Building healthy cultures in financial services

By 14th August 2018Article

The concept of a ‘healthy culture’

Early 2018 marked a new chapter in the FCAs mindset to organisation culture across the UK Financial Services Sector. It published a series of essays from a broad spectrum of expert stakeholders, including industry leaders, regulators, specialist consultancies and academics. Their aim was to create a better understanding of culture, to re-emphasise its relevance and impact on customer conduct and to encourage a desire for culture to change for the better across all organisations in Financial Services. At Blacklight Advisory we contributed to this process orchestrated by the FCA and have worked in the field of culture change for many years. And whilst we would never claim to speak for the FCA we do feel we can offer a perspective on what they are trying to achieve and how they are trying to help businesses understand a new concept; a ‘healthy culture’.

A healthy culture is desired by the FCA for all organisations operating in financial services. This core message chimes distinctly from the FCA’s essays on culture. This new concept proposes that a healthy culture is a necessary state for businesses to thrive and for the delivery of good customer outcomes. ‘Having your cake and eating it’ they declare! Indeed, on a less surgery note, it is not too dissimilar to a ‘healthy lifestyle’ to achieving ‘personal happiness’. But here’s the crunch: it will no longer be good enough for organisations to focus on avoiding being ‘unhealthy’, for example by focusing on checks and controls to prevent employees from doing bad things. The concept of a healthy culture requires nothing less than being ‘all in’ to enable organisations to strive to be their best.

Attaching the term ‘healthy’ adds a new dynamic and tone to the FCA’s concept of culture. You can strongly argue that a moral compass has now been established that is intended to guide organisations in determining right from wrong within their organisations. Therefore, just as ‘drink driving’ has become socially and reputationally toxic; organisational behaviours that contribute to fear, greed and dishonesty should and will attach the same stigma. Conversely, if healthy practices such as exercise and diet are socially recognised as ‘good’; organisations will go out of their way to emphasise practices that promote ethics, transparency and trust. This is certainly a message emanating from a number of new business start-ups in the financial services sector who differentiate and anchor their culture to a positive and ethical identity.

The FCA also states that whilst culture may not be measurable, it is manageable and will insist that organisations are taking active steps to manage their culture. Unfortunately, over the last 10 years the way culture has often been managed has been through compartmentalisation; by focusing on terms such as ‘risk culture’ or ‘conduct culture’. In these two examples, behaviours are functionally boxed and examined in isolation of the overall picture. However, healthy is a comprehensive concept: mind, body and soul. Therefore, even if your organisation is great at following the rules, but unable to learn and adapt; then how can your culture be healthy? Which bring us back to a fundamental scope of a healthy culture: it is holistic, systemic and encompasses the whole organisation and what goes on in it.

Finally, a healthy culture marks a significant shift in tone from the FCA. For some time, the FCA has been synonymous with being the ‘critical parent’ in the regulation of Financial Services: you must do, you should do, abide by the rules or else. At times this has permeated through to the styles of compliance and risk teams as they become the enforcers of organisations. However, the FCA have been clear: lets work more with principles and judgement; less blind adherence to rules. And this is not without good cause. When recently working with the CEO of an insurance business; he reflected that when he reviewed significant customer complaints, they mostly stemmed from blindly following rules rather than applying common sense. Therefore, this may mark the point where critical parenting leadership styles evolve to be more nurturing and developmental. Perhaps, even treating the people within organisations as adults?

What is a healthy culture?

Refreshingly, the FCA are not pushing a one size fits all template for what a healthy culture is. Hence, they have produced a series of essays on perspectives on culture rather than an instruction manual. It means organisations will need to make their own minds up on what healthy means. However, to start the ball rolling we deciphered the key message Blacklight Advisory takes from this compendium: a healthy culture is an organisation driven to be the best they can be, underpinned by a continuous process of consistently questioning and developing their strengths and virtues.


To build on this definition, and to help organisations have conversations that can contribute towards their understanding of a healthy culture, we have identified a number of essential ingredients that we believe are important to cultivating it.

  • Integrity: The corner stone of leadership and applying judgement to decision making. This is easier for a start up with its inherent innocence and freshness; and very difficult for mature and larger organisations chasing efficiencies and productivity. However, integrity starts with the principle that your people, your suppliers, partners and your customers really count and must be treated fairly and with respect.
  • Purpose: The business mission is ethically sound, honest and transparent without suspicion of hidden or competing agendas. Inspiring your people and your customers with your mission is essential, but what is key, in an environment where weasel words and spin often mask the truth, is that you are authentic and trusted to deliver what you promise, and to practice what you preach.
  • Quality: Customer outcomes should not just be adequate or standard; they need to be the best they can be. And that should emanate throughout all aspects of your organisation, from the internal website to the employee handbook. Details matter, and high-quality delivery should permeate your whole organisation. But this must be done so in a positive and developmental way, rather than by stick or coercion.
  • Community: That group and people dynamics within your organisation are nurturing, inclusive and respectful. Lack of appreciation for diversity impacts conscious and unconscious bias within organisations and is clearly a destructive force impacting teamwork, collaboration and cohesion. It can also materially impact customer outcomes. Real change is needed across Financial Services and this was a priority concern raised by the FCA.
  • Supervisory practices: Systems and processes must make it easier for employees to reliably do the right thing. Supervisory practices must underpin this: to challenge indifference, collusion and to champion inquiry. The phrase ‘you get what you settle for’ is very apt when thinking about this. What behaviours does your organisation ‘walk pass’ or ‘turn a blind eye to’?
  • Psychological safety: Finally, this last ingredient perhaps underpins all those above. It’s the fundamental freedom for all employees to openly express themselves, to admit mistakes, to challenge and to learn and grow without fear. The scandal at Barclays over their treatment of a whistle blower highlights how this freedom can be subverted and fear of expression suppressed. High performing teams admit mistakes – it is why they are high performing. So champion mistakes, admit being fallible and learn.


These ingredients highlighted above are not intended to be exhaustive; and should serve to help discussions across your organisation to identify what a healthy culture means for you.

What muscles will be needed to build a healthy culture?

In reviewing the FCA essays, it was refreshing to see more focus on the management of culture than the measurement of it. Measurement has been something of an obsession for many years now in organisation culture and has contributed little to its improvement. This is largely because what is measured is a poor gauge of the complexity of culture and because they provide a limited diagnostic capability. Our suggestion for building a healthy culture is less about measurement and more about working towards continuously developing adaptive improvement interventions that develop your strengths and virtues. The key question being: what organisational muscles will need to be strengthened and how can you keep them conditioned over time to deliver your purpose? Initially, these may be muscles that may not have been used for some time. So, to identify what needs strengthening, perhaps the starting point is if we go back to our informal definition of a healthy culture: an organisation driven to be the best they can be, underpinned by a continuous process of consistently questioning and developing their strengths and virtues; it gives us clues to what needs to improve.


Recently at a client leadership event, the discussion led to the admission that the senior team couldn’t readily answer: “Why do our customers choose us?” As we highlighted above such questions of purpose and identity are essential for a healthy culture. But when we asked why this senior team struggled with questions such as this, the answer was there was never the time to talk these issues through, or when they did discuss – they were too hard and never made any headway. So, what is missing?


We believe that an important muscle that needs developing is getting the right people in a room and having effective conversations around messy and complex issues such as culture. In our work with clients using Transactional Analysis (TA), which is a useful lens to understanding what is going on in the dynamics of relationships, we have found that conversations, if they happen at all, are often conducted at cross purposes and are prone to breakdown. This effects communications at every level in an organisation and opens up the risk that critical information is being withheld, distorted or blocked. The dynamics of relationships may also reveal recurring themes within organisations that may serve to victimise, blame or isolate functions, teams or individuals. These are all outcomes the FCA are particularly alert to as indicators of future conduct failure.


Another key muscle to condition: organisations must know how to ‘reason and learn’. Unfortunately, some management development programmes can be limited to building the necessary awareness and skills to comply to rules, policies, accountabilities, decision making frameworks, processes etc. These are all examples of what Chris Argyris, in his article ‘How Smart People Learn’ (HBR 1991) would call ‘single loop learning’. He illustrates this using the analogy of a thermometer. When a set temperature is met, it switches the heater on. The proliferation of traffic light reporting in almost every aspect of conduct risk management exemplifies this trend, as is the consequential defensive and deflective strategies that managers often ‘switch on’ if they have a red indicator! Argyris, contrasts this way of learning with ‘double loop learning’: the capacity to deeply understand and take personal ownership of complex problems; to honestly and critically unpack the reasons why they have occurred; and to derive iterative insights and interventions into how the situation can be improved. This is often through challenging their own and their teams’ mindsets and behaviours.


But how is this developed? This type of reasoning isn’t easy for leaders especially in admitting to mistakes, revealing personal weakness and having the courage to call out the behaviours of others. In our work coaching leaders and managers, we have found that enabling them to ‘reason and learn’ is a critical muscle in their development. Our support gives them the space, guidance and challenge to get under the surface of complex systemic issues and also infuses them with the strength to role model these traits to their teams. We know the FCA are worried about the ‘tick box’ culture at times prevalent in Financial Services, which can be said to be partially driven by single loop thinking. In contrast ‘Double loop reasoning and learning’ offers deeper and more insightful opportunities for organisations to sustainably develop a healthy culture.


In conclusion, there is no doubt it is not easy to develop a healthy culture. However, with a strong focus at every level on building closer, more trusting and personal working relationships, equipping employees with effective communication, listening, reasoning and learning skills, establishing time and priority for messy and complex issues, and understanding the dynamics of an organisation, we believe building a healthy culture is possible. And to reiterate, these muscles are not theoretical or satisfied by rolling out a one-off training programme; these muscles, if they are to strengthen and stay strong, need constant work, focus, discipline and investment.