And the regulator urged the financial services industry to take effective action “quickly” so that it can reflect the people who use it.
FCA executive director of supervision – retail and authorisations Jonathan Davidson, explained how diverse, inclusive and purposeful businesses could create the healthiest workplace cultures.
“The specifics of your culture, like your strategy, remain up to you as leaders. But there is a growing consensus that healthy cultures are purposeful, diverse and inclusive,” Davidson told the Annual Culture and Conduct Forum for the Financial Services Industry.
“A culture where all employees feel a purpose beyond just making money while avoiding regulatory censure. A culture where a job is not just a job. A culture where all employees feel safe.
“Safe from retribution for speaking up. Safe from harassment and victimisation. In fact, an inclusive culture where all employees feel listened to and recognised for what makes them special.
“A healthy culture is one where diversity is the fertile soil in which innovation and improvement flourish.”
Davidson emphasised the importance of people being given freedom to speak and be included in businesses the culture will not last and that the sector needed to act urgently.
“Without safety, without inclusion, the value of diversity is lost and the diversity will eventually wither and die,” he said.
He added: “It’s clear that effective action needs to be taken quickly for financial services to become an industry that is truly reflective of the people it serves.”
Too often it can be fear that stops firms from building the right cultures and environments, and Davidson admitted this could include fear of regulatory action.
“I would summarise the most oft quoted barriers to having purposeful healthy cultures as having one clear common feature: fear,” he said.
“Fear of the short-term focus on profits, elevated in importance by financial key performance indicators and short-term horizons for reporting.
“Fear of taking the initiative to do the right thing and being blamed if it goes wrong – especially by the regulator.”
This can lead to the development of tick-box cultures, increased bureaucracy or situations where senior management do not trust or empower middle-managers and frontline staff.
Empower frontline staff
Encouragingly though, the FCA noted the upheaval generated by the coronavirus pandemic had empowered frontline staff and allowed them to take greater decision-making responsibility.
Davidson highlighted progress was being made with the regulator seeing the permafrost between senior management and the rest of business starting to melt as trust was being built.
However, there are people who still face tough situations.
“I confess that I did not foresee that faced by coronavirus the financial services would purposefully sweep away many of the big barriers to healthy cultures,” Davidson continued.
“But the experience of coronavirus hasn’t been the same for everyone and it hasn’t been positive for everyone.
“Some colleagues in the industry have continued to serve customers face to face. Many have had to endure increasing levels of hostility from stressed customers.
“Indeed, the Institute of Customer Service reported in July that customer-facing staff across a range of sectors have been subject to increasing levels of hostility, with more than half having experienced abuse from customers during the pandemic.”
Davidson said purposeful leadership was required to tackle the evolving challenges of the coronavirus and Brexit and maintain the healthy culture within businesses.
“For me, a key concept is that leaders are not only responsible for their own decisions but also for being proactive about the behaviour and competence of those they lead,” he said.
Davidson concluded his speech by confirming that with a restructuring ongoing at the FCA he was going to be leaving his post.
He will be taking up a position as senior adviser on financial services and the FCA’s purpose and approach to sustainability in preparation for the COP26 conference next year.