4 lessons for customer leaders from the Banking Royal Commission
- 05 February, 2019 12:30
The report has been tabled and the 76 recommendations are in.
The long-awaited final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, produced by the Honourable Kenneth Madison Hayne, paints a scathing picture of the culture and sales practices inherent in Australia’s financial services industry. They’re practices resulting in severe wrongdoing, and have led to substantial losses and grief to customers while yielding hefty profits to the providers themselves.
As Commission Hayne puts it: “Very often, the conduct has broken the law. And if it has not broken the law, the conduct has fallen short of the kind of behaviour the community not only expects of financial services entities, but is also entitled to expect of them.”
In response, the report sets out sweeping changes to the way the industry conducts itself and sells products and services to consumers.
While many of these will be specific to the financial services sector, what should be obligatory reading for every organisation are the four observations made by Commissioner Hayne in the report. All of these showcase a complete disregard for customer interests and are worth delving further into here, because they’re vital insights for any marketer, chief customer officer or CEO looking to steer their organisation towards a more customer-centric approach.
In fact, there are a few clear lessons on what many have recognised are keys to ensuring your organisation is customer-led, from the very top to the very bottom and everywhere inbetween. Ignore these at your peril.
1. Employee and customer experience are intrinsically linked
The first observation made by Commissioner Hayne is the glaring disconnect between what employees of the financial services institutions have been asked to do, and what’s in the best interests of the client.
Namely: “In almost every case, the conduct in issue was driven not only by the relevant entity’s pursuit of profit but also by individuals’ pursuit of gain, whether in the form of remuneration for the individual, or profit for the individual’s business.
“Rewards have been paid regardless of whether the person rewarded should have done what they’ve done.”
In other words, employees are being remunerated and recognised for behaviour only in the company’s interest, not the customer’s. An organisation is never going to be customer-led if staff put corporate interests and profits firsts because they’re at risk of losing their jobs if they don’t.
Being customer focused means employees must recognise customers’ interests as the key measure of success. Processes, KPIs, remuneration schemes and priority lists that put products and services before a customer’s need will never get you there.
2. Customer transparency is paramount
Intertwined with employee impact is the second observation in the report: “Entities and individuals acted in the ways they did because they could.”
And how did they get away with it? “Entities set the terms on which they would deal, consumers often had little detailed knowledge or understanding of the transaction and consumers had next to no power to negotiate the terms. At most, a consumer could choose from an array of products offered by an entity, or by that entity, and other, and the consumer was often no able to make a well-informed choice between them.”
This again reflects a must in external engagement: Offering customers the ability to understand what it is they’re purchasing or signing up for.
This is something clearly in focus in the current Digital Platforms Inquiry into the power and influence of digital juggernauts, such as Google and Facebook. And it’s arguably what’s led to the backlash against Facebook’s data practices, as well as the General Data Protection Regulatory (GDPR) laws introduced in May 2018 in the European Union.
Being customer-led is about allowing customers an informed choice. Hiding terms and conditions, obfuscating details of products and services, and leaving customers with a lack of sufficient information simply can’t be allowed to continue. That’s not in the customer’s interests and in the long term, it’s not in the organisation’s either.
3. Cultural alignment is absolutely vital
The third observation in the Royal Commission report is the often contradictory position partners have played in the mix. In many instances, consumers are dealing with financial services entities through an intermediary, who is often diametrically opposed to what’s important from a customer’s perspective and in some cases, what an organisation is looking to provide to a client.
As the report states: “The interests of client, intermediary and provider of a product or service are not only different, they are opposed. An intermediary who seeks to ‘stand in more than one canoe’ cannot. Duty (to client) and (self) interest pull in opposite directions.
“Or, if the intermediary does not act for the provider, the intermediary may act only in the interests of the intermediary.”
An entire organisation, from its own employees through to the partners and supply chain involved in producing and delivering its products and services, has a responsibility for the customer and the products and services being provided. It’s no good suggesting those in the IT department or manufacturing plant, or your third-party agency or consulting partner, don’t have a role to play in servicing customer needs and interests and ensuring what you provide is sound.
Everyone must not only be aligned, they should be obliged to put the interests of clients and customers first.
4. Senior management and societal accountability is instrumental
This leads to one further big lesson for all: True customer-led approaches require engagement and enforcement internally as well as externally.
Putting in a voice-of-customer platform, or a new process responding to customer feedback, or enforcing KPIs for front-line teams specifically to deal with customers better are great initiatives. But if you don’t have the CEO and board’s ultimate backing and buy-in to putting customers first, they’re stymied.
And none of this will go anywhere if you don’t also have checks and balances to ensure organisations are keeping to the right track. Because when you a company does something that’s not in the customer’s best interests, they should not only own up, but be held to account.
In the final report, Commissioner Hayne makes this point through his observation financial services entities have too often failed to be held account for breaking the law, and that society and regulation, as well as CEOs themselves, should be able to hold them to account.
“Misconduct will be deterred only if entities believe misconduct will be detected, denounced and justly punished. Misconduct, especially misconduct that yields profit, is not deterred by requiring those who are found to have done wrong to do no more than pay compensation. And wrongdoing is not denounced.
“The Australian community expects and is entitled to expect, that if an entity breaks the law and causes damage to customers, it will compensate those affected customers. But the community also expects that financial services entities that break the law will be held to account.
“Everything that is said in this report is to be understood in the light of that one undeniable fact: It is those who engaged in misconduct who are responsible for what they did and for the consequences that followed.
“Because is the entities, their boards and senior executives who bear primary responsibility for what has happened, close attention must be given to their culture, their governance and their remuneration practices.”
The rise of social media and digital certainly give consumers more ability to single out bad behaviour when they spot it in organisations than ever before. It’s equally clear there is a requirement for up-to-date regulation and public checks that further hold organisations to account for bad behaviour. What’s also paramount is chiefs of organisations take responsibility for the companies’ actions in market.
There’s no doubt the report into Australia’s financial sector offers the industry a broad broom to sweep in change. Here’s hoping it leads to better customer outcomes in all other sectors too.