Julie Pardy, Director of Regulation and Market Engagement at Worksmart, joined our CEO, Adrian Harvey, on the 22nd July 2021 for our latest webinar: Culture Measurement: Help is Here.
Our hosts examined some of the key issues in regards to measuring culture in financial firms, looking at what defines effective cultural indicators, the impact of a data-driven regulatory approach, SM&CR, the PRA’s approach to qualitatively measuring positive indicators, and the impact that RegTech is having on helping organisations strengthen their approach to measuring culture.
Below are some of the key findings that came from the session. Our thanks to all who attended and took part in the polls. The webinar is available to watch on demand and you can download the Insight Guide that accompanies this session.
“Should we all know the ins and outs of culture within our organisation here and now and be able to present that dashboard to the regulator and say, ‘job done’?”
– Julie Pardy
Our panel kicked the session off by looking at how cultural measurements can be broken down into four key areas: Purpose, Leadership, People Polices, and Governance. Julie highlighted that these measurements are used to ‘promote wider discussion’ about culture with firms, noting that the conduct regulator in particular has been consistent about these four pillars; emphasising the need for firms to understand how these pillars apply to firms within the context of their market.
“Does an annual employee engagement survey measure the culture of an organisation? I think most people recognise that the answer is no.”
– Adrian Harvey
Our hosts then turned their attention to why culture measurement is so difficult for firms, discussing the various interpretations of how firms look at assessing their culture. Julie noted that some firms question whether they should have indicators to develop their cultural story. Adrian raised a pertinent question regarding the use of single point in time assessments – particularly the use of employee engagement surveys – and the robustness these provide in terms of ‘real-time’ culture measurement.
The FCA’s latest business plan was next up, with the panel focusing on the regulator’s renewed drive to become a genuine data-driven organisation. Both hosts noted that a data-driven methodology represents a real transformation in the way that a firm’s cultural indicators could be assessed by regulatory bodies in the future.
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Culture Measurement: Help is Here
- Examines why firms should adopt a continual assessment methodology to assess positive and negative culture indicators.
- Looks at how firms are benchmarking their current success with the regulators.
- Discusses the impact of a data-driven regulatory approach and what this now means for financial firms.
“[SM&CR], it’s been expensive, painful, confrontational and challenging.”
– Julie Pardy
Julie discussed the different approaches firms have taken when implementing SM&CR, describing how the governance has improve in nearly all the firms who have embraced the accountability regime. Budget, organisational maturity, systems and resources were highlighted as being the key areas where most firms have seen challenges. The hosts also examined the fundamental issue of how Senior Managers know that the information being built by them up would be ‘good enough’ if reviewed by the regulator.
“A lot of firms invested heavily to get SM&CR ‘done’ but then it’s just back to business as usual.”
– Adrian Harvey
Engraining SM&CR into BAU was cited as being one of the primary areas where some firms are struggling. Both hosts offered insights into why such a big regulatory change item is difficult to embed; highlighting how RegTech solutions are taking away time-consuming, ineffective, and costly administrative tasks that allow firms to focus greater attention on the things that really matter to improve culture.
Adrian noted that there was also a sense of increasing discomfort from some Senior Managers regarding the maturity of evidence they can rely on in terms of their people. Training & Competence (T&C) was noted as one of the core culture framework pieces, informing a wider discussion from the panel regarding how easily the regulator may be able to spot ‘red flags’ within organisations due to a lack of training provision changes – particularly if the regulator compared a firm’s assessment practices from a pre and post-SM&CR perspective.
The panel then discussed the premise of cultural audit assessments put forward by the regulator, getting a sense of how ready firms were for these in our first poll:
Q1: What work has been undertaken in your firm in readiness for the purported regulatory culture audits?
- None, we weren’t aware that culture audits were coming 15%
- None, we believe our culture is fine, so it’s BAU for us 6%
- We have a culture project ongoing to help develop and improve culture 54%
- We will be launching a culture initiative during 2021 17%
- Other 8%
*Poll results based on 280 responses. Some questions were multiple choice.
“The PRA talk about cultural indicators, defining them as obtrusive and unobtrusive.”
– Julie Pardy
What defines an effective cultural indicator? Our panel looked to the Bank of England’s Organisational culture and bank risk Staff Working Paper No.912 to glean some valuable insights into how firms could apply the use of the PRA’s obtrusive and unobtrusive indicators to help answer this question.
With culture being dynamic, it was asserted that single point assessments do not provide the continual assessment mechanism required to continually assess cultural improvement. It was highlighted that the use of obtrusive indicators was introduced as way to critically challenge the traditional thinking and methodologies that some firms currently use to measure their success and failures.
Employee bias was one of the critical thinking elements to emerge from the discussion, with both hosts noting the potential issues raised when exclusively relying on the efficacy of evidence provided from some ‘default’ indicators such as employee surveys.
Q2: What impact has the PRA/FCA SM&CR culture agenda had on you and your firm?
- None, we were confident with our approach on culture and governance 0%
- None, the approach in our firm has been tick box rather than value add 15%
- Some, we have made positive improvements to governance and culture 50%
- A lot, we have made changes across all areas of the business as a result of implementing SM&CR and driving better culture 35%
*Poll results based on 280 responses. Some questions were multiple choice.
“You need a continual assessment methodology – you do need to know what is going on in your organisation at all times.”
– Adrian Harvey
Existing cultural indicators in firms were discussed at length during the session. Both hosts noted there was a still a significant reliance on these, with complaints data and employee surveys highlighted as being the go-to methods to form the basis of cultural assessment framework within most firms they visit, despite research indicating that these ‘default’ methods – although valuable in some instances – present significant shortcomings in terms of real-time cultural assessment.
Our panel concluded by asking our participants which measures they were already deploying, before discussing how RegTech is helping firms in the sector to take away costly administrative tasks. Improving sight of risks and giving employees a better chance of being the most effective in their role were noteworthy highlights. Our hosts also observed how more firms are now engaging with RegTech firms to help build business cases to implement the technology they want for the future.
Q3: Which of these key tools and measures is your firm already equipped with and utilising successfully? (Multiple choice)
- Quantitatively measuring your current cultural values 41%
- Intentionally aligning culture, strategy, and structure 59%
- Ensure staff and stakeholder participation at all levels across the organisation 54%
- Frequent and copious communication at every level 56%
- Management of the emotional responses of individuals at all levels 8%
*Poll results based on 280 responses. Some questions were multiple choice.
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