As the nation’s financial services industry continues to focus on its greatest-ever remediation efforts through 2020, the leaders of many institutions have overlooked one of the most important areas requiring remediation.
The boards and leadership of most impacted organisations, including some of the biggest listed companies in the country, are missing remediating the cause of most of their problems identified by the Hayne Royal Commission, notes three of our industry’s specialist recruiters.
“Few of our financial services organisations have recognised that their problems were not caused by processes or by technology, but by people,” says Sally Humphris, Executive Director at specialist wealth management industry recruiter Super Recruiters.
Ms Humphris cited how APRA recently described the risk and compliance functions of the nation’s largest financial institutions as being in need of urgent overhaul. Institutions have staffed these departments with many additional people, but these people are not necessarily addressing the problems, according to APRA, she noted. “This suggests institutions need more skilled people with proven performance and expertise who can make a difference, not just more risk department headcount.”
“This highlights how many of the financial services industry’s hiring, management and engagement process need to be remediated.
“Many industry leaders have not begun thinking about how to remediate this major problem. They continue to use those same out-dated HR department screening and selection processes. This needs to change in 2020.”
The people problem
Ms Humphris cited research by LinkedIn that shows the majority of candidates hired are selected on ‘gut feel’, despite the fact this is successful only one in seven hires. “These are low odds for success and investment owners and managers would not invest in a company with those odds. So why do their HR departments? Yet this remains how most financial services organisations hire.”
“Research clearly shows that traditional resumes and job interviews alone are poor predictors of actual job performance. Interviewees give rehearsed answers and interviewers pick candidates they like rather than those whom have a proven track record of delivering results.”
She added that further research by Harvard Business School shows that 90% of business strategies fail due to poor execution. “Our institutions require candidates who are proven delivers more than ever.”
The LinkedIn research also showed that almost two-thirds of HR teams admit their traditional interviews failed at assessing candidates’ soft skills. Yet it is these soft skills that organisations are increasingly looking at assessing for cultural change. Ms Humphris added: “All organisations want to ensure they are employing people with the values of honesty and integrity they require in order to match customer and community expectations as highlighted in the Banking and Financial Services Royal Commission. To do so, they need to transform their hiring processes.”
Technology alone is not the answer
James Lai, Director of HR tech firm Meetig8, said: “The recruitment process needs to be transformed in many financial services organisations in order to better consider candidates’ past performance and cultural fit, not just in their own words, but also from past and present colleagues. This can be done, combining both improved technology and more objective people skills.”
“Wealth managers don’t invest in stocks and companies the way they invest in people. They do much more research, assess past performance to select proven performers. It should be the same when it comes to hiring people. It is also important to look at what lessons candidates learnt from any past poor performance and also their values and cultural fit with the organisation.
“There are many people with a history of poor performance and cultural fit that can undermine an organisation and lead to the issues that we have seen brought to public attention through the Hayne Royal Commission,” said Mr Lai.
Paul O’Brien, principal of risk consultants Riskwise Professionals, adds: “We all know how hiring the ‘wrong’ person to an organisation can cost time, money, clients and reputation. It is time our industry leaders removed the risks that have been, and in many cases still remain, inherent in their HR departments.
“2020 is the time to transform our industry’s financial services people practices.”
Super Recruiters’ recent Super Industry Issues 2020 Report found many c-suite leaders were uncertain as to how to transform their human resources practices, with almost 40% not happy with it. But less than a third expect to transform it for the better, as shown below.
 Over more than two years of successful service
 Harvard Business School – Robert Kaplan and David Norton 2018