In recent years, the relationship of the UK’s banks with the concept of “risk” has been evolving rapidly.
Risk in the banking sector comes in many forms. Lending risk is perhaps the most obvious. The collapse of the global economy in 2008, for example, has been widely attributed to a policy in America of offering sub-prime mortgages – essentially, of lending to people who couldn’t possibly repay their debt. In the UK, the appetite for lending risk in banking has changed dramatically in the intervening years in response to changes in the regulatory environment and an overall move away from an environment of light-touch regulation.
Another prominent area of risk – in banking and other sectors – is the risk of fraud. I don’t know about you, but I often field e-mails purporting to be from this, that or another well-known high-street bank and urging me to update my security details. I’m tempted to dismiss them – who on earth would be fooled by such a scam?! But the fact that they keep on coming suggests that yes, they work. Of course, this is just one way in which client accounts are accessed fraudulently. Banks increasingly have to keep abreast of the creativity of crooks.
Periodically, banks also fall prey to the risk of trading by staff beyond authorised limits with the consequential losses. Another prominent area of risk in banking is in the failure of IT systems. And, well, the list goes on…
The risk of recruiting the wrong person for the job
There’s a risk that’s spoken of less often, in banking as elsewhere, even though it’s a risk that we take on a regular basis – the risk of recruiting the wrong person for the job.
Maybe you’ve been there yourself. You interviewed a range of candidates and one or two really stood out as front-runners. Perhaps they had a track record of experience that was way ahead of their peers. Perhaps they had worked for all the best organisations. Perhaps they had had an early success that made them stand out or, simply, impressed you in interview… you made your decision and looked forward to the outcome…
…the person who looked so good on paper and who impressed you so much at interview turned out to be someone quite different once his or her feet were under the desk.
If ever you’ve had this experience, you’ll know how painful it can be and how difficult it can be to unravel. For starters, even if your antennae start to twitch early on, it takes time to realise that yes, you really have got a problem on your hands. Probably, you’ll want to take action to support the individual you’ve recruited to give him or her the best possible chance to succeed. Meanwhile the body of evidence starts to grow which tells you you’ve got it wrong. Some of these can be hard measures – deadlines or targets that have been missed, for example, or a failure to deliver something (a proposal, a new client, an IT system…) that was promised in interview. Some of them can be so-called “soft” measures – a failure to engage with key stakeholders, for example, or to set a clear and compelling agenda.
By the time you’ve identified the problem, tried to support the person you’ve recruited in getting up to speed, realised you need to move them into a different job or to sack them, sacked them and recruited a replacement, the consequences can be bruising and include the time lost in moving forward a key agenda, the alienation of employees or key stakeholders, the costs of recruiting a replacement… the list goes on.
Recruiting for competence
As early as 1973, Professor David McClelland wrote a paper entitled Testing for Competence Rather Than for Intelligence which was published in the American Psychologist. He proposed that a proliferation of aptitude and intelligence tests had created a whole movement in the US which, however, failed effectively to predict actual performance. Instead of joining his colleagues in pursuit of a general and universal test of individual aptitude, McClelland proposed an alternative; he looked for ways to test for competency which were rooted in an understanding of the job and of the characteristics and behaviours that actually differentiated high performers.
Ground-breaking at the time, McClelland is widely credited with opening up our deeper understanding of what makes people effective in a wide range of roles and the word “competencies”, which he used in his 1973 paper, is now widely understood.
Widely, but not universally…
Whilst some organisations have made great strides towards recruiting the right (wo)man for the job, mistakes still happen. Organisations are particularly vulnerable to making mistakes in which people make decisions based on a poor understanding of the job and of it’s essential requirements, a poor understanding of what it takes to succeed in the job, and replacing effective methods of assessing for competency with over-reliance on a person’s career history (as reflected in a CV), on interview methods which fail to get under the skin of a candidate’s actual capability and on “gut feel”.
If you want to recruit effectively, here are just some of the things you need to be thinking about:
- Do you have a clear and simple job description in place which clarifies the core purpose and essential requirements of the job? Too many senior recruitments fall at this very first hurdle;
- Do you understand the competencies that predict success in a given job? It seems to me that, at the moment, too many behavioural descriptions are “motherhood and apple pie” rather than reflecting any careful observation of (let alone quality research into) what makes people effective in a given role.
- Do you have an effective method for testing for competency? Assessment centres are widely used when recruiting for multiple role-holders whilst I use competency-based interviews to assess candidates for senior leadership roles.
I would add that the use of psychometric tests can enhance your recruitment efforts – though they are not, in my view, a substitute for any of the core elements outlined above.
We can all look at the banking sector and name senior figures in the industry who were reckless in the extreme in the period which led up to the events of 2008. They are casting a long shadow over the industry… the mythology of the banking “fat cat” is alive and well and will no doubt be slow to respond to any actual changes in banking behaviour.
My own experience has been a little different. Assessing candidates for senior roles in UK banks I have met any number of men and women who are concerned to support the success of UK banking, the effective management of risk and a real connection with the customer.
At least in retail banking, that’s you and me.
PS The photo came from a recent walk along London’s South Bank. Some of the photos I took on that day will be appearing on my new website – coming soon – at www.learningforlifeconsulting.co.uk