindness to their activities achieve positive results by adopting more ethical, empathetic and moral principles to their operations, while still operating to the same high performance and revenue focused standards as they always have. The market will find the right price for kindness, and there is always room for more.

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