Nigel's Eyes

20220526 All change: managing policies and procedures in a fluid and hostile environment.

Financial crime risk and compliance officers are necessarily managers of change. But they have suddenly become subject to the whims of management consultants in how they go about doing their job.

That might be fine if the management consultants didn't change their approach with the wind.

I have just seen a job advert for a Director of Financial Crime Change. There's an obvious requirement for both leadership skills and a "deep" financial crime knowledge. Then it goes on "someone that has been involved in lots of Change initiatives working in an Agile environment."

This is not the first time I have seen something similar and it puzzles me deeply.

Risk and Compliance is a very taxing function. The management that goes with it is, actually, not - or shouldn't be.

It can be summarised like this: "I'll work out what we need to do to stay out of trouble, I'll tell you what to do and you do it. And if it's different to the last time I told you, I'm sorry about that but it's not my fault: it's because outside influences keep telling us, as an industry, to prioritise different stuff. I try to minimise that disruption."

Change management was a big thing in the 1980s. The men with their heads on upside down (bald, beards) who surfed first one faddish wave then the next passed through it on the way into, or out of, total quality management.

It wasn't as if it was new even then: the "time and motion" man with a brown coat and a clipboard watched how people did their manual jobs and looked for ways to make it more efficient. So it changed. Then another clipboard would appear to look for ways to make the new system safer. And it changed again. And then would come the shop steward and say that if things weren't done his way, or more money paid because productivity had increased, he'd call for the downing of tools. So things would change again or work would stop or be subject to a "slow down." Quality suffered and no one ever asked the customer what he thought.

Modern financial services businesses are factories. The people doing the job don't see the people who use the product or service. They, and the organisations - be it supranational bodies, governments or regulators - that tell them what to do pay little or no attention to the fundamentals of the service.

In the 1970s, cars rolled off the production line and dealers had to tighten up the nuts and bolts that were not screwed up properly. Today, that's financial services. But it is rarely the fault of the ordinary staff and it's almost never the fault of the financial crime risk and compliance officer.

But they both get the blame. A big part of the problem is that there is simply too much change and an approach that says "let's do the same, bigger, harder, faster."

Speed v Agility

The biggest fads of the past five years have been "Fail Fast" and "Agile."

Fail fast is stupid. Seriously. It's stupid. Like Agile, it originates in software development where both had a purpose. And where failure has few consequences until it's deployed by which time, one hopes, the bugs have been ironed out.

But Fail Fast found its way into general management. Think of the phrase "throw it at the wall and see what sticks." That might work for pasta (if you are dumb enough to believe what you see on TikTok) but it has no place in serious management. The proponents of Fail Fast were mostly hired-in CEOs on massive packages and obscene bonuses for hitting KPIs that they themselves set. "Create a new business division and launch it. Never mind that it costs USD50 million, tick that one off the list." Great collect bonus, say "so long and thanks for all the fish" and jump to the next idiot board blinded by the apparent success and then, when it fails, say that it was the successor management who didn't understand the vision.

No one bothers to look at the fundamentals and say "that was a rubbish idea from the outset."

And so it is with "Agile" although those that buy into it as a special management approach and pay specialist consultants (who still have their heads on upside down - and who were specialists in Six Sigma when that was trendy) to tell them what, if they sat on the toilet for ten minutes with an old copy of Management Today they would realise is common sense - or wrong.

So what is in "Agile"? Let's ask someone favoured at Harvard so you can't say I'm making it up.

Sarah Jensen Clayton is a senior client partner with Korn Ferry, leading the firm’s Culture and Change capability in North America. Early last year she wrote an analysis for the Harvard Business Review.

You can read it here: https://hbr.org/2021/01/an-agile-approach-to-change-management

But I'll give you the bullet points.

1. “create a sense of urgency.” "Moving quickly will mean that not everyone will be able to weigh in, and your change vision won’t be perfect. But it will make clear where you stand, put an end to any speculation and buy you time (though not much) to develop a plan."

So that sounds like "jump in with both feet, say it's urgent and take people by surprise so they can't question your fundamentals. Or point out you don't know what you are doing. Read it again: you'll see that is exactly what it means.

2. "CEOs can accelerate the change process by empowering a group of trusted experts deeper in the organisation who can be redeployed full-time against the challenge at hand."

Yes, absolutely. After all, it's long been recognised that many management consultants come in, ask the staff and then cobble together a report from the knowledge that's already in the company.

Then she goes on "Companies should also look to build an external network of advisors who can quickly be tapped to weigh in on business threats where in-house expertise doesn’t exist. Having these individuals at the ready will reduce your response time and lend credibility to the plans that are created. Your group of experts should include a change management adviser."

Ah, there's the pitch. The last bit. The first part is actually good sense. But last sentence makes it clear: there will be change and it will be difficult. But what if it need not be? Who will be prepared to say "no" to the "experts" who survive on making sure no one in the company can do so?

3. "To eliminate friction and delays, the group of internal and external experts will also need to quickly align on guiding principles and open a physical or virtual “war room” to drive collaboration."

Great: you are going to pay rooms, or Zooms, full of external advisers to hold meetings about your business - and many of them will be meetings about meetings. I'm part of a group of eight where the number of e-mails about setting up a conference call can run to twenty or so over a period of days. At least our meetings are short, productive and cover topics in depth and they start on time even if someone is late.

4. "Encourage self-organising teams to supplement your efforts." Absolutely. It's called delegation. Good delegation doesn't need to be told details: it's about employing the right people and allowing them to take responsibility and act on it. This is the essence of good management. Good traditional management. If you see something that needs doing, do it.

5. "Use internal social channels and influencers to drive employee awareness and engagement." Ah. I get it now. It's management for a generation that thinks structure is boring and resents it. It's using psychological warfare to get them out of the free coffee shop, off the brightly coloured big balls and away from the pool table and encourage them to actually work in work hours and go home outside those hours. Of course, we used to call this method of communication memos or pin notices to the wall in the staff room.

6. "Embrace a “test-and-learn” approach." It's called experimentation and while it's an essential part of R&D when you are making widgets, it contravenes one of the basic rules of management: staff like routine. Don't keep changing stuff because you don't know how it will turn out. They hate it and they don't respond well. Unless they are playing pool and don't give a toss anyway.

7. "Shift from long-term to short-term accountability. " This is the most sensible part of the whole thing. Don't give people who are building mad, likely to fail, things long deadlines that might even be after they have left. Check, check and check again. It's like cooking. You don't wait until the food is on the table for your new In-Laws first dinner chez vouz, do you? You taste at every step of the cooking process, even if it means that at some point you end up with the dinner in the dog and there's a bit of a wait for the Pizza delivery.

So, is there anything of merit in "Agile"? Only if your head is on upside down and in any case you've never read the management books on your dad's shelf. You should. Then you might decide that all the fads are just expensive, disruptive nonsense. Why? Because at least half of the businesses lauded in those books as at the forefront of the business world and management practices in the 1980s failed within ten years.

What's the expression? Focus on the knitting?

That's why there should be no place for Money Laundering, Terrorist financing, Bribery, etc. Risk and Compliance Officers to be required to adopt Agile practices.

Absolutely none.

People don't leave bad companies: they leave those who think Agile is a good way to manage compliance.

It isn't. Managing risk and compliance requires stability so that people who have to operate the complex machinery of policies and procedures know which lever to pull and when to pull it. And equally importantly, when not to pull it.

Just like in a factory.

The constant demands for changes in priority can be designed out if you have the right people who can see what's coming. There should be no need for dramatic changes. Small tweaks from time to time are enough.

That is the way to deal with the fluid and hostile environment created by the tsunami of demands of governments, regulators and self-appointed "standards" bodies. You can just think the problems they cause out of the way before they cause them. If you have the right people.

If you want to be agile, go and do parkour.

And not "parcor" That's a contraction for "partial correlation." It's when you get when you test something in the real world and it's not ready. And that's when the regulator comes and puts the chains on the door or demands a massive penalty.