Organisational culture in financial services

Why organisational culture matters

Nearly 15 years after the global financial crisis, organisational culture continues to top the agenda of policymakers, regulators and senior boardroom leaders.

However, the post-Covid-19 world looks very different to the one that led to the crisis of 2007 to 2009. Different factors are at play.

Hybrid working, climate change, DE&I, the emergence of Generation Z in the workforce, the growing impact of employee and stakeholder activism and social media on corporate strategy and commercial operations have individually and collectively transformed many aspects of the financial services sector.

With these changes have come even greater scrutiny, challenge and risk. Today, trust and confidence in a firm and its management can be eroded and lost almost overnight. It is against this backdrop that the role and value of organisational culture has to be measured. Having a strong culture that articulates and embeds the purpose and values of an organisation’s operating model has never been more important.

Purpose and goal of our study

Our goal in undertaking this global research study is to help financial services firms better understand both where the sector as a whole stands in its approach to culture, and to enable individual organisations to identify what they should do to improve further.

Above all, we hope our research helps to stimulate thinking and debate in the boardroom and among management teams that ultimately leads to a greater understanding of organisational culture and its long-term impact on performance and profit.

How we conducted the research and key findings

We surveyed more than 500 senior leaders (covering business, risk, compliance, operations, ethics and HR) in financial services firms across the world, from small organisations to large multinationals.

Among the findings, our research reveals that:

• Technology is the biggest challenge facing financial services firms. Around 60% of respondents to our survey believe new and emerging technology platforms pose the biggest threat to their organisation’s culture.
• More than half of respondents say that managing a multi-generational workforce poses a significant challenge to their firm’s culture over the next two to three years.
• Although people managers have a crucial role to play in setting the behavioural tone of their direct reports, survey respondents consider them to be the least committed to the culture of the firm compared to other senior leadership teams (for example the board or C-suite executives), or those in public or client-facing roles.
• Only 40% of respondents rate their firm’s leadership as excellent or close to excellent in terms of their communication skills and visibility across the organisation. In addition, only one third (31%) say that their firm’s leadership excels at supporting employees who are based in different locations.

Measuring an organisation’s culture maturity

We found that firms fall into three distinct categories of maturity – each with  different characteristics that reflect the scale and scope of their strategy, the commitment and approach of their leadership, and the systems, processes and activities that they have put in place to reach and engage their workforce.

These categories are:

• Developing – The development of organisational culture is in its early stages for these firms. Their principal goal is to meet regulatory requirements and prove to their stakeholders that they have a basic programme in place to handle culture and employee conduct issues.
• Embedding – They have a deeper understanding of the importance and value of fostering a suitable culture. They are more likely to have detailed plans for their strategies and employee engagement.
• Leading – These firms have formulated a comprehensive strategy to guide their decisions and actions. They have aligned and communicated this strategy across every level of their organisation. They have invested sufficient time and resource to develop and enforce clear and consistent policies that support their strategic objectives and enable them to monitor and evaluate performance.

By structuring our findings in this way and by providing practical recommendations to help each category of firm to improve its approach to managing culture, we hope firms can use our analysis to benchmark themselves across a number of different areas to determine where to concentrate their time, investment and resources.

In addition to the recommendations, we have offered specific commentary and viewpoints throughout the report to draw out practical insights relevant to a particular theme or issue. These insights have been grouped as ‘The A&O perspective’.

Structure of our report

Our findings are broken down into six pillars that we have used to judge effective cultural maturity:

1. Organisational approach - The ways in which financial institutions organise themselves, and the time and effort devoted to this is of critical importance to overall organisational culture. For this reason, we have given this pillar the highest weighting.
2. Achieving a sense of purpose - ‘Purpose’ is organisational glue for all firms. Leading firms carefully consider their business culture and articulate it to their workforce, taking time to disseminate it and make it vital for employees. In financial services, where regulators take ever-increasing interest in good conduct and culture, purpose can be a useful way to harness these organisational qualities.
3. Setting the tone from the top - Leaders have the opportunity to take ownership of a firm’s culture through approaches such as role modelling the appropriate behaviours. Today, leaders are expected to be accessible, available and empathetic, willing to coach, listen and learn.
4. Governance of culture - Strategy is just one part of good organisational culture. The governance underpinning that strategy is critical to the success of any approach. Given that regulatory expectations of board members and senior management are now well established, it is noteworthy that only 60% of our respondents consider these two groups to be fully committed to continuing positive culture in their businesses.
5. People strategy and training - All businesses have to balance productivity and quality with the culture of the firm and the conduct of its people. An important element is the management of employees so they have an environment which brings out the best in them.
6. Engaging employees - While leading from the top and setting the agenda on organisational culture is important, the reverse is also true – listening and responding to employees allows firms to understand and react to their needs and concerns.

Register to download the full report

You can download the executive summary here. Alternatively, you can download the report immediately by completing a short registration form.