People Risks, Compliance Motivation

and Culture
PART 2: Solutions
Keryl Egan
Stormont Consulting

Presented at the 6th Annual Financial Services and Compliance

Conference, Sydney, February 9-11, 2009
 Applying Influencer to Compliance
Motivation and Culture

Influencer is a Vitalsmarts programme which provides a

methodology for bringing about behavioural and cultural change. In
this presentation Influencer is applied to culture change at the
hypothetical Blue Sky Bank.

Keryl Egan is a Vitalsmarts certified trainer and consultant for

Influencer and Crucial
Conversations.

Copyright 2009 Keryl Egan and Stormont Consulting

 Influencer
The Power to Change Anything
Navigating
Change
with
Influencer

Copyright 2009 Keryl Egan and Stormont Consulting

 Setting the Sails for Change
Blue Sky Bank Clarifies its Current
Position
Problems with Compliance Motivation
Measures of the current culture on the trading floor at
Blue Sky Bank indicate that 55% of traders regard
compliance as obstructing their trading objectives and
therefore seek ways of circumventing or ignoring
regulations.

Blue Sky Bank is seeking to develop effective internal self

regulation and to preserve its reputation as a socially
responsible corporate citizen.

Copyright 2009 Keryl Egan and Stormont Consulting

Setting the Sails for Change with
Influencer

Copyright 2009 Keryl Egan and Stormont Consulting

Applying the Influencer Model
 Clarify Blue Sky Bank’s outcomes:
 Why does compliance matter and what has to change?
 Research the context and problem.

 Find Vital Behaviours:

 What would people have to do to obtain the Bank’s desired
compliance outcomes?
 Who does it well and what can be learned from them?

 Crucial Moments: When do the vital behaviours matter the

most?

 Use Influencer Six Sources of influence to promote

selected vital behaviours
Copyright 2009 Keryl Egan and Stormont Consulting
Clarifying Outcomes: More
external regulation or more
internal motivation

 National Australia Bank solution:

Excessive focus on process,
documentation and procedure
manuals rather than on
understanding the substance of
issues, taking responsibility and
resolving matters.

 Carapace: Measures external to

human motivation do not have the
flexibility, judgment and balance
necessary for human systems.

Copyright 2009 Keryl Egan and Stormont Consulting

DESIRABLE OUTCOMES
Internal Values and Grace in
Execution
 Personal and Social Values
Develop core strength in the
company through shared and
stated values

 A Framework provides Safety

Regulations and compliance are
used the backbone or framework
for good judgment, initiative and
informed risk taking

 Compliance and Freedom

A solid backbone and core
strength produce an agile,
motivated culture which provides
security and strength but also
allows for boldness, skill and
degrees of freedom.

Copyright 2009 Keryl Egan and Stormont Consulting

Blue Sky Bank Develops a
Desirable Outcome
Outcome Statement

“Within 12 months, by July 1st 2010, there will be a

70% measurable improvement in traders’ ability to
reach their trading goals whilst working within
current
regulatory requirements.”

Copyright 2009 Keryl Egan and Stormont Consulting

Design a Setting for Pro-social
Growth
Blue Sky seeks to achieve the desired outcome by influencing behavioural
and cultural changes which harmonise external regulations with internal
values , business goals and public values or expectations.

Arrange a hierarchy of experiences

 Start with single, small acts of responsibility or acknowledgement of

those behaviours which are key to the goal

 Gradually escalate these acts of responsibility or acknowledgement

Copyright 2009 Keryl Egan and Stormont Consulting

INFLUENCER: Find the first Vital
behaviours
Find the specific and measurable behaviours which
demonstrate
that traders are actively pursuing their trading
objectives and
observing current regulatory requirements.

 What would you see the person actually do

which shows this?
 What would be the impact if they did this?
 How can you measure it and its impact?
Copyright 2009 Keryl Egan and Stormont Consulting
Derive Vital Behaviours from
General Principles
for Pro-social Growth (Zimbardo)
 Encourage admission of mistakes

 Encourage personal responsibility - prevent diffused responsibility

 Reduce anonymity by acknowledgment of self worth

 Support critical thinking - discourage blind conformity to the norm

 Discourage small transgressions which can escalate

 Reward behaviour based on values consistent with law and

regulations

Copyright 2009 Keryl Egan and Stormont Consulting

Examples of Vital Behaviours at
Blue Sky Bank

 Speak up about violations of compliance rules

and challenge each other on the spot

 Admit to mistakes without fear of reprisal

 Encourage challenge, problem-solving and

discovery of innovative solutions

Copyright 2009 Keryl Egan and Stormont Consulting

INFLUENCER MODEL: Define
Crucial Moments

 When are these behaviours critical to

success?

 At what time of day, month, year does it

matter most?

 Which conditions make it a crucial

moment?
Copyright 2009 Keryl Egan and Stormont Consulting
Examples of Crucial Moments
 When someone has just ignored or by-
passed a regulation

 When business is brisk and time is short

 You have made a mistake and you are

tempted to hide this

Copyright 2009 Keryl Egan and Stormont Consulting

Putting It All Together
 Research and Diagnosis: The reason for by-passing regulations
 No time
 Poor systems and access to daily changes in regulations
 Pressure from clients or upper management
 Inexperienced back office staff
 Compliance regulations don’t make sense or have no real meaning

 Vital Behaviours: Start small and add more behaviours over time.
Blue Sky Bank starts with
 Traders speak up and say ‘no’ to clients even when they may lose
the client for doing so
 Middle and back office say ‘no’ to traders who ignore compliance
 All check regulatory changes consistently and often

Copyright 2009 Keryl Egan and Stormont Consulting

Sources of Influence to Promote
Compliance & Achieve Desired
Outcomes
 Research shows
 most people apply only one source of
influence at a time when they want to change
behaviour

 People who use multiple sources of influence

achieve better results X 10

 Designing an influence strategy takes time, skill

and courage BUT…..it makes success inevitable!!
Copyright 2009 Keryl Egan and Stormont Consulting
 Six Sources of Influence for 3 Vital
Behaviours
Speaking Up, Admitting Mistakes, Volunteering
Ideas

Motivation Ability
Personal Connectcreating
the person to their own values by
a
Provide training to enable the vital behaviours e.g.
Crucial
dialogue about self regulation, self Conversations training for speaking up in high stakes
responsibility and situations
values. Define individual responsibilities for
regulation at every Level and create a crisis
of
conscience by expecting people to speak up
and
working to get buy-in.

Social Define responsibilities for self regulation at

every Seek support of senior management who are willing to provide
resources or knowledge and problem-solving
Level. Find Opinion leaders to model the
behaviours
and help others to speak up, admit mistakes
and
Volunteer ideas.

Structur Design incentives and rewards for Use office design, data and cues plus IT tools to keep the vital
Copyright 2009 Keryl Egan andbehaviours
speaking up, admitting mistakes
Stormont Consulting
in mind
al and innovating.
Creating an Influencing Strategy
 Source of Influence 1: Managers describe socially responsible reasons for
compliance and speaking up & admitting mistakes: give stories and
examples

 Source of Influence 2 : Training in communication provides skills for

speaking up

 Source of Influence 3: Engage opinion leaders to lead the way

 Source of Influence 4: Upper management provides resources and

removes technical obstructions to compliance and problem-solving

 Source of Influence 5: Public acknowledgements and rewards for speaking

up, admitting mistakes and finding solutions.

 Source of Influence 6: Place reminders, data and cues in easy to see

places

Copyright 2009 Keryl Egan and Stormont Consulting

Measuring Success
 Measure compliance incidents, reporting and handling
over the year to July 1st 2010.

 Criteria for team performance and productivity includes

behavioural measurements and ratings

 Measure pro-social engagement, collaboration and job

satisfaction over one year from base measure

 Analyse and evaluate results to determine next steps

Copyright 2009 Keryl Egan and Stormont Consulting

Continuous Improvement
 Define the next set of desirable outcomes

 Develop the next set of vital behaviours

 Construct the next influencing strategy

Copyright 2009 Keryl Egan and Stormont Consulting

Than
k P.O. Box 327, Leichhardt

you
NSW 2040
Ph: 02 9564 0425
Mobile: 0414 734 840
Email:
kerylegan@stormontconsulting.com
Website:
www.stormontconsulting.co
m

Copyright 2009 Keryl Egan and Stormont Consulting

References

 APRA, March 2004: Report into Irregular Currency Options Trading at the National Australia Bank
 Bullen, D: Fake : My Life as a Rogue Trader. Publ. by Wiley 2004
 Calavita, K and Pontell, H: Heads I win, Tails you lose: Deregulation, Crime and Crisis in the Savings and
Loan Industry 1990
 Enron: The Smartest Guys in the Room HDNet Films 2005, Dendy DVD
 Heimer, C. “Thinking About How to Avoid Thought: Deep Norms, Shallow Rules, and the Structure of
Attention” in Regulation & Governance (2008) 2, 30–47
 Miller, A. The Sociology of Good and Evil, Guildford Press, NY, 2004
 Parker, C. The Open Corporation: Effective Self Regulation and Democracy, Cambridge University Press,
2002.
 Patterson K, Grenny, J, McMillan, R, Switzler,A “Crucial Conversations: Tools for Talking when Stakes are
High” NY 2002
 Patterson K, Grenny, J, McMillan, R, Switzler,A. “Influencer” McGraw Hill, NY 2008
 Price Waterhouse Coopers. Investigation into foreign exchange losses at the National Australia Bank 12
March 2004
 Sheedy, E “ Applying an Agency Framework to Operational Risk Management” CMBF Papers No.22
Applied Finance Centre, Macquarie University, August 1999
 Steare, R “ What’s wrong with business: Integrating Profitability, Responsibility and Ethicability”® Price
Waterhouse Coopers
 Stevens, Glen: “Education, Integrity and Common Sense.” MAFC Issues Paper, 2003
 Thompson, Dianne: “Accountability and Board Functionality: National Australia Bank’s Experience”.
Paper for presentation at the 11th Finsia - Melbourne Centre for Financial Studies Banking and Finance
Conference, “Banking and Securities Markets: Convergence, Innovation and Regulation” 2006
 Zimbardo. P: “A Situationist Perspective on the Psychology of Evil: Understanding How Good People Are
Transformed into Perpetrators” in A. Miller, The Social Psychology of Good and Evil. Guildford Press, NY,
2004

Copyright 2009 Keryl Egan and Stormont Consulting