How NEDs and CFOs can improve culture in financial services firms
Since 2008 there has been a lot of focus on "the tone at the top" when considering the culture of financial services firms. What does this mean in practical terms? ICAEW's Financial Services Faculty explains what Non-Executive Directors and Chief Financial Officers can do to improve organisational culture.
- NEDs should lead board discussions on the firm’s mission and its target culture.
- The organisation should define and communicate its mission statement. This should position the return on equity (RoE) target as a consequence, rather than as the mission itself.
- Ensure there is a regular assessment of culture and consider the full range of tools available to develop a rich picture. For more information, see the ICAEW publications Culture and purpose and How to audit culture.
- Board members and CFOs should share their experience of RoE targets and how they may drive staff behaviour. Consider how staff might respond if RoE were set at different levels, and where undesirable behaviour might emerge.
- Ensure a suitably robust control framework. Setting a high RoE is like driving a car – the faster you drive, the more controls and safety measures you need. For a given RoE target a corresponding sales culture is likely to emerge.
- Engage early with shareholders to help them understand the rationale for targets and desired customer outcomes.