If Organisational Development is the answer, then what is the question?
The Financial Markets industry is in the midst of huge disruption and change that is re-shaping and redefining it.
The old ways of working are no longer sufficient to succeed.
The traditional transactional ways of generating P&L, where results clearly flow from actions, are failing to achieve the results shareholders and investors demand.
Firms are searching desperately for ways forward but keep running into resistance and dead-ends.
So the questions is: What should Financial Market (FM) businesses be looking at to help them respond to the challenges they face?
The answer may lie in a field most Financial Market people have probably never heard of: Organisational Development.
What is Organisation Development (OD)
Organisational Development is an approach which involves looking at whole organisations from a systemic perspective.
Organisational Development first seeks to understand the system, then seeks to make it function more effectively and productively.
Taking a 4-dimensional perspective.
Organisational Development (OD or OrgDev) practitioners seeks to gain a whole organisation perspective: Top-down, bottom-up, outside-in and inside-out.
Viewing the organisation through the lenses of these 4 dimensions brings powerful insights and knowledge.
An OD approach helps empower the organisation’s leaders, strategic planners, and managers.
OD can help make sure an organisation is best placed to interact and succeed in the external environment by being internally as strong and fit as possible.
It enables an organisation’s leaders to more effectively respond to challenges and to plan and structure the organisation for greater success going forward.
Organisation Development (OD) is not HR
It is important to distinguish OD from the Human resources (HR) functions. In many firms OD is often an offshoot of HR, which can restrict its effectiveness.
Why Taking an Organisational Development Approach is More Vital to FM firms than ever?
Firstly:The modern business environment is increasingly complex and rapidly evolving.
This business environment of today is often defined by the term VUCA (Volatile, Uncertain, Complex, Ambiguous).
Secondly, Financial Market(FM) business have been hit by waves of disruption in recent years. These include:
• New capital rules,
• Changes in regulations, and severe punishment for failure to conform.
• Changes in systems technology,
• Reduced margins and fees,
• New entrants and the growth of Fintech,
• Changing client and market behaviour.
These highly disruptive aspects are on-going and will continue to play out for some years.
The consequence of these have been to reduce profits and lower returns.
Businesses have responded in many ways, yet despite some internal changes the old models and way of doing things are resisting change and adaption.
We see many firms struggling to adapt to these challenges.
Chairs get shuffled, operations closed or re-organised, new systems brought in which appear to be panaceas.
But though the intention are good, the changes usually end-up being mostly cosmetic.
Thus the old system and its ways largely prevails.
Adapt or Die: Organisational Development Offers a New Way.
The winners of the future will be firms that can implement real and meaningful change.
An Organisational Development (OD) approach can help them achieve this.
Firms that are more proactive in ‘Organisational Development’ thinking, are already getting ahead.
We experience these firms as coping and adapting far better to the environmental challenges than their rivals.
In banking we see them generating better returns and receiving more favourable ratings in league tables.
Amongst hedge funds we see these firms attracting more capital, even where financial performance may be only marginally superior to competitors.
They may only be doing OD in ways which are partial and incomplete, but ‘In the land of the blind, the one-eyed man is king‘.
Generating ‘People Alpha‘.
‘People Alpha’ describes the additional value earned on business activities by focusing on the human aspects of Financial Market performance.
Research from Citi Prime Finance looked at ‘People Alpha’ in terms of a group of leading hedge funds’ people practices and their coincidental returns.
Firms who gave the highest attention to the ‘People Aspects’ of their business saw significantly stronger returns. (200bp per year on total AuM)
Firms who gave the high attention to the ‘People Aspects’ relative to similar size firms who gave their people practices low focus, saw 200bp additional return on total AuM over a 3 year period.
Organisational Development also Helps Improve Technological Capabilities.
It is not just about people performance alone.
The firms we see adopting an OD perspective are also taking a more strategic and human focused approach to technology and technological implementation.
The successful workplaces of the future will be the ones that best harmonise and capture the nexus between human and machine most effectively.
For Financial Market businesses, Organisational Development offers a new path to deal better with the many tough and unpredictable challenges they face.
If you enjoyed this article:
You may enjoy some of our other articles which explore a range of themes related to human performance in Financial Markets. This includes ‘Why Hedge Funds Should Focus On ‘People Alpha’ and other posts on our Articles Page.
We are passionate about working with people and businesses that want to better themselves.
If you are curious about any aspect of our work, or would like to understand more about how we could help you or your business: Then please email us at info@alpharcubed.com.
