Culture is an intangible quality – something that evolves naturally and is felt and observed in behaviours, rather than deliberately created and measured. Experiencing unfamiliar cultures may be something we deliberately seek out.
Think of that feeling you get touching down in a different country, where the streets look similar but all around you are different languages and signs, vehicles on the “wrong” side of the road.
Addressing the opportunity cost of excluding whole segments of society from the value that we can bring must surely bring its own rewards.It may create excitement or unease – for example, anyone accustomed to the western retail practice of paying the price on the ticket may find themselves unnerved by the expectation to barter in a Marrakesh market.
But if culture is organic, it can also be changed by key influencers.
Inside of firms, this typically means the leadership team, but it can also be a few key individuals lower down the hierarchy whose informal work networks give them a surprising level of power to effect change.
Professor of mathematics Hannah Fry explains this phenomenon brilliantly in her Uncharted podcast for the BBC.
Bringing things back to financial services, the Financial Conduct Authority's consultation CP23/20 on diversity and inclusion talks repeatedly about the importance of an inclusive culture with a diverse set of views to counteract groupthink.
Not everyone agrees that groupthink is a bad thing. Stephen Bush, in his 2022 article for the FT, suggests organisations prone to groupthink can act with a unity of purpose that is lacking in one paralysed by internal disagreement.
Nonetheless, there is convincing evidence (and dare I say, near consensus, ironically) that groupthink can lead to poor decision-making.
A culture of groupthink has been attributed, at least partially, as a cause of the global financial crisis.
There were dissenting voices predicting the bursting of the US property bubble and others who saw through the fragility of complex sub-prime mortgage-backed securities, but these were notably few, and their warnings were blindly ignored by the majority.
In our response to the consultation paper, we note that the UK is still paying for the crisis – a £27bn net cost to the Treasury of bank bailouts, an expected £150bn in the cost of unwinding QE and around £30bn of permanently lost GDP every year since 2008.
These avoidable costs alone dwarf the FCA’s £880mn policy cost estimates. Would a less male-dominated, ego-driven culture have seen and done things differently?
Aside from risk avoidance, there are other benefits to improving the diversity of the sector. These may be harder to quantify but are nonetheless worthwhile.
McKinsey research shows that firms with more ethnic and cultural diversity are on average 36 per cent more profitable, while research by Momentive finds that 78 per cent of employees think it is important to work for a company that prioritises DEI, building loyalty and retention.
These factors inevitably work their way into the firm’s ESG scores and further increment shareholder value.
Even as an unregulated firm we recognise these benefits and are on our own journey to be more diverse and inclusive.
We measure a wide range of DEI metrics and have a diversity, equity and inclusion committee working to implement a detailed diversity strategy. It does demand some time, but this is already paying dividends.
Like the FCA and Prudential Regulation Authority, we believe that increased DEI can only improve the way financial services operates.
As an industry, we should reflect the people we serve, and addressing the opportunity cost of excluding whole segments of society from the value that we can bring must surely bring its own rewards – to employees, shareholders and customers alike.
It is down to leaders to set the tone, agree the strategy and co-opt those network influencers throughout the business to truly bring those benefits to life.
Jon Dean is head of retirement strategy at Altus Consulting
