Culture as Contagion

With the Hayne Royal Commission having issued its final report, executives across the Australian financial sector are asking how to correct circumstances that led to past misconduct. Budgets for governance, risk and compliance measures will swell, but those added resources are not likely to produce the desired result without a reappraisal of what drives human behavior within firms. 

Management theory, as it is applied among firms worldwide, persistently elevates the importance of incentives in driving employee behavior. These incentives are seen as primarily financial. Moreover, they also presume the well-known “rational actor” model of human behavior. This results in the belief that, if incentives are properly “aligned,” all will be well and that the optimal way to motivate behavior is one- employee-at-a-time.