What’s all this emphasis on culture in business about then? In this series of five blogs, I’m going to explain how and why cultural change matters even in the most austere of professional firms.
In case you missed it, the Financial Conduct Authority (FCA) introduced guidelines for Consumer Duty in July 2023.
Writ-large, the new regulations set higher and clearer standards for consumer protection across authorised firms than ever before.
There’ll be plenty of burning of midnight oil by legal eagles and compliance experts as template documents are revised to match the new guidance. Markets have been tested and aligned to these requirements to enable business to carry on pretty much as usual.
But should that really be the case? To do so is to ignore the spirit of the new FCA guidance – and, to me, that is key to being a modern professional firm in the 2020s.
In my role as chair of the Association of Professional Compliance Consultants (APCC) and as someone whose ‘day job’ is to help embed best practice within professional firms, I see the Customer Duty as an opportunity, not a threat. It is a start point, not the end, of a journey and certainly not a convoluted compliance cul-de-sac or the latest compliance hurdle to meet.
Key to the FCA’s Consumer Duty paper, which redefines the spirit of its regulatory requirements, is culture.
Another new business buzzword, right? The sort of thing taught in business school and largely the preserve of marketing agencies based in converted warehouses but nothing to do with the real world of business.
Well, maybe. Culture now has more focus among professional firms than it once had yet sadly remains a challenge for many. The FCA has identified four key drivers – leadership, purpose, governance and rewards – which I will expand on in this series.
The conundrum with culture as a driver for change is aspiration. Too many firms aim to meet base benchmarks so inevitably set their bar so low they reduce all new regulations to little more than a tick box exercise.
By failing to raise their sights to the true potential culture has to offer, they self-limit their own vision.
Flipping the focus from compliance to culture offers more than a drudging duty of care – not just to customers (who, rightly, are king – without them there is no business) but also to other stakeholders, be they employees, partners (LLP or otherwise), third party associates and suppliers.
The whole process becomes experiential – the root of growing a vibrant, organic modern business culture that is fit for our times.
Starting with how we motivate and treat everyone involved in our businesses makes sense so they do our marketing for us. If they espouse our virtues to all and sundry, business can become a breeze. We all know that coming on recommendation really is the easiest way to win new business.
‘Virtue’ can do a lot of heavy lifting here, of course. Virtues are values we live by. The dictionary description is: ‘behaviour showing high moral standards.’ No one ever aimed to be borderline virtuous. It’s cultural not compliant. Why wouldn’t you seek to roll out the best values across your business?
Not only are the FCA identifying four key drivers as an indicator of the health of a firm’s culture, they also provide an understanding of what the FCA expects so you can align your focus in the best way possible. Partly this is about Leadership.
Culture isn’t something done to people, it actively involves them. More than what they do, it includes an understanding of why they do it.
This requires leaders to chart the course, set the tone, imbue the culture and, crucially, live by it, not design it for others but somehow feel they have a free pass to shimmy their own behaviour out of the picture.
It’s not a technical issue either. Culture has no technical requirement or ‘compliance’ element to meet. It’s your thing.
The second driver is Purpose – which is about having an overall vision and mission of the business rather than the purely functional goal of making money to pay the salaries and dividends, which is merely the result of good cultural practice not vice versa. Having everyone on board for the mission is crucial.
The third driver is Governance – how to create an authentic vibrant culture so the purpose (vision and mission) of the firm is put into actual practice and procedures every day with the support of effective leadership.
Finally, the fourth driver of the FCA’s focus is People – how can firms reward their employees for the contribution they make which, too often, is measured in sales-based financial incentives. This can sometimes result in too much emphasis steered towards commission bonuses for some, with other employees left unrewarded and therefore feeling undervalued.
In combination, this is all about aligning culture to aims and values, overseen by clear leadership, driven by purpose, good governance and carried out by employees who ‘feel’ incentivised by the internal culture with customers being the happy recipients of financial products and services that truly respect and value their custom.
I hope you enjoy delving deeper into these key drivers of culture in this blog series. I’ve included a couple of bonus blogs that I believe are crucial to the overall business culture mix.
If you would like to leave any comments or observations, pose a question, or request further information about how to embed a good culture into your business feel free to contact me.
OTHER BLOGS IN THIS SERIES
Driving cultural change – leadership
Driving cultural change – purpose
Driving cultural change – governance
Driving cultural change – people
Psychological safety – is it for real?
ABOUT THE AUTHOR
Julie Ampadu is the current chair of The Association of Professional Compliance Consultants (APCC), a member of the Reporting & Data Standards Transformation Board for the Bank of England (BoE) and Financial Conduct Authority (FCA) as a representative of the APCC and the founder of Chameleon Compliance Ltd and Business Chameleon Ltd.