Advice Matters – from the archive

Advice Matters is an accredited monthly e-journal. Each edition contains a number of articles written by industry experts, that combine knowledge and skills related topics, with technical and regulatory updates. Every edition is aligned to the ApEx standards, with a review at the end of each journal to show the learning outcomes and standards covered. (This is not available in the sample below).
Advice Matters will allow professionals to access 12 hours of structured CPD throughout the year from the comfort of their desk, or on the go using a mobile device. Each edition is also accompanied by associated questions and answers to help test and verify knowledge.
Take a look at a recent article from our Skills & Expertise section of Advice Matters that focuses on your personal development. The article provided below looks at the culture of behaviour.

Skills & expertise

Personal Development is often forgotten or neglected, as it is not seen as important as the other areas of CPD. In reality it can be the aspect that makes the real difference to your clients and your earning capacity. In each edition of Advice Matters we will discuss potential development areas and ensure any Regulator focus that aligns to this area is covered in a very timely manner.

The Culture of Behaviour

There’s no escaping it – ‘Culture’ remains one of THE key words of the moment, as it has been for the last two, or three years. There’s not much that the FCA issues, or says, that doesn’t have some reference to Culture in it.

For a relatively short word it packs an enormous punch and it’s got many in the industry scratching their heads about what it actually means to them and how they go about measuring and providing evidence of the prevailing culture(s) in their organisations. Without doubt, the Senior Managers and Certification Regime (SM&CR) has provided much of the impetus for this.

Even just 5 years ago, if you had dared utter the word ‘Culture’ in many a Board room it’s highly likely that you would have been met with some awkward shuffling of feet and rolling of eyes, not to mention various blue-tinged expressions of derision.

Along with vision and values, Culture was often seen as being just one of those ‘faddy issues’ promoted by the ‘soft and fluffy brigade in HR’. I use these terms not to be deliberately provocative, but because I heard them voiced – in all seriousness and without a hint of irony – by a major insurance firm’s Managing Director during a Board meeting in the not too distant past. I also use the past tense, but that’s because I’m an eternal optimist – either that, or I’m just hopelessly naive.

I fear that it’s probably the latter; for as this article is being penned, the headlines are abuzz with news of the latest scandal to hit Financial Services – the collapse of London Capital & Finance – with its potentially life-changing implications for many of those who were taken-in by financial promotions that were, in the FCA’s words, “…misleading, not fair and not clear.”


‘Advice Matters’ has considered the matter of ‘Culture’ from various angles on a couple of occasions in the past, but such is its fundamental importance we make no apology for revisiting it in this edition.

So, let’s quickly refresh our memories on what culture is and where it comes from, before we consider some of the behavioural aspects.


“Positive culture, as I will call it, goes right to the heart of what firms and their staff are, what values they represent and, the positive ethical customs.” – Andrew Bailey, Chief Executive, FCA, March 2018


Culture will always be firmly rooted in the values that an organisation promotes and ideally, those values will be aligned to a clearly defined corporate vision which should be the primary motivator of the business’s strategy. All of these will be major factors in determining what the organisation deems to be acceptable – or not – in terms of employee conduct and behaviour.

Those at the highest level of the management hierarchy are responsible for setting and maintaining the organisation’s culture and its associated tone. These people are role models and the likelihood is that the behaviours and attitudes they exhibit will be imitated by those lower down the hierarchy, to a greater or lesser extent.

For a senior manager this responsibility extends beyond the context of the workplace. How an individual behaves in their private life is just as pertinent and it can have serious ramifications for their professional prospects and personal credibility, as evidenced in the cases of Jonathan Burrows (ex-Blackrock) and Paul Flowers (ex-Co-op Bank):

Article 1
article 2

There is no one definitive type of organisational culture. According to Kim Cameron and Robert Quinn there are four types:

  • Clan
  • Adhocracy
  • Market
  • Hierarchy

Each of these culture types will be shaped by their leaders’ characteristics and each one carries behavioural risks that must be managed and mitigated effectively.


In very general terms each of these culture types can be described, as follows:

Clan culture – Family-like environment, with a focus on coaching, mentoring and “doing things together”

Behavioural risk: unwilling to challenge & overly consultative to the point of being indecisive

Adhocracy culture- Dynamic and entrepreneurial environment, with a focus on risk-taking, creativity, innovation, and “doing things first”

Behavioural risk: impulsive, ill-informed decision making & a failure to apply appropriate risk-controls

Market culture – Results oriented environment, with a focus on competition, achievement, and “getting the results”

Behavioural risk: overly aggressive in pursuit of targets to the detriment of others & a disregard of defined boundaries / standards

Hierarchy culture – Structured and controlled environment, with a focus on efficiency, stability and “doing things right”

Behavioural risk: propensity to ‘hide behind’ rules, inflexibility & an unwillingness to exercise personal initiative


The effectiveness of the organisation’s overall leadership will be determined by how well it balances the influences of each of the culture-types, because individuals will be drawn to one in particular by the very nature of their own personality type. Getting this balance right is an essential leadership skill and this goes a long way to explaining why the FCA is now places as much, if not more, emphasis on ‘Leadership’, as it does on ‘Management’.

Achieving the correct balance and alignment of culture types relies on an organisation’s Leadership being willing to hold a mirror up to itself – collectively and individually – and to acknowledge, accept and address any faults that are reflected back. It’s likely that one of the four culture types will be more dominant than the others – the question is, are the attendant behavioural risks properly understood, managed and mitigated?

This picture gets more complicated when one factors in the influence – healthy or otherwise – of the sub-cultures that exist in the organisation.

Here’s a little exercise for you to try:

Picture your organisation as a whole. Which of the 4 culture types do you think best describes your organisation’s overarching culture?

Now, picture the different departments / functions that your organisation’s comprised of. Which of the four cultures do you think is the most influential in each one?


Don’t be surprised if the answer to the second point differs from that of the first.

How can this be?

Imagine an organisation whose overarching culture falls into the Clan type.

Within this organisation there is a target-focused Sales team that is naturally inclined (collectively and individually) towards the Market-type culture.

Similarly the organisation’s creative and innovative Product Development team’s natural cultural habitat is likely to be Adhocracy-based.

The Finance team will probably be found to favour the structured and process-driven environment associated with the Hierarchy-type culture, whilst the Customer Service function may well find itself naturally aligned with the organisation’s overarching Clan-type culture.

Those working in these functions will exhibit the behaviours associated with their sub-culture type, albeit within the context of an organisation whose leaders promote a Clan-based culture.

The challenge for the organisation’s Leadership is to enable the separate functions to operate within the context of their natural culture-type preferences, whilst doing so within a clearly defined, consistently applied framework of behavioural/ethical standards whilst, crucially, avoiding the promotion of a ‘silo-based’ mentality.

These behavioural tolerances should be clearly communicated throughout the organisation and supported by a robust system of governance and control.

Here are some of the elements that will contribute to a robust system of governance and control:

  • Clear articulation of the organisation’s core values
  • Leaders role-modelling appropriate behaviours and standards of conduct (i.e. ‘talking the talk and walking the walk’)
  • Open and transparent communication throughout the organisation and at all levels
  • A comprehensive induction process for new employees – including expectations around individual behaviour and conduct (i.e. what is / isn’t acceptable)
  • Training and competence arrangements that are aligned with the organisation’s values and the associated behavioural expectations and required standards of conduct
  • A performance appraisal process which takes proper account of an individual’s conduct and behaviour
  • Performance objectives that are aligned to the organisation’s values and ethics
  • An environment in which constructive challenge is actively encouraged
  • Zero-tolerance of poor conduct / bad behaviour, backed-up by a disciplinary process that is seen to work
  • A clear understanding of the organisation’s conduct risk ‘hot spots’ and how these are managed and mitigated
  • Clearly defined pathways for escalating cultural issues, supported by a formal Whistleblowing policy and procedures
  • Root cause analysis of customer / client complaints with remedial actions being taken promptly and efficiently
  • Consistent application of the FCA’s Conduct Rules

Problems arise when the governance and control mechanisms fail to address the challenges posed by dominant sub-cultures that are not aligned to the overarching organisational culture and, if they actually exist, where behavioural tolerances are ignored and exceeded.

So, having a clear understanding of the sub-cultures that are in play within in an organisation will help facilitate the process of identifying, managing and mitigating the much larger issue of individual behaviour and its bearing on conduct risk.

At this point it’s probably worth reminding ourselves of the Conduct Rules that form the third main element of SM&CR:

The Regime’s ‘Tier 1’ Conduct Rules apply to all relevant employees within FCA-regulated firms:

rule 1

Four senior manager-specific ‘Tier 2’ Conduct Rules (SC) supplement the five Tier 1 Conduct Rules:


We have yet to see all the facts around the London Capital & Finance debacle, but it’s hard not to take the view that the final analysis will reveal an organisational culture which was overly tolerant of a lack of effective governance and control and, by the same token, condoned behaviours that fell short of the normal standards of acceptability. It will be interesting to see how the Conduct Rules – Tiers 1 & 2) are applied to this scenario.

“Culture is primarily a function of individual behaviour. Behaviours can be assessed through three elements: the character of the individual, the judgements of the individual and the outcomes of their decisions.”-  Sir Hector Sants , Former CEO, Financial Services Authority (FSA)


Advice matters

Hannah Gunthorpe

Open Course Coordinator

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