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It is not just the regulator who cares about the culture within your organisation. Increasingly, it’s the individual employees who are taking stock of where companies are excelling and failing to meet expectations.

Between July and September 2021, an impressive 979,000 Brits uprooted themselves for job-to-job moves – a record high, according to the Office for National Statistics.[1] These were predominately driven by resignations, which were up by approximately 60% compared to pre-COVID levels.

Having gone through successive lockdowns, the country’s workforce has experienced a cultural shift, where priorities have been realigned in both personal and professional capacities. This means that employers must adapt or risk high turnover rates as the period of ‘the great resignation’ looks set to continue into 2022.

In this article from Adrian Harvey – CEO of leading AI provider, Elephants Don’t Forget – he considers the impact of culture on employee retention and standards of service, including how poor measurement methods can lead to the formation of psychological barriers to performance.

In early October 2021, an estimated two million workers were readying themselves for a change in employment. Of these, 57% cited that a better work-life balance was the primary reason, whilst 38% were keen to develop their skillsets.[2]

High employee turnover can be very damaging to team performance, as it takes up to eight months for a newly hired member to reach a required level of productivity, on average.[3]

Harvey asserts that firms must be mindful of these factors and adopt more effective and objective ways to assess the cultural ‘temperature’ of their firm.

Harvey explained:

“Feedback from our recent webinar polls suggests that there could be a significant difference between how culture is seen from a C-Suite perspective and how it is felt by an employee.

With culture being dynamic, do single-point-in-time assessments and employee surveys provide the objective continual assessment mechanism required to critically assess cultural improvement activities?

From our polls, we analysed the collective responses from 448 FinServ professionals to ascertain their current state of cultural progression.

When asked what impact the SM&CR cultural agenda has had on their firms, 15% of 280 financial professionals stated that their approach has been tick box rather than value add. Tellingly, none of the participants stated they were fully confident.[4]

36% of 168 Risk & Compliance professionals stated they have ‘little or no understanding of what drives poor conduct and culture in their firm and, when conduct risks have been identified, they are not acted upon’.[5]

Just 4% noted that they have the ability to conduct ‘ongoing monitoring to actively manage conduct risks’ within their firm.

In terms of meeting the regulator’s six key expectations to ensure that all customers are treated fairly, 62% of 165 Risk & Compliance professionals stated that ‘monitoring and evaluation’ was their primary challenge, with 33% stating that the ability to ‘take practical action’ was a major concern.[6]

Given that poor or toxic company culture costs UK businesses approximately £20.2 billion a year, it’s clear that more needs to be done by firms to measure whether they’re truly fostering positive cultural environments right from the top.”[7]

As well as suffering financially from low productivity and high employee turnover, organisations with poor culture also run the risk of harming their customers and brand by delivering insufficient standards of consumer service. Harvey asserts that the Financial Conduct Authority’s (FCA) proposed New Consumer Duty – expected July 2022 – will further sharpen focus for firms to improve their conduct and culture.

If the New Consumer Duty aims – as the FCA states in the consultation paper – to change the culture of a firm, then firms need effective ways to affect – and evidence – that culture and conduct is improving, and that these improvements are translating into advisor capability that produces positive consumer interactions and improved standards of day-to-day conduct.

The regulator has expressed the need for firms to ‘embed’ the New Consumer Duty within their organisation and offered some guidance on how they might expect firms to do this; highlighting the use of ‘in-house or external training, purchasing e-learning courses, and informal training or knowledge sharing sessions.’[8]

However, I would urge firms to assess whether these training provisions are robust enough to ensure they can shift any lasting and embedded changes. Judging by the findings of the regulator’s Financial Lives survey – and that fact that this proposal is being tendered – the evidence would indicate that these ‘default’ methods have led to sub-optimal outcomes historically.

Many of the ‘default’ learning provisions outlined by the regulator often take the form of a one-size-fits-all, single-point-in-time assessment, with little in the way of continual reinforcement and embedment of key learning concepts following initial or refresher training of key subject matter. They also treat employees as a uniform job collective and disregard what individual employees know and do not know, which is counterproductive to improving culture and employee conduct.”

Harvey’s organisation, which conducted a three-year employee competency study, analysed the responses to over 72 million employee knowledge questions – many of whom work within financial services – (defined as: knowledge of products, services, policy, process, and governance) to ascertain an average level of tenured employee competency. Their study concluded the average level of employee competency to be just 52%.[9]

Harvey concluded:

“Our study shows that, in the majority of cases, employees only really know half of what they need to in order to optimally perform their role within organisational and regulatory requirements.

It illustrates the need for firms to adopt a continual assessment methodology to holistically understand what is going on within their organisation at all times.

The existing cultural indicators used in firms – like annual employee surveys and complaints data – often become the go-to methods to form the basis of their cultural assessment framework, despite research[10] indicating that these methods – although valuable – do present significant shortcomings in terms of real-time cultural assessment.

The objective for firms should be to give employees the best chance of being the most effective in their role. To some extent, you can understand why firms might take a ‘tick the box’ approach to culture and conduct. However, if your firm pursues this as a strategy, the conduct of your employees is likely to be reflected in this approach. If firms truly want their culture to drive better outcomes, they should be reflecting the precedent set out within the regulator’s proposed New Consumer Duty now.

To achieve a culture that is evidentially focused on good outcomes, firms must adopt a continual improvement process within their T&C regimes to drive lasting and embedded improvements to employee capability to meet the proposed success measures.”

Elephants Don’t Forget are world-leaders in the use of AI to optimise people performance. We financially guarantee knowledge improvement at scale – in the flow of work – resulting in demonstrable economic benefit for your business. Find out more here.


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