It’s easy to get the impression that it pays to be bad.

A recent 1,000-page Royal Commission report on misconduct in Australia’s financial sector revealed hair-raising stories of excessive commissions, rampant mis-selling and charges levied on the dead. The report declared that individual greed and an imbalance of power and knowledge between banks and their customers contributed to these actions, and that companies who broke the law were not adequately detected, punished and deterred.

So how do you stop a bank from misleading its customers?

Many of the recommendations in the report are practical yet predictable suggestions combining more rigorous oversight with more transparent self-assessment.

So far so sensible.

But recent news suggests that the Australian Securities and Investments Commission (Asic) has started to think more creatively, investigating how Artificial Intelligence and natural language processing could detect financial misconduct. It’s also engaged an organisational psychologist to observe and report on the boardroom deliberations of large listed financial entities. Participation is voluntary, but as one anonymous chairman observed, “You know what it’s like to be volunteered for something.’’

The psychologist’s focus is on identifying both the good and bad behaviours that determine how bank boards make decisions, but there are industry nerves over whether this is a permanent shift in corporate oversight.  Australia wouldn’t be the first. The Dutch central bank employs two full-time psychologists to evaluate group dynamics, decision-making, leadership and communication. In the UK, behavioural psychologists have been involved in tackling gender issues and racial diversity on FTSE100 boards.

The latter reviews extended beyond banking – the FTSE100 spans the mining sector, aerospace and defence, construction, telecoms, apparel, retail, food and drink, travel and leisure, media and tech. While it’s fun to knock bankers, many of the observations made in the Royal Commission report could apply to companies in any of these sectors: greedy individuals are as likely to work in tech or fashion as banking and regulatory imperfections exist in almost all of these sectors.

Do  businesses  inevitably descend into a race to the bottom without strict and constant oversight? Is the cycle of scandal and censure an inevitable aspect of corporate life?

Will the nice guys always be taken advantage of?

British medical psychotherapist Penelope Campling confronted similar issues in a 2015 paper on reforming the culture of the National Health Service in the UK, written in the wake of a series of scandals involving abuse and neglect. Her concern was similar to that expressed by the reluctant volunteer quoted by the Financial Review: that the most obvious response would be yet another programme of activity ‘on top of an already toppling tower of initiatives’, designed to appease public outrage rather than fix the underlying problem.

Campling calls for ‘intelligent kindness’. She points out that healthcare is an emotionally stressful environment; workers face situations in which they can feel hopeless and helpless, and will protect themselves in all manner of ways. They deserve our understanding if these coping mechanisms reveal vulnerability and insecurity. Financial services aren’t alone in developing cultures of fear and paranoia. Biscuit companies and beauty magazines are just as likely to evolve into toxic workplaces.

Beyond these individual challenges, we can add organisational dysfunction, poor communication and unclear boundaries. Excessive accountability dehumanises the workplace, desensitising workers to the needs of colleagues and customers. Campling suggests that the cumulative effect of these forces erodes compassion or kindness at an organisation-wide level; when people are left to fend for themselves in challenging situations, or feel threatened by a culture of regulation and performance management,  our instinct towards self-protection takes over.

Campling’s antidote is ‘intelligent kindness’ – an approach to problem solving that develops a virtuous circle of closer and more compassionate relationships at an individual, team and organisational level. The virtuous circle begins with the simple idea that people working in a system should be driven primarily by a sense of kinship. In other words, healthcare workers should see the person in the patient and seek to deliver the sort of care they would wish for family and friends.

The same notion applies to the corporate world; ‘customer’ or ‘consumer’ are dehumanising terms that encourage a sense of ‘us’ and ‘them’. CMOs and marketers are the most likely of all professionals to fall into this trap, referring to ‘consumers’ and defining people by their degree of brand loyalty or their purchase frequency. How often are we happy to substitute the messy reality of a person for the comforting caricature of a customer persona?

An important aspect of intelligent kindness was discussed last year by Elizabeth Arzadon, the organisational psychologist commissioned by Asic to report on boardroom behaviours. Her insight is that while everybody agrees culture is important, leaders often avoid dealing with it because they lack confidence in their ability to change it. She prefers to cultivate an attitude of health and prevention on the part of leadership. Her suggestion is similar to Campling’s: blaming leaders for poor culture will only make them defensive and inert; a more intelligent approach is to manage cultural risk. This means accepting that this risk is inherent in all businesses and all business strategies but that it can be managed. In her own words, “Acquisitions, geographical expansion, management turnover, or cost imperatives can all increase the likelihood of cultural issues arising. That isn’t the fault of leaders, it’s simply an outcome of situational variables.”

Whether we’re talking about a consumer, a customer, a chairman or a CEO, the more we focus on the person, the more likely we are to build a relationship of mutual trust and respect – and ultimately to deliver a more satisfying outcome for all. Beyond being more empathetic, an organisation that practises intelligent kindness will be more efficient: improved communication and collaboration will deliver productivity benefits, as well as a culture where issues can be more clearly identified, more openly discussed and positively resolved.

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