The reputation of National Australia Bank among customers, analysts, shareholders and staff has taken a serious beating in recent years. Melinda Finch talks with Elizabeth Hunter, head of people & culture, about the ambitious transformation program designed to redevelop and revitalise Australia’s largest bank
The reputation of National Australia Bank among customers, analysts, shareholders and staff has taken a serious beating in recent years. Melinda Finch talks with Elizabeth Hunter, head of people & culture, about the ambitious transformation program designed to redevelop and revitalise Australia’s largest bank
NAB lost more than $360 million in the foreign currency scandal of January 2004. What were NAB’s main people management and related issues at the time?
Following the foreign exchange losses, we quickly recognised that we had a number of broadly-based issues that needed to be tackled.
Firstly, we were too bureaucratic and cumbersome – our business structure was complex and we tended to over-engineer the way we did things. Management lacked ownership and accountability for costs.
Secondly, we were inward-looking and not customer-focused – we operated in silos and there was a lack of divisional cooperation.
Thirdly, we had a weak compliance framework – our people did not have sufficient awareness of our policies, and in some cases policies and procedures were not well developed. Our processes for monitoring compliance were complex and did not allow issues of substance to be identified and escalated.
Finally, we had major gaps in our cultural framework – while we had a set of values, people were not held accountable and values were not reflected in the way people were assessed. Culture change programs were voluntary and there was a lack of visible and consistent leadership in this area.
The Australian Prudential Regulation Authority’s March 2004 review of NAB found that some of the ‘people & culture’ policies – including codes of conduct, structured performance management systems and formal systems for resolving disputes – weren’t respected or applied by some individuals or management. In such cases, did HR fail to implement or maintain these policies? Was this an organisation-wide problem?
We had a lot of policies already in place, but they weren’t necessarily integrated with what we were saying was important. To help realign these areas, we introduced a set of corporate principles that outline the expected behaviour of all our employees. The principles are embedded across our whole business and reinforce the importance of having a culture that not only values great performance but also the right behaviours. ‘How’ we achieve our results is just as important as ‘what’ we achieve.
To further reinforce the importance of the right behaviours, we have directly linked our corporate principles to our performance management framework. At the end of the performance year, every employee will be measured on their behaviours and will need to pass a behaviour ‘quality gate’ to be eligible to receive a short-term incentive. Passing the gate is like getting a ‘ticket to the game’. As our performance management framework touches everyone, no-one should think that the corporate principles and behavioural expectations don’t apply to them.
In the Macquarie Research Equities review of NAB in September 2005, low levels of employee engagement were cited as reasons for downgrading the bank’s earnings forecast and reducing the stock recommendation to neutral. Were there internal indicators of employee disengagement prior to this analysis? And if so, what was being done to address them?
We were very aware of the key issues that were adversely affecting our performance. Unfortunately, there were no quick fixes for these underlying problems and it was going to take time to rebuild the organisation.
Our 2005 employee opinion survey results strongly reinforced that our people are committed to our customers, but they also highlighted our biggest challenge –how to get our people to engage with the organisation as well as the customer. In other words, how to rebuild their connection with NAB.
We recognise we have a way to go on our cultural journey. The thing we’re most encouraged about is that our people are passionate about the customer and providing outstanding service – this is a great base on which to build the business and culture we need. What a difference two years make.
Organisational transformation is nothing new among Australian banks – what’s so different about NAB’s culture and people agenda?
Cultural transformation is seen by all parts of the business as integral to delivering on the organisation’s strategy and mitigating business risk. Leadership teams within each of the regions we operate in view cultural transformation as a top business priority, and identified it as such by making it a part of this year’s strategic planning process.
We are taking a balanced approach to organisational transformation. Making sure our leaders are behaving the right way is just one piece of the puzzle. We also need to ensure we have the right people capabilities in place and our employees are skilled in what it takes to drive performance and culture change. Furthermore, our formal systems and processes need to support the desired culture.
A good example of how we have aligned the behaviour we want to see and our formal systems and processes is our new Enterprise Agreement. The agreement supports the cultural transformation of our business through increased flexibility, simplicity, reward for performance, and recognising we are a diverse workforce with different needs.
Another important driver of cultural transformation is having a compelling vision that employees can commit to and believe in. We have done a lot of work to communicate our organisation’s aspirations and goals, and ensure employees understand what they mean and how they can contribute to achieving them.
Our recent brand launch provided a great opportunity to reinforce this. Our new logo and visual identity were a powerful signal of change and new beginnings, and a renewed focus on the customer and on our purpose to ‘help our customers fulfil their aspirations’.
To bring our new brand to life, we introduced a set of ‘brand behaviours’ that strongly reflect and reinforce our corporate principles. They also helped to demonstrate that our brand is much more than a logo – it is our people and the customer experience that sets us apart from our competitors. Living our brand every day means delivering on our promises, being real, easy to do business with, and backing our customers.
APRA’s March 2004 review argued that cultural change had to be driven from the top – is this happening?
I would agree that most models of culture change emphasise the importance of top leaders role modelling the right behaviours and helping to drive change through the organisation. All of our leaders are responsible for bringing our people along with us on the change journey.
This change is truly being driven from the top levels of NAB – our Board has been involved and is fully committed to transforming our culture, as are our executive teams around the globe.
How is the people & culture division ensuring that the organisational culture that is being talked about is the same as the one that is being acted upon?
First and foremost, we have spent time understanding what’s going on in our culture and continually checking to see that people are working on the right things. Measurement is a critical ingredient – you need people working on things that will address your cultural issues.
A good example of this is around one of the cultural issues we needed to address – our people were scared to escalate problems and issues. We have since done a lot of work in this area to ensure we have a number of ‘safe’ channels in place. Some of these include:
A confidential alert line – a telephone-based channel that is staffed by specially trained operators who handle any concerns raised with care and discretion. An employee can remain anonymous if they choose. The alert line has been extremely valuable as a channel, as the quality of some of the disclosures received have alerted us to the emerging risks in a timely manner and have enabled us to address.
Concern online – an online channel available to our employees for raising issues and concerns. Once again an employee can remain anonymous.
CEO and executive feedback lines – our Australian CEO and executive general managers have their own feedback email addresses. Since September 2004, over 1,500 emails from employees have been sent to the Australian CEO’s feedback line. Since May 2005, around 600 emails (about 15 per week) have been sent through this channel. Although this channel can be used to raise a serious issue or concern, it is mostly used to provide general comments and suggestions or ask questions.
Within people & culture, we have a people advisory centre – a call centre available to all employees for people-related queries and concerns. We also have a case management team that provides employees and people leaders with guidance, advice and support on the resolution of workplace issues.
Our Performance Management Framework (PMF), and in particular the quality gates (as mentioned previously) reinforce the importance of behaving the right way. People leaders are responsible for addressing non-compliance or inappropriate behaviour. Also, as part of our PMF, we run a leadership behaviour survey – a 360 degree feedback survey in which people leaders, direct reports and peers can provide confidential feedback on an individual’s development needs.
In recognition of the importance of leaders role-modelling the right behaviours, we have a number of leadership development programs in place that involve activities and role plays centred around solving problems.
In August 2005, APRA’s David Lewis said: “Within NAB, the whole [foreign currency trading scandal] affair has been enormously cathartic. The bank has set about a program of corporate renewal that is unprecedented in Australian financial institutions.”How long will this corporate renewal program take and how will its impact be measured?
I can’t imagine a time when we wouldn’t want to be working on our culture, but achieving any significant change takes a number of years, particularly in an organisation of our size.
We are just past the halfway mark of our three-year journey – we have successfully stabilised the business and we have the right people in place who are focused on the right things. While we have made good progress, we recognise there is still a great deal to be done. Our focus now is on rebuilding and transforming our organisation to become truly competitive.
Our cultural renewal program is all-inclusive from the Board down. NAB has a long history of almost 150 years in Australia, and culture in an institution of that age takes a lot of hard work and commitment to change.
How important is employee engagement
"We weren't surprised with the results of our last employee opinion survey, and in particular the responses we received on questions such as 'I have thought about leaving', which are part of the subset of questions that contribute to the engagement score," says NAB's head of people & culture, Elizabeth Hunter.
"However, focusing only on the subset of questions related to engagement during our period of stabilisation did not provide an insightful construct. We have found the alternative 'satisfaction' measure to be a broader and more appropriate measure for our organisation at this point in time. We have focused on identifying the root causes of the issues underpinning engagement and satisfaction, which has helped us better align our solutions."
