Can culture be measured? If so, how?

In a speech to the Investment Association Culture in Investment Management Forum, Sheldon Mills, Executive Director of Consumer and Competition at the Financial Conduct Authority (FCA), highlighted the four key drivers of culture which the FCA measure and assess a firm’s culture against: purpose, people, leadership, and governance.

Measuring Purpose and Governance

A firm’s purpose can feel like an abstract concept, but put simply, a firm’s purpose is its aim – what it sets out to do and achieve both financially and non-financially for its clients, consumers, investors, and employees.

Each firm’s purpose will be unique as it must consider the nature and scale of its business, the sector it operates within, and the people it serves (including clients, customers, and shareholders). Purpose is often most evident in the firm’s key documentation – its strategy, framework, values, products or services, and policies and procedures.

A common misconception, however, is that a firm’s purpose is solely what is documented in a business strategy or plan. Purpose is defined not only by what a firm says it will do but what it does in practice – whether that be by the Chief Executive Officer at a shareholder meeting or a customer service operator communicating with a customer.

When a board or committee considers the effectiveness of their purpose there are several key questions, they must ask themselves:

• If we were to ask all of our employees to outline the firm’s purpose, would they be able to correctly articulate it?
• If we were to ask our customers what they thought of our products, and service and specifically, what we say versus what we do, would their answers align with our understanding of our purpose?

If the answer is no to either of the above questions, it is likely that the firm’s purpose is not clear or effectively embedded.

Measuring People and Leadership

People metrics reported to boards and committees often focus on the quantitative information such as key performance indicators (KPIs), remuneration amounts, and resource levels. Such information can provide a useful insight into the culture of the firm – what qualities and behaviours does the firm reward and value and what action does it take to ensure its employees are treated fairly? The key question with these metrics is whether the actions and policies of the firm align with its purpose and values.

Firms must also not undervalue key qualitative information which can point to poor, or lack of a well-embedded, culture. Key questions for senior leadership to consider include:

• Do employees feel empowered and safe to speak up if they need help, have a concern, or even have a suggestion?
• Do employees feel management are approachable, will listen, and consider issues raised fairly? (And take appropriate action when necessary).
• Do employees perceive that when senior management make a mistake, they acknowledge it, and endeavor to rectify it?
• Do employees think that they are assessed fairly, and targets are realistic and achievable?
• Do employees trust senior management to consult on key decisions affecting their people and consider their views before making decisions?

This type of qualitative information is frequently received via anonymised staff surveys, or external assurance exercises.

However, the key to measuring and monitoring culture, is to ensure that you are asking the right questions, and through effective communication channels that span from the very top of an organisation to its front-line staff.

Jonathan Davidson, former Executive Director of Retail Supervision at the FCA noted in an interview, that it’s not just about generating an authentic purpose and a safe ‘speak up’ environment – a ‘listening up’ culture is equally as important.