Do We Need Separate Excellence Criteria for the Financial Services Industry (and Maybe Others)?

Posted by Harry Hertz, the Baldrige Cheermudgeon

I am referring in particular to the Leadership category of the Baldrige Criteria for Performance Excellence. More specifically, to the questions related to legal and ethical behavior. And, to give an example, the questions, “How do senior leaders’ actions demonstrate their commitment to legal and ethical behavior? How do they promote an organizational environment that requires it?”

Let me share some data from a June, 2012 survey of 250 U.S. and 250 U.K. senior individuals within the financial services industry. Thirty percent of the respondents stated that their compensation or bonuses created pressure to compromise ethical standards or violate the law. Twenty-six percent indicated that they had observed or had firsthand knowledge of wrongdoing in the workplace. And 24 percent believed that financial services professionals may need to engage in unethical or illegal conduct in order to be successful. In a broader study of over 2,000 employees just released by the Ethics Resource Center, 13 percent of all U.S. companies’ employees felt pressure to break the rules. This is less than half the percentage for financial services, but still a real concern.

To address the survey respondents, the Baldrige Criteria might need to state, “How do senior leaders actions demonstrate their commitment to success, recognizing that it may sometimes compromise legal and ethical behavior? How do they promote an organizational environment that achieves success, recognizing that it may require illegal and unethical behavior?”

The survey results and the revised Criteria questions sound unbelievable, don’t they? Yet these are survey data from 2012, several years after the global financial crisis and while we are still suffering the consequences. The headline for the financial industry survey summary starts, “Financial Services Professionals Feel Unethical Behavior May Be a Necessary Evil…” Do they really believe that?

Certainly, there are many very ethical people and businesses in the financial services industry. Some of them have been recognized by and involved in the Baldrige Program. Let’s hope they prevail on the others to change their ways.

(I promise my next blog post will be about a very positive customer experience I recently had!)

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7 Responses to Do We Need Separate Excellence Criteria for the Financial Services Industry (and Maybe Others)?

  1. Bryan Zak says:

    An area that I think has a lot of opportunity is to expand the existing criteria for non-profits and governments. I would like to see specific criteria for large governmental organizations. This morning I was listening on the radio to how one government had established a policy to use up the water in a particular river before it could serve another county. The two governments as part of peace negotiations are learning to cooperate and agree over the water resource. It would be wonderful for the two countries to have criteria as roadmap for their futures.

  2. Barry says:

    J D Power found similarly interesting results in most industries on the topic of “satisfaction with quality” in 1990. In a survey of 5,000 adults aged 18 and over about their satisfaction with 120 categories of P&S, a majority said that their overall satisfaction with the quality of P&S was not being met and was getting worse. Interestingly, on the same survey, 67% were satisfied with the quality of P&S their INDUSTRY was producing, 75% satisfied with the quality of P&S their COMPANY was producing, and nearly 100% satisfied with the quality of P&S THEY produced.

    You can see the same thing here. It is always the other guy that is the problem. If the finance industry parallels the J D Power data, your Category 1 questions would get responses from them in the upper two scoring bands … until the site visit and Franks-Dodd is turning out to be one tough site visit.

  3. Harry Hertz says:

    Thanks for the comments. Barry, I think there is a difference from the early days of satisfaction with quality. In the current studies the survey respondents are commenting on pressure they feel, not that others should feel (i.e. my ethics are under the gun, not their quality is bad).

  4. Nancy Timmons says:

    Truly surprising; however, perhaps the time has come for dealing with what is evidently the real world of financial services.

  5. GreenDriverLV says:

    Without a state program in NV anymore, I’ve been a bit removed from the Criteria, but are there still criteria asking how compensation is tied to performance? I distinctly remember writing OFIs or comments as a state examiner to the effect of linkage with these two elements. But along the same lines, even in my own company, the individual’s desire for personal wealth (the bonus) overrides the desire to perform well legitimately so they act unethically to “fake” the scores in their favor. Their performance in the metric looks great (Results), the senior leaders are pleased with their linkage (Leadership), and the employees would be delighted with their bonuses (Workforce). Unless an examiner stumbled across an employee with high ethics to whistleblow, no one is the wiser.

    • Harry “The Baldrige Cheermudgeon” says:

      GreenDriver raises a good point and supports why Baldrige is a systemic approach to performance excellence. It is not about individual linkages of compensation to performance (which, BTW, is overall organizational performance, not individual performance metrics) but compensation and performance as part of a system that also includes ethics, legal compliance, strategy, the customer, and sustainability. When one linkage in the system dominates there is always a consequence in the area of sustainability.

  6. Harris Nicewarner says:

    Thanks a lot for the article.Really looking forward to read more. Really Great.

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