Crelos April 2010 Newsletter

Crelos Newsletter

April 2010

Welcome to the Crelos regular update

Since our last newsletter and the announcement by the FRC that they are proposing to adopt the recommendations of the Walker Report into a revised Code due out this year, we have been continuing our work teasing out the implications for leaders in both financial and non-financial institutions. Because the role of behaviour in affecting good corporate governance has come under intense scrutiny following the financial crisis, the answer to how do we achieve good corporate governance is key.

The solution reflects balancing an array of influences which is probably at its widest in the case of banks. A critical balance has to be established between, on the one hand, policies and operational constraints required by financial regulation and, on the other, the ability of the Board to make business critical decisions key to the long term sustainability of the organisation.

Over recent months, Crelos has been working on a number of initiatives to bring to the fore how evaluation can help Board effectiveness. These initiatives include contributing to the Walker Review and the FRC review of the Combined Code. In addition to this, detailed interviews with Chairmen and Senior Independent Directors from FTSE 100 companies and regulatory authorities have been conducted to establish their requirements for Board evaluation. This research has identified the importance of a multi-disciplinary approach to Board Evaluation.

As such, Crelos’ behavioural analysts are now working with a multi-disciplinary team comprising of lawyers from the international legal firm, Norton Rose LLP, group dynamics specialists from the Tavistock Institute of Human Relations, with further support from a senior independent director at Brian Quinn Consultancy and a panel of senior and experienced Chairs and Non–Executive Directors of Boards. The team’s approach is to bring together the learnings from a variety of disciplines such as social sciences in the specific application of behavioural psychology, leadership studies, group dynamics, organisational studies and complexity theory with the disciplines of Governance and Compliance, Remuneration, Risk, Alignment with Shareholders, Culture and Disclosure. Because every Board faces different issues, every Board evaluation will be different; requiring input from different and distinct disciplines. Research into multi-disciplinary teams indicate that they are more innovative and produce higher quality solutions (Borrill et al. 2006)

We believe that we are entering a new era in the role of the Board. The approach to evaluation represents a significant and important improvement in postively affecting not only Board performance but ultimately, overall business performance.

At A Glance...

Shaping Our Current Thinking – Inside the minds of the money minders

In Practice – Practical Guide To Precision Development

Sector In Focus – New construction industry survey

Did You Know?

Shaping our current thinking: Inside the Minds of the Money Minders

Initial findings from research conducted by Mannie Sher, Director of Group Relations at the Tavistock Institute and Alison Gill, Director at Crelos on leadership reflections on money, behaviour and leadership during the financial crisis of 2007-2009 indicate that the crisis has been a profound experience. Very senior people admit that they were found wanting. When the crisis came to a head the very behaviours required to solve the crisis were collaboration and collective responsibility between banks, regulators and politicians yet lack of trust and confidence prevented this from happening.

The research undertaken so far has involved in-depth interviews with selected senior officials of banks and other financial institutions. It is based on our hypothesis that money, finance and capital serve as “containers” (in Bion’s use of the term) for profound individual and social meaning which are often hidden. By revealing that meaning, we should enable the finance industry to develop more effective ways of avoiding financial crisis and improve decision making.

The interviews are at an advanced stage and they are providing profound insights about the finance industry. Our respondents have said that the financial crisis has been a shattering experience that has rocked the foundations of financial institutions. People in them are now better able to reflect on events and take a candid look at themselves, and acknowledge where they have been found wanting. Very senior people are acknowledging that they knew their behaviour was “excessive”, but they persuaded themselves otherwise. Their behaviour was described as “delusional” and had the characteristics of herding. A group mentality had developed and was embraced enthusiastically. Throwing caution to the winds, all believed “this time is different”. The regulators have wondered about their own sense of powerlessness in the face of the whole system’s ‘unlimited capacity to delude itself’. They said it was like working in a ‘world of illusion built on illusion’, in which they too got caught up.

It is emerging that most directors do not understand (1) the full implications of the economic systems becoming so complex as they have evolved across national boundaries to the global stage, and (2) that there was an over-reliance on numbers and mathematical models over good person-to-person judgment. A third realisation is that even the most senior people of the largest world financial institutions understood that they had to work collaboratively. However, they could not do so. Their own internal, intra-institutional and inter-national competitive and rivalrous dynamics prevented this.

There is a strongly held belief that because politicians are feeling the pressures to act in order to assuage public outrage and address the need for justice to be seen to be done, that this is once more forcing short-termism onto financial systems. However, this comes with potentially disastrous consequences. There is a real requirement for global solutions in addressing national and inter-national problems which has far-reaching implications. It is the hope of the researchers that the research and evaluation work will provide new ways of thinking about and approaches to decision-making. The hope is that these insights will bring the many disparate parts of the financial world and political world into greater harmony along with a sharpened ability to see exactly how critical it is to think from an open system perspective.

Alison Gill and Mannie Sher

To receive a copy of the final research report please email

In Practice – Practical Guide To Precision Development

As we see signs of the recession easing off, organisations are starting to breathe again and think about loosening their belts – but should they? Our view is that organisations need to take the learning from the recession – development works best when it is tightly targeted and outcome focussed.

During the recession, those responsible for the people strategy came under increasing pressure to cut costs and ensure that organisation was operating efficiently. Budgets were cut, development activities halted and qualifying return on investment became even more essential. Organisations now face the challenge of restoring normal service. The answer is not to throw money at the problem but to accurately prioritise and target development interventions where they are going to have the greatest impact.

Crelos have developed this Practical Guide To Precision Development with a view to remind us all how to:

  • Align development with the business strategy
  • Prioritise and maximise development budget
  • Help leaders think more strategically about people development

If you have any question, or would like to discuss some of the content with one of our consultants, email or call us on 01491 845 535.

Sector In Focus – New construction industry survey

We recently worked with the Chartered Institute of Building (CIOB) to explore the effects of the recession on managers, in particular, on how it has changed their role.

The majority of managers surveyed (70%) rate themselves strongly on generic technical skills but poorly on leadership skills.

So, what are the best companies doing? One example is Costain’s award-winning Project Management Academy. Costain’s Academy is based upon the leadership behaviours identified by the Association of Project Management (APM).

Did You Know?

…according to a year long survey carried out by Deloitte entitled "Managing Talent in a Turbulent Economy: Where are you on the recovery curve?"

  • In companies that foresee no additional layoffs, 60% of executives plan to increase programs for developing high-potential employees, yet
  • Only 10% of executives describe their leadership initiatives as “world-class across the board”. Executives do not have a high sense of confidence about their efforts in developing leadership programmes, despite near universal agreement on the importance of leadership programs.
  • Deloitte say they are seeing that companies do not foresee further painful layoff decisions and furthermore, they are committing themselves to both retaining top talent as well as to investing in “world-class” leadership programs to build robust pipelines of emerging and senior leaders.

…according to PriceWaterHouseCoopers’ latest Annual Global CEO Survey which offers an up-close look at how business leaders have responded to the challenges brought about by the recession.

  • 85% of CEOs interviewed expect to overhaul the way their organisations manage people during change as a consequence of the economic crisis
  • Talented, well-skilled and well-educated workers were identified by three-quarters of respondents as critical to the competitiveness of the UK. From this, 65% plan to increase investment in training and development.