Mind the gap: Finance Directors understanding of organisational culture

Clare Burns, PhD candidate, Griffith Department of Business, Strategy and Innovation
Heather Stewart, Senior Lecturer Griffith Department of Business, Strategy and Innovation
Luke Houghton, Senior Lecturer Griffith Department of Business, Strategy and Innovation
 
Directors in Australian finance organisations’ impact thousands of finance staff, who in-turn, impact millions of customers, some of whom are vulnerable (Kingsford Smith, Clarke, & Rogers, 2017). Numerous government and regulator investigations into the finance industry have found long standing problematic culture issues to do with fairness (Australian Government Department of Treasury, 1997; Campbell, 1981; Murray, 2014). Despite these investigations, large finance organisations’ ethical conduct have continued to fall below community standards (Hayne, 2019). As yet, the finance industry, using traditional quantitative approaches, have not resolved deep-rooted ethical problems within its culture; but they have increased reporting on their espoused values (Australian Council on Superannuation Investors, 2017; Commonwealth Bank, 2018). Organisational theorists advise a gap between espoused values and those in use, within an organisation, produces a breeding ground for defensive routines (Argyris, 2010; Schein, 2010). Defensive routines emerge when people’s social order is challenged; therefore, they seek stability through projection, denial, games, blame, and other rationalisations (Ashforth & Mael, 1989; Oh & Farh, 2017).
A review of the 2018/19 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (hereafter Commission) documents found evidence of director defensive mechanisms such as projection, rationalisation, cover-up, self-sealing logic, and denial (Hayne, 2019; Transcript of Proceedings, 20 November, 2018; Transcript of Proceedings, 27 November, 2018). These documents also revealed customer outcomes of defensive routines: farmers and small businesses losing their livelihoods, vulnerable people being sold finance products not-fit-for-purpose, and customers being offered loans they could not afford (Hayne, 2019). While little is known on director’s cultural assumptions, it is unlikely finance directors intentionally seek to bring harm to vulnerable customers. Still, the Commission, like other investigations, found an “unwillingness to acknowledge problems and deal with them” (Australian Government Department of Treasury, 1997; Campbell, 1981; Hayne, 2019, p. 377).
Organisational culture within finance has been studied less than other industries such as the arts, architecture, media, health, and sport (Holderness, 2017; Li, Griffin, Yue, & Zhao, 2013). There is scant literature on finance director subculture and their impact on the organisation’s subcultures, other than what is stated in corporate reports. These reports do not include enacted values in use indicating underlying assumptions (Argyris, 2010; Holderness, 2017; Sheedy & Griffin, 2018). The time to address the development of improvement of an organisation is when there is a problem (Schein & Schein, 2016). The Commission labelled the industry “dishonest and greedy” (Hayne, 2018, p.73), recommending they follow organisational theorists advice to “hold up a mirror” to reality (Hatch, 2011; Hayne, 2019, p. 377). Given the significance of finance directors’ subculture on their subordinate’s subcultures, the research question which guides this study is, How do finance directors understand their organisational subcultures? Which leads to an underlying question: Why is there a need to meaningfully investigate finance subcultures to improve ethical culture within large finance organisations?
An interpretive, exploratory study into a large finance organisation is now underway which incorporates organisational fieldwork of three key subcultures (Schein & Schein, 2016): directors, designs (people developing financial products and processes), and operators (people directly engaging with customers). Early findings from this research will be shared, which includes verbatim quotes from each subculture that either corroborates espoused values, such as “the customer is at the heart of everything we do,” or contradicts what is espoused. For example, directors in this study said their culture is “collaborative,” “fair,” and “simple.” Designers spoke of “the hierarchy delaying results” and people being “nice” to the point of “too nice,” where “complacency” is tolerated. Operators spoke of their culture being “complex,” “cliquey,” “high pressure,” and a lack of career progression. For directors to decrease the gap between espoused values and values in use, instead of minding the gap, a deeper understanding of subcultures is needed.