COMPANY CULTURE IS KEY FOR LONG TERM SUCCESS IN THE FINANCE WORLD

Matt Jenkins, Head of Consulting, Footdown

Since the global financial crisis in 2008, the finance industry has been under close scrutiny from both the public and regulatory bodies. Since then the industry has invested millions of pounds in programmes aimed at improving the industry’s public image, eliminate unethical behaviours and restore trustworthiness. Yet, almost ten years later, two out of three consumers still believe that banks only care for their own interest, and they have very little trust in financial institutions’ integrity.

According to a PWC study, 59% of financial services CEOs believe that lack of trust in their business is a threat to growth.

So how can financial services companies regain the public’s trust and enjoy long term success?

Better rules are necessary but not sufficient to restore trust; something deeper needs to happen: the underlying ethical behaviour in the financial sector has to improve as well

And ethical behaviour can be encouraged and supported only through company culture. As we’ve seen from various headlines, stronger governance, risk control and various compliance systems did not stop misbehaviour within the finance industry.

Therefore, financial institutions have to dig deeper and make significant changes to their company culture because no matter what regulations are passed to govern the industry, financial organisations need cultural safeguards in place to protect their reputation.

Culture drives individual behaviours which in turn affect the company’s day-to-day practices and interaction with customers and other market participants. Culture can be both a key driver and potentially mitigate risky behaviours.

A healthy company culture that promotes risk awareness and rewards professional ethics drives strong performance and can be a crucial competitive advantage because it fosters the innovative spirit necessary to adjust to fast evolving digital technology, ever increasing customer expectations and an influx of new entrants to the market.

Use hindsight

But before creating a high performance company culture business leaders must first assess and learn from past mistakes.

Factors that usually contribute to failures of culture include:

  • Lack of clear corporate values and priorities – the company culture is not communicated clearly enough, or there is a visible disparity between the firm’s public values and rewarded behaviours do not align with the organisation’s ethos
  • Governance gaps – micro-cultures develop within specific departments that are not aligned with the stated values and company mission
  • A focus on short term financial performance against long term sustainability
  • Lack of flexibility and agility regarding the increasing complexity in size and scope of financial services
  • Increased depersonalisation – reducing customers to trading partners instead of building long term relationships

Make sense of the current context

To build a strong company culture you also need to understand what exactly is happening in your organisation regarding performance, innovation, customer satisfaction and employee engagement.

Your primary source for these insights should be your employees. They are the ones handling the day-to-day activity and they can provide valuable information about the company’s strong points and potential weaknesses.

Thankfully, nowadays business leaders can use smart, innovative diagnostic tools that cut through the noise and deliver razor sharp insights you can use to increase organisational performance and business execution.

One thing to keep in mind is that company culture is a complex ecosystem that changes and adapts constantly. Therefore you need to assess it regularly to detect any hurdles and quickly correct underlying issues.

This assessment can clearly indicate if employees understand what is expected of them, whether they’re translating the company’s values into their workloads, and if rewards and other reinforcing mechanisms can support the desired cultural change. In this way, you can then set the basis for clearly targeted interventions that go beyond vague talk of cultural change.

Get to action

Once you understand what went wrong and where you are now, you need to manage the outcomes and strategise how to create the right company culture to succeed.

Remember, there is no such thing as an ideal organisational culture as a firm’s culture is influenced by many different factors and not all companies should have the same culture. However, it is of paramount importance to gain buy-in within the organisation, align it with business objectives and focus it on what employees value most.

Usually, successful company culturesare underpinned by four main pillars:

  • ‘Tone from the top’ – senior managers lead by example
  • Accountability – promote responsibility and enable employees to ‘own the risk’
  • Constructive communication –  promote and stimulate constructive, independent and critical attitude among employees
  • Incentives and rewards – correlate remuneration and career paths with employees, at all levels, promote and apply the company’s core values.

Cultural change is challenging and it takes time, but if you focus on incremental changes in judgments and behaviours, you could see significant adjustments in a short period of time.

If left unattended however, company culture might be the root cause of conduct failure and it will be a lot more difficult to manage if your company is in the headlines as a negative example.

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