The investment industry has lagged in reforming company culture at the expense of gaining competitive advantage, a new report has said, stating asset managers can fall behind the pack if they keep prioritising short-term performance.
New research from Willis Towers Watson’s Thinking Ahead Institute has noted the language and framing used around culture in the industry remain limited, despite growing weight being given to asset manager culture assessments in hiring and firing decisions overseen by asset owners and consultants.
According to the report, common failings limiting cultural quality include insufficient regard for organisation’s purpose beyond short-term business results, low regard for understanding and assessing “soft” or intangible factors and limited development of language and facts necessary to communicate culture.
Further, institutional investors were said to have limited appreciation of how subcultures exist and interact within their organisations as well as weak engagement on culture in talent acquisition and development.
The cultural differences between asset owners and asset managers were reported to be the most evident in the client-focused area, where asset managers over time had been increasingly drawn to more self-centred values in response to commercial pressures.
“There is considerable need for cultural improvement in the industry,” the report stated.
“The obsessive [preoccupation] with investment performance over short-term periods has not produced sustainable value.”
The report also noted that culture can be a differentiating factor for companies, as an edge over competitors, commenting: “While business strategy and investment strategy can be mimicked by competitors, culture is impossible to recreate”.
Roger Urwin, co-founder of the Thinking Ahead Institute said organisations that have had edge across inclusion and diversity, sustainability and organisational purpose have been “particularly [well positioned] to address stresses from the COVID-19 crisis and the recent social crises around racial injustice”.
“In these abnormal conditions, strong culture has proved to be a huge blessing,” he said.
Mr Urwin added that during the five years when the study was conducted, conversations with investment organisations about how to generate sustainable performance from more effective cultures had improved “markedly”.
“There are now a number of investment organisations globally able to differentiate themselves with their purpose and culture,” Mr Urwin said.
“The factor most indicative of edge here is leadership commitment to elevating and actively shaping culture in the organisation.”
The Thinking Ahead Institute has recommended more use of incentive compensation to align culture and the addition of C-suite culture and talent officers to drive change.
Its report has also included a new model for defining culture and a framework for investment groups to assess and manage their cultures.
The model has a reporting dashboard with metrics across dimensions of culture, such as client-centric and people-focussed elements, as well as leadership attributes over innovation, diversity and inclusion and transparency.
“We measure what we do because we can,” Mr Urwin said.
“But we can measure more than the activities we currently do. The [institute’s] culture model and dashboard represent an attempt to capture a source of considerable comparative advantage for those who recognise the value in measuring culture as a step in the path of cultural improvement.”
As part of the institute’s ongoing power of culture study, it is gathering data from investment groups in an effort to develop benchmarking to help drive up cultural standards in the industry.
Mr Urwin said the research group has looked at best practice models of purpose and culture in business strategy, connections with employees and consistent engagement with stakeholders.
“We firmly believe that best practices in purpose and culture management are critical to improving industry resilience and sustainability and outcomes for all stakeholders,” he said.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].