What happens after implementation of the Senior Managers Regime, Certification Regime, Conduct Rules and Whistleblowing changes?

Introduction

The Senior Managers Regime and the related Certification Regime, Conduct Rules and Whistleblowing changes are central to the reform of the financial services industry, and have major implications for banks and their senior leaders.  During 2016, these changes will impact the responsibilities and behaviours of leadership; boardroom culture and tone from the top; governance and operating models; and the value proposition for leaders.

Most banks are naturally focused on meeting initial compliance by 7th March, 2016 against the Senior Managers Regime.  The question is, “what happens next?”  Meeting compliance requirements, narrowly viewed, is unlikely to create the wider cultural change to empower Senior Managers to discharge their responsibilities. By approaching this change strategically, there is an opportunity to transform leadership and culture within banking, increasing accountability and effective delegation, simplifying decision making and improving agility – helping to rebuild trust in banking.

An Opportunity

Looking beyond a narrow compliance response, there is significant transformative opportunity.

Firstly, some of the formal aspects of the Senior Managers Regime can be used to help streamline the bank’s organisation, improving governance and decision making.  This is particularly true in complex, matrixed organisations where decision rights are unclear—for too many people in banks today it is unclear who should make a decision; or people fear making the wrong decision and are paralysed into inaction. An excessive number of committees tasked with oversight of culture, conduct and related issues leads individuals to delegate responsibility.  The Senior Managers Regime creates an opportunity to clarify leadership, remove complex matrixed reporting lines and improve agility of decision making.

Secondly, the Senior Managers Regime is a strong lever to help improve leadership, creating space for ethical leaders to lead effectively and exposing those who are either not willing or not capable to lead in the right way.  There is an opportunity to develop banks’ DNA to a level where accountability is not something to be feared, but embraced.  Rules and compliance are important, but when it comes to leadership developing a culture of accountability, where leaders are comfortable making ethical decisions, this is vastly more effective than rules that disempower leaders.

Thirdly, alongside other initiatives, the Senior Managers Regime creates an opportunity to help restore trust in the industry and build more sustainable results based on social, economic, customer and shareholder value.  Trust is usually re-built slowly through actions and decisions made consistently in the customers’ interests and with a level of transparency that shows the leader and the bank have nothing to hide.

Finally, implemented well, these changes are an opportunity to improve performance through a culture that emphasises accountability, not bureaucracy.  Leaders and managers will have ’space to lead,’ with greater autonomy, clarity of decision rights and lines of delegation.  Removing inappropriate decision-by-committee bureaucracy will accelerate change and innovation within the bank.  A more purpose-led organisation and investment in capability can help increase motivation.

To help implement the Senior Managers Regime in ’the spirit of the law,’ action is encouraged in the following five areas:

  1. Define accountabilities for each leader and a chain of accountability
  2. Support leaders and help them exercise their accountabilities
  3. Build deeper leadership capability at all levels
  4. Create a culture of accountability and the right behaviours across the leadership team
  5. Attract leadership talent with a purpose-led value proposition

Want to find out more about the practical way to deliver this change? Contact us.

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