Culture Peer Forums

These events are part of our series of regular roundtables, where senior culture leads from major financial institutions, asset management firms and fintechs come together to hear from our keynote speakers and discuss some of the issues that they are dealing with day to day. The events are relatively informal and are an excellent forum for peer-to-peer networking.

A virtual discussion with Moni Mannings -  Culture and the role of the Non-Executive Director

14 September 2021

We hosted the next in our series of Culture Peer Forums on 14 September 2021, as a virtual round table. The session (Culture and the role of the Non-Executive Director ("NED")) focused on the influence and impact that NEDs can have on culture.

We were delighted to be joined by Moni Mannings, an experienced independent NED and Ambassador of Women on Boards, who spoke about embedding diversity and inclusion within an organisation, key factors driving an organisation's culture, and the role that a NED can play in influencing culture within an organisation.  Her NED roles include, Hargreaves Lansdown, Easyjet, Investec, Barnado's and most recently, Cazoo.

Moni explained how her childhood in Pakistan, migrating to the UK with her family, joining the bar and later joining an international forwarding-thinking and entrepreneurial law firm gave her many different cultural experiences. She wanted to bring these lived experiences into her role as a NED and influence different types of businesses - strategically, financially and culturally.

Jemima Coleman, a Practice Development Lawyer in our Employment team, asked Moni a number of questions relating to her role as a NED and experience of influencing culture within organisations across a range of sectors and industries.

What are the key factors in driving organisation's culture? Many factors drive an organisation's culture as culture is a combination of things. Regulation, social norms and attitudes can all have an impact. The most impactful thing is leadership: the attitudes and behaviours of leaders, as well as the structures and processes that amplify these behaviours, in both positive and negative ways. The executive committee and other senior people within a business can have a strong influence on the culture of an organisation.

How can a NED influence culture in their role and how is this different from the role that the executive can play? The difference between influence and power is important. The mechanism to influence comes from having built trust and credibility - both with seniors and others within the workforce. If you are trusted and credible you will be able to have an impact throughout committees and through supporting and encouraging nascent ideas, and by challenging any questions and actions which may look like they are taking you away from the desired outcome. You cannot make culture but you can guide it and have an important influence in ensuring it does not go off-piste.

Can you share some practical examples of where you or another NED has directly intervened and impacted a firm's culture? One of the boards Moni was on did not have an express ESG policy and so one of the NEDs questioned how they were articulating this policy. This question resulted in a series of further questions which helped the executive focus on something which was important - the need to look at this issue in greater detail for the sake of investors, an organisation's people and its clients. The NED can have a role to play in asking important questions and then helping and supporting executives on this journey. Moni illustrated how language can play an important role, and how awareness around language is key, citing an example of how the 'back to the office' language after Covid restrictions eased could inadvertently suggest that the office is the only place where valuable work can be done.

Was an organisation's response to the Black Lives Matter movement something which, as a NED, you felt that you could influence? Until the death of George Floyd, there had been lots of talk about diversity and inclusion, belonging, etc., but this was slow to progress. His death was an opportunity to acknowledge the state of the world and that there is a structural imbalance. We asked executives to consider whether an appropriate communication could go to employees to acknowledge this event, as well as after the death of Sarah Everard. By acknowledging events such as these, organisations are able to show cultural sensitivity to differences within their organisation.

Reward and remuneration is an important consideration in the context of culture. In your capacity as remuneration committee chair in various organisations, do you see interventions in relation to this? Remuneration is a significant lever in the commercial world (which is in contrast to the charitable sector). Use of long-term incentive plans started to develop the mindset of senior executives towards understanding the value in the longer-term picture.

Further questions

A number of questions and comments were put to Moni by participants and provoked interesting discussions:

As the NED of a wide range of types of firms and industries, what are the good things that other firms and other industries are doing? When starting as NED within an organisation what do you think of as a good and bad cultural indicator? Moni stated that she loves the common threads that can be drawn across different sectors and industries. Health and safety is a good example. The attitude to health and safety in the aviation and manufacturing industries is about learning from errors and is not an attitude of blame, whereas organisations in other industries may seek out who is to blame for a particular issue. These kind of attributes can be brought to other organisations.

From a wider perspective, how many organisations are doing an ESG tick box exercise from a NED perspective? Or is there a move towards small organisations embracing obligations to wider society and taking a responsible approach to things? In Moni's view, the way that organisations engage with ESG will have long-lasting impact on brand. It is best to start with values and purpose, by asking: what is the point of us and how do we deliver on what the point of us is? Organisations need to consider what makes a difference to its people, customers and brand. It is about selecting an area where an organisation wants to make a difference and do this really well. If you build ESG out from purpose, it will form part of the structure of an organisation and the goals of its employees. Boards of Financial Institutions have a way to go on the social and environmental aspects of ESG.

What, if anything, has changed culturally in the board rooms and beyond in other firms? We all talk about culture but can you really do anything about it? Is it just good lip service or can you improve the nature of an organisation? Moni believes that as a NED you can definitely move things in a better direction. On one of the first boards Moni was on, she was the only woman and by the time she left the majority of the board was female. The impact this had internally was significant; the conversation was different and started to change as more women came onto the board. There is now much more articulated pressure from outside an organisation. Investors, regulators, clients and customers are now requiring companies to develop more articulated policy around ESG, and this is filtering into the boardroom. Progress is slow but it is moving.

What are your thoughts on measurement and how you measure the impact of cultural initiatives? Moni commented that culture is like a cloud, and how do you capture a cloud? The approach is to start with values and purpose and then decide which outcomes will demonstrate that these are being met. If an organisation was looking to set up part of the business in a new jurisdiction, we would know if it was being successful there as there would be many factors to consider. This is the mindset that we need to ask executives to apply when it comes to moving the dial - make it tangible, like a business imperative.

What did you seek to have on your CV to put you in the best position to be considered for a NED role? Moni said that she had management roles within the law firms she worked at. She was on the board of a law firm to give her perspective beyond her practice area and so had some understanding of the pressures of being responsible for a larger business. Secondly, she drew out what difference in thinking she believed she could bring. Finally, she said that networks are very important, as is the need to tell people you are trying to change direction from your current role.

What strategies did you use to influence other people? Did you deploy humour or a forensic analytical approach? What were most effective to influence the rest of board? Moni believes that listening more than talking is important, so that you really understand where people are coming from and understand what the issues are before making a contribution. Humour is also brilliant for being able to diffuse a difficult situation. You must also be able to understand that as lawyer you do think differently - you need to have the confidence in being able to draw out solutions from complex and ambiguous situations. Private practice makes you capable of focusing on the task at hand not the person you are engaging with - it is about the issue not about the person. Other disciplines fold the two together and it can become quite difficult to distinguish between the issue and the person.

In terms of the Financial Institutions sector, the Prudential Regulation Authority has to some extent required that a senior manager has the responsibility for culture allocated to them. Does this role sit best with someone on the executive team or can a NED perform a better holistic view? In Moni's opinion, it has to be someone who is involved in the day-to-day business of the organisation. It is within the small things that you create a culture - there needs to be a cascade. One person cannot be the determinant of the culture; the whole board has to take responsibility (despite regulatory requirements for having a senior manager allocated this responsibility). Also, you cannot sub-contract culture to a sub-committee - it needs to remain a core board responsibility.

Do you have any advice for future aspiring NEDs? Moni thinks that you can definitely impact an organisation's culture as a NED. For those from a non-traditional background looking to apply for a NED position, give yourself the benefit of the doubt. Expand your networks - these networks are the ones that have got you to where you are now, but as this is a different area you will need to look to expand your networks.

A virtual discussion with the Financial Reporting Council -  Corporate governance and culture: how would you score?

May 2021

We hosted our second Culture Peer Forum of the year on 26 May 2021, as a virtual round table. The session (A virtual discussion with the Financial Reporting Council -  Corporate governance and culture: how would you score?) focused on corporate governance and culture and was a chance for businesses to reflect on how they felt they were performing in these respects and on how they could improve.  

We were delighted to be joined David Styles, Director of Corporate Governance and Stewardship, from the Financial Reporting Council ("FRC"), who spoke about the FRC's approach to corporate governance and culture, especially in light of the FRC's Corporate Governance report, published in November 2020, which revealed that businesses are not meeting the high standard expected of them.

The FRC: regulatory responsibility and codes

David then spoke about the FRC's role in general. He talked about how the FRC is a regulator for corporate reporting and audit quality but that its enforcement powers are limited; it relies on the market to work and on investors to supervise and enforce where needed. The FRC does, however, follow and monitor a framework which is stricter than self-regulation, as the codes that it monitors do have regulatory underpinnings.

The three main codes the FRC is involved in are:

1. UK Corporate Governance Code. Businesses must produce a Corporate Governance Report and either apply it or explain why they haven't done so. This code was designed to accept the fact that different businesses govern in different ways.

2. The UK Stewardship Code. If you are an asset manager, you need to explain your relationship with the code by either signing up or by stating what your alternative business model is on your website. A statement will be made by the FRC later this summer about who has been successful signing up to code.

3. The Wates Corporate Governance Principals. These principals apply to large private companies (as defined by the number of employees and turnover), currently around 1700 large private companies are involved. Narrative reporting regulations require that these companies say whether they follow a code and also report on it. The FRC has just started some research relating to reporting on these principals, the results of which are expected later this year.

The Review of Corporate Governance Reporting report

In November 2020, the FRC published the "Review of Corporate Governance Reporting" report, which can be accessed here.

One of the statistics that stood out in this report is that only "52% of companies commented on their culture in a meaningful way". David was asked about his view as to how organisations can ensure their assessment of culture is "meaningful", in the way the FRC measures.

In response, David referred to a 2016 FRC report on culture, which stated that "culture eats strategy for breakfast". He said that you can have finest strategy in world, but your culture has to be healthy enough to deliver it - the two are completely interlinked. There is also an inevitable link here to good governance. David said that there are many different measurements that companies can take in order to assess culture in a way that is "meaningful", such as: staff surveys, pulse surveys, retention rates, training take up, exit interviews, career progression, whistleblowing reports, social media and so on. David's view is that the code is flexible and so the approach to measuring culture can, and will, vary - it is important that individual companies work out the best approach for them.

The development of culture during the Covid-19 pandemic

Culture has become more of a focus since the start of the Covid-19 pandemic and in particular there has been an increased spotlight on the relationship between companies and their employees / workforce, which is now referenced in the UK Corporate Governance Code for the first time. David said that there is likely to be further dialogue and discussion on this subject within FRC's Annual Review of Corporate Reporting.

In the Review of Corporate Governance Reporting report, a lot of companies said that their culture was a "work in progress" and that they were taking time to "bed in" from a culture perspective. The strongest and most insightful reporting came from companies showing how cultural changes were impacting their business; a focus on outcomes with respect to reporting is key.

The development of the FRC

The FRC is currently in the process of a consultation regarding the development and implementation of a new FRC; the Audit, Reporting and Governance Authority "AGA". The basis of the consultation is with respect to the internal changes and extra powers that are needed for the FRC to become more effective; the FRC is currently not an enforcer and this is something that it is looking to change. There has been a suggestion that the current corporate reporting review function would look at governance and could also examine the quality of corporate governance reporting such as whether the report or explain principles are good enough with regards factors such as timescale, rationale and explanation. Regardless of these decisions, the FRC will remain supervisory in terms of governance itself.

Questions

A number of questions and comments were put to David by participants and provoked interesting discussions:

1. What decisions has the FRC made with regards strategy as a result of feedback received from the November 2020 report? The FRC issued a short report in February 2021 around "comply or explain"; David thinks that too many companies just want to comply because it's less risky to do so. He went on to say that sometimes these companies haven't actually complied with the code but have just "dressed it up as compliance". What the FRC really wants to see are actions taken in respect of governance - the February 2021 report gave good examples of this and of the components involved in a good explanation. The February 2021 report can be accessed here.

2. What do you think are the main barriers companies have to assess and understand culture and what leads to better outcomes for customers? The FRC is commissioning research into what these barriers are. In David's view, sometimes the key to knowing how to overcome the barriers is knowing where to start and thinking about what we really need to know about the culture. There is a clear link with strategy and corporate purpose that has really come out of the pandemic. The original definition of governance within the UK Corporate Governance Code was "the system by which companies are directed and controlled"; David thinks that the system has become more complex, more global and takes in a much wider range of factors. The main barriers at the moment seem to be resource and complexity.

3. Examples were given by various attendees about how they are working to improve their culture and governance internally. One such example that was given was about an internal survey, that has been amended to read "What is your experience of the workplace?", as opposed to just asking "Are you happy or satisfied?". The survey also includes questions such as: (1) "Are you doing what you said you would?"; (2) "Do people see that?"; and (3) "What's the outcome?"  Culture to this particular business is about everyday behaviours; it can create a positive environment but it can also be hostile and intimidating if not dealt with properly.

4. An interesting conversation was had with regards how to ensure, with so many competing interests, culture gets enough focus by the boards of businesses. There was discussion about whether there should be a specific "Head of Culture" or whether a committee structure, with HR and Risk leading the charge, works better. For some, the view was that a broader, committee style approach worked better and provided a more rounded view.

The FRC has also recently published an interesting workforce engagement study, which "aims to provide a deeper understanding of the current intersection of corporate governance with employee voice, in the light of requirements in the 2018 Corporate Governance Code for boards to ensure effective workforce engagement." The study can be accessed here.

The reality of leading cultural change: with Dame Inga Beale

16 March 2021

We hosted the first Culture Peer Forum of 2021 on 16 March 2021, in a webinar format. As with our previous sessions, the Forum has proven to be a valuable way to listen to and question ideas and strategies regarding how organisations are responding to the challenges presented by Covid-19 and issues of culture more widely.

Our topic was 'The reality of leading cultural change' and we were delighted to be joined by our guest speaker, Dame Inga Beale. Inga was the first female CEO of Lloyds of London and held this position from 2014 to 2018. Inga played a hugely significant role in leading the process of digitalisation and cultural change at Lloyds, which was no small challenge given a history of unsuccessful attempts to do in a significant way. There were around 30,000 employees (and a huge range of customers) whose input Inga wanted to consider. The main challenges were around people and keeping the face to face trading environment alive.

Inga addressed the main challenges she faced:

1. The extent of the cultural change required.

2. Changing the system of performance management.

3. Simplifying the approach to change.

4. Winning support.

5. Failure to consult on certain decisions.

You can read about how Inga addressed these challenges here.

As part of the cultural change, various groups, initiatives, and events began. Some examples of these are:

• Employee resource groups;
• A Pride at Lloyds group; and
• An annual festival of Diversity & Inclusion.

Questions

A number of questions were raised to Inga:

1. How successful were you in persuading people within Lloyds who were initially "on the fence" or even against cultural change, to shift their views?

2. Can cultural change only happen when you bring new people into an organisation, or do you think it is possible to teach existing employees to change their values and mindsets?

3. In your opinion, what was the most challenging institutional behaviour that needed to be addressed?

4. How do you put diversity and inclusion at the heart of culture, to avoid it just being a "façade"?

5. How do you think the best way is to go about increasing engagement of a wider group of employees, across diversity and inclusion networks?

6. What difference do you think that Covid has made to the culture of firms?

7. How do you think people in leadership positions should look to lead the way out of this pandemic?

You can read her answers here.

Do whistleblowers improve your culture? with the Chief Executive of Protect, Liz Gardiner

29 July 2020

In 2012, Protect (the UK's whistleblowing charity which provides free, confidential legal advice to whistleblowers, whilst simultaneously campaigning for legal change) ran a report titled "Silence in The City" that looked into whistleblowing within the financial services sector. The main issues that arose from that report were the importance of trust and transparency. The 2020 report "Silence in The City 2" looked at 352 whistleblowers' experiences between 2017 and 2019, following the 2016 FCA rules on whistleblowing being introduced. The following represent some of the key findings from the 2020 report:

• A much greater willingness (93% of respondents reported this, up from 78% in 2012) of whistleblowers to use internal policies and systems to report their concerns. This demonstrates a high level of trust and awareness within firms, in respect of where employees can go to raise concerns. In addition, only 7% of respondents, down from 18% in 2012, reported that they would go straight to the Regulator with concerns. Whistleblowers are increasingly giving their employers the chance to rectify the issue, before escalating it.

• In addition, two thirds of whistleblowers who responded in 2020 said that they had raised the concerns whilst still in their current employment. Whilst this majority is encouraging, it does leave one third who wait until they've left the firm to speak out which is an area for development.

• One third of respondents reported that they were willing to raise their concerns more than once - this was a 10% increase on the 2012 results.

• No respondents reported using whistleblowing hotlines, there was a strong preference for face to face contact with a senior person.

• 78% of respondents raised concerns regarding recurring issues within the firm, which emphasises the employer's responsibility to improve culture longer term, as opposed to in response to claims.

• 57% of concerns were characterised as organisational wide, which suggests the issues may have been known about throughout the firm.

• Around one third of respondents said that their concerns were ignored, 70% said they felt victimised and 75% said they had not received any feedback from raising the concerns.

Leadership in, through and out of the crisis - lessons from retired senior British Army General Sir Richard Shireff on COVID-19 crisis management

24 June 2020

• Coping when things go wrong - many organisations will have had an imperfect response to the crisis. How can leaders move on from an imperfect response? You have got to be honest, consider what went wrong and lessons learnt. An “after action review” is key. Identify things that went wrong and how they went wrong; this takes courage. This is not just about lessons learned, but also lessons identified and lessons implemented: the first step is examining the situation, then identify the mistakes, and (most importantly) implement changes as a result of those findings. Sometimes you need to bring in someone else to help with review. A 360 degree review is helpful. There must be honesty and rigour in lessons learnt and a sustained effort to put them right.

• The importance of organisational "purpose" - what are you trying to achieve? Quite difficult for some firms to keep the sense of purpose going with everyone working remotely. How do you get a lot of people to keep going? In the army, soldiers may be more driven by doing their best for their colleagues (their mates) than by the notion of "Queen and country". Morale, shared purpose and trust are critical. This is a difficult time - immediate crisis, then looming unemployment and economic uncertainty. Firms need to tap into a "noble points of focus", for example: how to tackle the environmental crisis, how to support ESG initiatives within financial institutions, the bigger picture. What are we here to do, why do we do it, and how can we contribute?

• Diversity of leadership - perhaps not all firms have the right leaders - do we need different types of leaders for different types of events? If you trained, invested and brought on the right people - they will emerge stronger. Build on diversity of leaders to give you depth, to ensure they are capable of leading and making the right decisions.

• Chain of command - are there advantages of this as opposed to flatter organisational structures? Sir Richard agreed that it does have the advantage of making things happen very quickly; it gives you agility. A disadvantage can be that there are too many hoops to jump through/hard to unlock the hierarchy if something is urgent and important and it emerges first low down in the command chain. When it comes to thinking and planning, it's about unlocking the genius within your team, said Sir Richard. Organisations should develop a collaborative way to discuss issues, whatever a person's rank is. Cultivating a culture of openness, where people know their suggestions will be valued is critical. Blend the benefits of both structures wherever possible.

• "Never waste a good crisis", said one attendee. There are unprecedented opportunities now to do things differently, particularly recognising our wider responsibilities. Themes discussed included ESG, can we re-examine what future cycles might look like, "just in time" may still be relevant but we may be able to accommodate slower supply chains. How can we boost employee flexibility to boost motivation? How can we usefully contribute to reduce our CO2 footprint (eg reduction in office space, reduce travel)? Can we capitalise on a wider and more flexible pool of talent (eg not restricted to staff living near to a particular office). Another attendee said: "We need to grab the moment to bring about change".

Return to the workplace strategies and the longer term cultural impact of Covid-19 - with Dominique Ashby, Founder of neuro@work

14 May 2020

• Tone from the top: Generally, participants considered that their leadership teams have been very supportive of employees working remotely and the challenges that individuals are facing personally (particularly managing childcare). Participants considered that senior management were aware of the need to ensure that return to work is comfortable for the individual but also that some individuals are very keen to return to the office.

• Regional and international nuances: Given different countries are at different stages of the Covid-19 outbreak, there are obvious differences between those offices and how the UK offices are currently working. Flexibility, with regards both regional and international nuances, is key given the need to adapt to local regulation and culture/expectations. However, firms are learning from experience in Asia.

• Communication: Many businesses are noticing some positive effects of lockdown with regards to communications between teams. There have been more town halls, firm wide calls and global communications than usual. Many firms reported a consistent effort towards enabling people to feel supported during this time. There was also a perspective that the prevalence of home working enables better multi-jurisdictional engagement (because everyone is on the same level accessing remotely).

• Incentives: There was an interesting discussion around incentivising staff during this time. Conversations are ongoing about how to assess employees fairly for pay and promotion purposes. Businesses reported their focus on how to reward performance and talent in light of the current situation with a longer term lens. Some businesses reported town halls and group meetings as being helpful ways of acknowledging good performance.

• Different working models: Something that some businesses are considering for the future is creating categories of staff in terms of a normal working model (i) home workers; (ii) office workers; and (iii) in-between workers. They are also looking at whether there are opportunities to re-shape how office space is used (eg staff coming back to the office for group meetings/ creative discussions).

• Flexibility versus productivity: There has been a significant adjustment period whilst employees get used to working from home and balancing a new 'normal'. Some businesses reported significant goodwill amongst employees was engendered from the human centric responses by businesses. This has led to employees feeling reassured and supported. This goodwill, reassurance and support has, in turn, meant that a number of businesses were confident that productivity levels had not dropped at all or as significantly as expected. Employees want to work hard and are happy to do so for businesses that provide human focused support during this time.

Culture in a time of self-isolation: a focus on mental health with Richard Martin, Director and mental health lead at Byrne Dean

7 April 2020

• Mental health overview: There are significant challenges to mental health and wellbeing at the moment. Self-isolation in itself can bring huge challenges for many. We are a social species and so isolation of any form tends to have a negative impact. It is important that businesses identify and find ways around the potential, and likely, issues such as anxiety, isolation, uncertainty and a change in routine. Adequate mental resources must be provided, and trust and communication should be a priority.

• Responsibility: Attendees agreed that everyone has a role to play in creating a positive culture within organisations during the current climate. There is particular responsibility on managers and supervisors to ensure they check in with their teams, have regular calls with them and seek to understand their situations so as to adapt communication and consider workflow decisions appropriately.

• Business continuity planning: Given the incredibly high numbers of people contracting Covid-19, it is imperative to identify and plan for the risk to "key persons" within an organisation. If someone is working at the frontline of a business and becomes unwell, there is clearly a knock-on effect on others and on the business as a whole. Succession planning, particularly for senior individuals, is recommended to ensure that, as far as possible, their business continuity plans are not affected by, and are in fact strengthened in light of the current situation.

• Looking forward - lessening of hierarchy: Some potential positives, or lessons learned from Covid-19 and the working from home arrangements that are currently in place have already emerged. People are connecting with each other on a far more personal level. There are discussions around favourite recipes, tv shows, exercise classes and so on. People have also been seen generally to be increasingly understanding of different working styles, respectful of people's boundaries and accepting of personal situations. Even getting a glimpse into people's homes is breaking down the work/personal divide.

• Looking forward - ESG elements: As a result of travel restrictions, businesses worldwide are finding new ways of hosting meetings and conferences. It will be interesting to see whether and how travel practices change in the medium and longer term.

Creating sustainable performance cultures - with Deutsche Bank's Global Head of Performance, Engagement and Culture, Birthe Mester

30 January 2020

• Business performance v people performance:

  • Seen as separate, as opposed to one thing which is not good
  • People don't speak up; management need to be spoken to about issues that arise.

• People don't speak up because of:

  • Fear (of being reduced to a single rating in performance management rating)
  • Missing the skills to be able to raise issues.

• Country dependent - attitudes can vary greatly across the world, therefore flexibility in your own approach is key.

• Talent agenda needs to become the business agenda.

• Selective listening vs active listening - acknowledge the difference between the two.

How the Banking Standards Board measures culture - with Alison Cottrell, CEO

20 November 2019

• The Banking Standards Board's (BSB) survey focuses on what people believe or perceive is happening at their firm in terms of culture - it differs from an employee engagement survey which focuses on how happy/engaged employees feel.

• The BSB provide the data to each participating company board, both relating to the individual company and with benchmarking data across each of the nine areas. There were 72,000 responses in 2018; 82,000 in 2019. It is a very good evidence-base and the largest data set on this topic nationally, maybe even globally.

• The key challenges to a "speak up" culture are navigation (who to contact), fear (of reprisal) and futility. It is important for organisations to make clear positive action is taken when they receive confidential disclosures.

• Key to influencing culture is communication - and this has to be two-way - and predictability. Senior managers have to be open to listening and also behave in a predictable way to instil a positive, open culture.

• It is easier to change culture where you can articulate a clear business rationale for doing so eg to tackle poor public perception or following a widely publicised incident of misconduct/poor practice.