Improved performances by companies will go a long way towards taking
the sting out of regulation, says Kit Jebens
Persuading managements to change their tunes for the improvement of
their firms relationships with the media, the public, their investors or
their customers may be a little easier than persuading them to take a
new approach to their regulators. More and more industries are being
drawn into the regulatory net and those that are caught find that it
brings increasingly heavy burdens of cost and complexity.
Generally the reaction to advancing regulation is defensive. It takes
the form of setting up bureaucratic structures and responsibilities
supervising tight auditing arrangements and stilted compliance rules for
those in a firm’s front line of commercial development and sales.
Good media relations depends as much on the quality of a firm’s business
as it does on its expertise in dealing with the press. Good regulator
relations depends just as much on the same properties. So long as a
financial services firm’s culture requires detailed bureaucratic
defensive measures, regulators will insist on them.
Most firms, in the personal investment field at least are severely
constricted by the traditional way they go about their business. Only a
radical shift to a new basis, which permits and favours good customer
care, will enable the regulatory load to be eased.
So long as products, marketing remuneration systems and management
continue to operate in traditional, anachronistic ways, the possibility
of escaping from the regulatory burden remains remote.
Products need to be developed to meet customer needs, rather than to
make them easy to sell. This entails making them simpler to understand.
Most customers are, for example, not interested in the technical
mechanisms, but they are interested in having simple answers to the
questions like ‘What will it do for me?’ and ‘What does it cost?’.
In addition to promoting simple clear documentation it should be
possible, for example, to separate protection from investment. It should
also be possible to design products with greater flexibility of
contribution to allow for changes in customer circumstances.
Modifying remuneration systems is, in most cases, essential to changing
sales culture. The popular belief that commission is bad and salary good
is a myth. What is needed is a remuneration structure that rewards good
performance without biasing sales towards any particular product in
preference to another, and which rewards quality as well as quantity.
It is quite unrealistic to consider remuneration systems which do not
reward quantity as well as quality. It is therefore vital that a
corporate ‘conscience’ is developed to guide sales people and ensure
that excess profit is not as customers’ expense. This is a
responsibility of all levels of management. The tone has to be set by
the chief executive and its delivery must be monitored and reported to
These are difficult messages to get across, but consultancies need to
understand that the media image of a firm is closely dependent on its
regulatory performance. They need to concentrate their persuasive
efforts on a shift of management emphasis from defensive self-protection
to a more positive concept of changing sale and marketing culture by a
combination of structural redesign, sales training and management
Kit Jebens is the former chief executive of LAUTRO