Management information on culture
Connecting the dots
How can Boards and senior management meaningfully assess the culture of their organisation? How can they understand whether their “tone from the top” is reflected in a strong and consistent “echo from the bottom”?
Understanding culture in financial services firms
Culture in financial services firms has moved towards the top of the agenda for regulators, investors and consumers.
Initiatives such as the UK Senior Managers Regimes will increase the personal accountability of Chairs and Chief Executives for culture, making it even more essential that they and their Boards receive meaningful management information (MI) on culture.
Drawing on Deloitte member firm culture experts from across EMEA, the US and the Asia-Pacific region, as well as our experience of working with clients, this paper seeks to answer the following questions:
- How can firms articulate their target culture?
- What are the principles for collecting meaningful culture MI?
- How can firms put the principles into practice?
- How do regulatory approaches to culture differ across jurisdictions?
This paper sets out eight principles for collecting culture MI which will help Boards and senior management to assess and manage their culture.
Eight principles for management information on culture
1. Measured against the firm's target culture
What does “good” look like for your firm? Senior management first needs to articulate their target culture in terms of what “good” behaviour looks like.
Metrics and indicators should then be chosen to measure these behaviours and should be interpreted in light of them.
2. Objective wherever possible
Some firms and teams still struggle to acknowledge that cultural issues may exist in their area. It can be difficult for them to be objective when assessing their own cultures. In assessing culture, staff need to be willing to challenge their own beliefs based on objective data.
3. Drawn from a range of sources
To form a balanced view of their culture, firms need to use a range of indicators drawn from difference sources. Information can be drawn from specific culture assessments, existing internal data and MI, and external sources.
4. Captures information on subcultures.
Within large firms, there may be subcultures across countries, business lines, market communities and grade. The data analysis needs to take this into account, and to identify outliers.
5. Contains evidence-based analysis and recommendations.
Culture MI presented to senior management and the Board should not simply be a list of indicators but should include analysis of what the indicators mean, what they tell the firm about its culture, what the areas of concern are and what recommended actions should be considered.
6. Tailored to the audience
In a large organisation it is likely that culture MI will be reported to different groups of people for different purposes. Those receiving culture MI may include heads of business lines, the Board, HR, Risk and Audit. At each level in the organisation, culture MI and reporting should be tailored to the needs of the audience in both content and granularity.
7. Considers the pace of cultural change.
Firms should assess their culture on a regular basis, while recognising that it will not change overnight. The frequency of reporting will depend on the circumstances of the firm.
Culture MI should be reported more frequently if significant cultural issues have been identified, if a cultural change programme is in place, or if the firm is going through an organisational change.
8. Supported by appropriate governance and capabilities.
Firms need appropriate governance arrangements around the design, monitoring and analysis of culture MI. The MI should be compiled by a team that is independent from the first line. It should include metrics collected from across the firm, including the front office and views from compliance, risk, internal audit and HR.
MI collection also needs to be supported by the appropriate capabilities, including people, processes and IT systems to be able to effectively connect the dots between different cultural indicators and understand the firm’s culture.