It's commonly understood that poor culture and poor practice are closely linked, however is there now a temptation to view culture merely as a regulatory requirement? Has it therefore become destined to be another catch phrase which brokers don’t really understand or truly believe in?
There is dynamic value in a broker having a truly centric culture that does indeed put its customers at the forefront of all it does and why it exists. It’s widely understood that without the correct culture, a broker is undoubtedly at risk of being exposed to intervention from the regulator. Costs associated with this type of action are tangible, but most brokers don’t view these costs as being real.
They are of the view that:
“Regulatory intervention won’t happen to us, we have a good culture here”
Massaging the Ooze
A broker believing at a Senior Management level that it has a good culture is one thing, however knowing and being able to demonstrate that it has the right culture cascaded throughout the business is a totally different animal.
At the very least there are the hidden costs to consider, these are more commonly undetected and exist through increased business as usual operational costs due to inefficiencies. Often a broker will choose to dedicate significant resource and focus internally at a middle management and front line staff level to deal with customer related issues, in an effort to try and ensure that the right culture is maintained.
This is what I define as “Massaging the Ooze”, as this type of approach is typical of a broker where the culture has not embedded throughout the organisation from the top down. There is almost a general acceptance at a middle management and front line staff level that these issues commonly exist but are simply viewed as an “ooze” which lies beneath the skin of the business. Often performance management arrangements within the broker prompt a quick fix mentality and an approach which simply massages that ooze.
The Senior Management Team of the business can often be blinkered to the fact that these type of issues exist to the extent that they do. As a result very few business practices are challenged or reviewed sufficiently to ensure that the right culture that was set by the Senior Management Team has in fact cascaded throughout the entire business.
There can be an over reliance by the Senior Management Team on the principle fact that the firm's culture must be right because the Senior Management Team set it and by their own admission they are all great communicators; yet setting the correct culture at a business goes far beyond this and often little is done at the highest level within the firm to challenge that the culture which has been set is in fact a truly good culture.
What do brokers have at their disposal to assist with setting a truly defined customer centric culture?
Regulatory-wise, there are a number of clearly defined rules and standards setting out expectations and requirements, however a firm with a truly defined customer centric culture will not stop there.
Take the example of introducing a new product. If challenged, a broker with a truly defined customer centric culture will be able to demonstrate evidence of having conducted detailed due diligence and business planning covering most of if not all of the following where relevant:
- Product complexity assessments
- Assessment of the product risks
- Customer suitability assessments
- Sales plans
- Training plans
- Systems and Controls
- Communication strategy
- Implementation and maintenance strategy
- Reality checking – audit
Strong business planning and forethought is vital to ensuring that a truly defined customer centric culture is established and maintained. Often the floors in a strong brokerage with a good culture are that they have identified what should be done, but fail to sufficiently resource how they do it. The business at different executive levels can become disengaged in the execution of the project and the all important communication does not disseminate throughout the business correctly.
Problems that arise do not escalate back up through the business chain to the Senior Management Team. The resolution of issues identified can become drawn out or may be difficult to fix. These issues grow, become more complex and act like a poisonous “ooze” existing under the skin of the business which is tolerated and massaged rather than exposed and cured, this is where the undefined costs lie.
If you would like to discuss your business culture in more detail and in total confidence then please contact me or the RWA Solutions team.