Embedding Consumer Duty in your culture first raises the question of how to define culture. A firm’s culture is multi-faceted, but at its heart, it is the values, beliefs and behaviours which influence how company employees perform, and how they work together. It is about how people behave when no one is looking, and about which positive behaviours are actively encouraged, and which negative behaviours are tolerated.
Culture change is a slow process, given it reflects everything that happens in a company, and can be influenced by a vast range of internal and external factors. So, what does it mean to genuinely embed the Duty within the culture of your organisation, and how can that be achieved?
The UK’s Financial Conduct Authority (FCA) sees four key drivers of culture.1
PURPOSE
Your purpose must align with the Duty
The FCA stipulates that a firm’s purpose must be consistent with the Duty. This is not just about ensuring the wording of that purpose clearly links to the delivery of good outcomes, but how it actually plays out in practice, across your organisation – how it drives and influences employee behaviour, to avoid just becoming words on a page. Being purpose-driven means that your purpose can be seen and experienced through everything you do, in all parts of the business, both internally and externally. It is reflected in your strategy, and your culture.
Beware of conflicting objectives
If your purpose, and therefore your business strategy, is not fully aligned with the principle of good outcomes, there is significant potential for conflicting objectives, for example:
• Leaders claiming to be focused on good outcomes, but de-scoping accessible formats from a change programme, to deliver against a timeline which drives their bonus
• Teams pursuing industry commitments to become more sustainable, driving a customer transition to low carbon products, which is unaffordable for vulnerable customers with low financial resilience.
LEADERSHIP
Culture is not just for HR
Ownership of culture often sits in the People/HR function (and is sometimes associated primarily with ‘softer’ business considerations like employee surveys) but viewing it solely as an HR responsibility can be a dangerous approach. To permeate the whole organisation, culture needs to be something visibly driven/enabled by the CEO – and embodied by leaders across the entire business – to ensure that all employees feel a sense of ownership and have a clear, consistent understanding of what is expected of them.
Tone from the top
It is also critical that you have the right tone from the top, with leaders fully bought into the need to deliver good outcomes, how their role influences outcomes, and the nuances of what the Duty really means for their teams. This means engaging them in ongoing discussion, not a ‘one and done’ training approach. To work most effectively, this needs to operate both top-down (through successful leadership role-modelling), and bottom-up (through constructive employee challenge). A vital activity for leaders therefore is about helping their employees understand – and buy into – the fact that the Duty is more a ‘way of life,’ and should underpin everything they do for their business, and every decision they make.
Help your employees understand their impact
Understanding customer impact is simple for those sitting in product design, or marketing, but harder to articulate for teams such as HR or Finance. Yet decisions from these teams can have significant impact – e.g. employees in HR understanding that when they refresh an org chart, this will ultimately impact the customers’ experience. Leaders need to enable their teams to identify how they impact customers, directly or indirectly, to ensure they have a positive impact on the customer’s experience, and the outcomes they receive.
Leaders need sound judgment
Fully implementing the Duty requires strength in judgment, to interpret the guidance – how far is far enough, to deliver a good outcome, or to avoid an unreasonable barrier? Have decisions been consistent across different teams and business units in your organisation? Would an unreasonable barrier in a personal credit card journey be viewed the same way in an insurance claim, or an annual review in wealth management? Building up capability in judgment comes through multiple activities, from the provision of consistent guidance through to sharing experiences (for example, via case studies) to help teams learn and improve.
GOVERNANCE & ECOSYSTEM
Build good outcomes into everything
Fully embedding Consumer Duty within a company’s culture requires building the concept of good outcomes into the entire ecosystem of the organisation. One of the misconceptions around the Duty is that it only applies to customer-facing and ‘business’ teams – product, sales, communications, risk, compliance, etc. However, the only way for it to become truly embedded is for the concept of good outcomes to be a part of everything that occurs across every team. Wherever employees sit within the business, the pursuit of good outcomes is the ‘golden thread’ which ties together their conversations and provides a unity of purpose.
This means systematically embedding good outcomes into a company’s infrastructure – so in policies, processes, procedures, guidance, frameworks, models, rectifications, training, induction, reward, recognition, audit approach, internal and external reporting etc. A culture of customer-centricity means that teams across the business apply the lens of good outcomes to everything they do. For example:
Ensure you consider third parties
Efforts to embed a commitment to good outcomes can be further complicated where third parties are engaged to support your customers. Third parties will often be supporting multiple firms simultaneously (via white labelling), and ensuring that they provide a service which is tightly aligned to your specific cultural values, while also fulfilling your customers’ needs, is key. An important consideration is sharing the right (proportionate) information across the distribution chain to enable an appropriate assessment of value.
Go beyond box-ticking on frameworks
There is a danger that firms develop a framework – for example, around fair value – and then consider that merely implementing that framework is enough to ‘tick the box’, rather than genuinely using it to dig into areas of poor value and making the appropriate changes. Culturally, many parts of a business may influence the outcome of that assessment – for example, Risk teams blending multiple fair value assessments together, which could disguise problematic areas; or third parties not delivering effectively because Supplier Management have not updated their contractual requirements. Firms accordingly need to understand all the cultural factors influencing the delivery and assessment of value.
PEOPLE
Ensure your teams feel psychologically safe
People are a material element in meeting the requirements of the Duty in terms of how they integrate the principle of good outcomes into their work – both proactively through their intent and actions, and also reactively by calling out where something is not going well.
If colleagues are to feel empowered to speak up and raise issues where they perceive customers are not receiving good outcomes, they must feel it is safe to do so. When major projects have significant momentum, it can be daunting to raise concerns that may derail timescales, impacting both the ability to achieve objectives and associated bonuses. Firms need to understand the ‘breakpoints’ around employees’ sense of psychological safety, how those differ across parts of the business, and how they can then be managed.
Reward can influence behaviour
As alluded to above, another key factor influencing employee behaviour is how they are rewarded. Historical issues such as PPI have demonstrated the perils of employees being incentivised to behave in a fashion that does not sufficiently align with customer needs. It is vital that reward and incentive structures are aligned to a firm’s purpose and values, which in turn must reflect the need for good outcomes.
Build capability constantly
Most firms will already have developed and delivered training to employees to help them in effectively implementing the Duty. But have all employees received it – or only those on the frontline of supporting customers? Has it only been done once and then forgotten? Has it been done in a way that enables firms to clearly assess employees’ confidence about supporting customers, and also the impact of training on colleague performance? Has it been done in a way which enables employees to understand customers’ behavioural biases, and their impact on decision-making?2 Have staff been trained sufficiently in areas where customer needs are more complex? Firms must ensure that their approach to building capability continually evolves to reflect how employees develop and where they need further support.
MI & MONITORING
The FCA is looking for firms to adopt a data-led approach to help them infer trends early, especially regarding customers with characteristics of vulnerability.3 The imperative is to ensure firms can make consistently good decisions based on both their insights and their culture. Often, the challenge firms face is not a lack of data, however – it is a lack of insight from the data they do have and how they use (or fail to use) their data to identify root causes for poor outcomes. There is so much data, they cannot see the wood for trees.
Firms should consider what they want to deliver and work backwards on the data required to realize that goal, rather than just repackaging what they have. It is not enough just to have the data – firms need to demonstrate why the data they are using is appropriate, and how they are using it for positive ends. There is also the opportunity to leverage large data sets to gain deeper understanding of customer needs and preferences, to enable greater personalisation.4
Measuring culture change
Reporting against the four outcomes is an important starting point, but this can be enhanced by broadening that reporting to provide a picture of how effectively the Duty is embedded in the firm’s overall culture. Ultimately, the biggest indicator of culture change will be an improvement in customer outcomes, but these should not be viewed in isolation.
There is no industry-agreed methodology for measuring culture or culture change. Firms can gain a better understanding of how well the Duty is embedded and how effectively the ecosystem is operating by triangulating insights across three themes. For example:
CONSUMER DUTY EMBEDDING REVIEW
As the FCA has noted, firms should not confuse implementation of Consumer Duty with being ‘done’.5 Fully embedding Consumer Duty in your culture means ensuring that the principle of good outcomes is present in all your ways of working, and is the driver of your decisions rather than an afterthought. It means ensuring that the concept of good outcomes is a fundamental part of strategy and implementation for every team. It means using insight to understand impact and drive proactive decisions, and to continually learn and improve.
To support firms in this journey, Capco has developed a Consumer Duty Embedding Review that helps them transition from a programme approach to business as usual. The Review is designed to ensure that delivery of good outcomes is achieved through a living, breathing ecosystem, one which recognises and supports the interdependencies between elements, and can help firms to be proactive rather than waiting for the FCA to intervene.
The Review also helps measure the impact of cultural change. This enables firms to improve the outcomes they deliver for customers, leading to increased trust and confidence in the sector. Implementing this approach will also give firms greater confidence to be able to answer the key culture questions expected from the FCA.
Capco’s unique expertise extends to all aspects of embedding good behaviours and outcomes in culture. To discuss further, please contact:
Oliver Sharland, Executive Director - Oliver.Sharland@capco.com
Petra Watkinson, Senior Consultant – Petra.Watkinson@capco.com
REFERENCES
1 Consumer Duty guidance FG22/5, section 10.6
2 https://www.capco.com/intelligence/capco-intelligence/behavioural-science-a-key-ingredient-in-your-consumer-duty-strategy
3 https://www.capco.com/intelligence/capco-intelligence/customer-vulnerability
4 https://www.capco.com/intelligence/capco-intelligence/customer-value
5 Roma Pearson, Director of Consumer Finance, FCA – Consumer Duty: The next steps, December 2023