As the regulator steps up their drive for firms to foster and maintain a genuine culture of compliance – where the fair treatment of customers is default and runs through the firm like veins through a stick of rock – more and more firms are turning to Artificial Intelligence (AI) for assistance.
In the light of the Financial Conduct Authority’s (FCA) determination that firms in the sector have positive customer-centric cultures, perhaps the biggest challenge facing a Chief People Officer (CPO) or Chief Operating Officer (COO) is: “How do you evidence that your firm has an appropriate and “good” culture?” Assuming, of course, that you have an acceptable culture in the first place!
I say “assuming” because judging by recent feedback – specifically from a survey we conducted in July 2021 of more than 250 Risk and Compliance Officers from FinServ firms who attended our recent webinar – 54% stated they have a program underway specifically focusing on developing and improving culture, with 17% asserting that they we be looking to assign time to launch a culture initiative within the next 12 months.
Well, last year we managed more than 100 million individual knowledge and competency interventions, the majority of which were in firms just like yours, across a required learning curriculum (just like in your firm), and the average level of retained competence was just 52%.
Add our findings to the fact that – in almost every public statement of late – the good and great at the FCA continue to reference and reiterate the vital importance of ‘culture’, and it is a fair bet that many firms – despite a lack of empirical evidence – may have concluded that they might just have a problem.
One, rather obvious, “self-test” that a firm might apply would be to consider their approach to employee Training & Competency (T&C). If one were to pose the question: “Just how fit for purpose is the current T&C regime in your firm?”, it would first be necessary to define what we mean when we say purpose.
Many firms approach employee T&C as a cost to be managed down and an outcome to be achieved. Typified by annual refresher training across a curriculum of “compliance learning” with little meaningful activity in between. Many in the sector quietly refer to this as: “tick-box compliance”; simply because it enables a firm to tick a box and assert that they have complied and trained their people.
Interestingly though, measuring and recording the delivery of training per se, rather than measuring and recording retained and applied competence, is likely to be a sure fire “tell” to an increasingly savvy regulator who is already alerted to this cultural fail.
Single point in time training, even when conducted in conjunction with annual refreshers, does not deliver the subject matter competency required to underpin a culture where the whole firm is aligned to, for example, Treating Customers Fairly.
How do we know? Well, last year we managed more than 100 million individual knowledge and competency interventions, the majority of which were in firms just like yours, across a required learning curriculum (just like in your firm), and the average level of retained competence was just 52%.
In other words, the employees knew around half of what they needed to know to be able to perform their role within the regulations. Now, the fact that – to date – this has not really been a problem is not a reliable indicator that it will remain the case in the future.
“Corporate culture refers to the beliefs and behaviours that determine how a company’s employees and management interact and handle outside business transactions. Often, corporate culture is implied, not expressly defined, and develops organically over time from the cumulative traits of the people the company hires.
A company’s culture will be reflected in its dress code, business hours, office setup, employee benefits, turnover, hiring decisions, treatment of clients, client satisfaction, and every other aspect of operations*”
I like this definition of culture as it swerves much of the flannel and gets right down to brass tacks. Culture is a function of the beliefs and behaviours of employees and management of a firm at any given time and, on that basis, it is easy to see why a CPO might be more than a little concerned in relation to employee T&C.
Afterall, how can any employee act on or reference training they have received but failed to learn and retain?
How frequently do you hear your employees congratulating you that your firm has got it right and the T&C regime really improves their knowledge and competency? Perhaps, more likely, most firms quietly admit to their employees suffering compliance fatigue, resenting “largely useless” and “time-consuming” training that has “little or no learning value”.
With the FCA embarked on a program to measure and monitor the culture of firms, without their explicit involvement, you would have thought that this cultural resentment of compliance training is likely to shine through rather quickly.
It seems such an easy, obvious, and somewhat immediate way for the regulator to establish if a firm has a cultural problem. I am no legal expert and do not purport to be, but I would have thought that all the FCA really need to do is point to blindingly obvious “tells” rather than attempt to prove a firm’s culture is inappropriate using some elaborate, potentially contested, cultural yardstick.
If the FCA can then corroborate this with big data analytics and social media scraping, it feels pretty compelling and difficult to defend – and becomes undoubtedly awkward for Senior Managers & CPOs.
Is the answer to simply find an alternative way to tick the employee T&C box? Perhaps. But why go to all the effort and cost of finding a better box ticking solution (which does not actually contribute to solving the bigger cultural problem) when you could use award-winning, proven Artificial Intelligence (AI) that guarantees you land competent and capable employees whilst also underpinning your transition to an increasingly healthy and appropriate culture.
AI, by the way, that is increasingly being used by firms (just like yours) to solve this very problem – and more.
One of the downsides of using AI, such as our own: Clever Nelly, (utilised by Aviva UK and Aviva Canada to land the only Gold Award at the 2021 Brandon Hall Group HCM Excellence Awards in the category of Best Advance in Machine Learning and AI) is that leadership must be on board.
You cannot force the AI on the employee base. Without organisational leaders – Senior Managers, if you like – stating unequivocally why the AI is being deployed and that its usage is, like participation in any legally required activity, mandatory.
Once the firm has decided to take positive, pro-active action, then – true to form – the AI does almost all of the heavy lifting and hard work. Employees are engaged in the flow of work, at a point of their choosing, but daily works best. Total daily elapsed time rarely exceeds 1 minute 30 seconds in the early months and frequently falls to less than 1 minute per user, per day after this period.
Not only will AI like Clever Nelly guarantee every employee learns and retains the theoretical knowledge demanded by the regulator, but it will also help firms like yours translate and transition that theory into individual capability and, ultimately, competency.
Knowledgeable and competent employees that understand the regulations and how to apply them in their role form a key pillar of a healthy and appropriate culture within any regulated firm.
In addition, our AI comes with a specific Human Capital Risk Analysis Tool (HCRAT) that enables larger firms to dynamically analyse evidenced risk arising from the employee base, compare and contrast functions/territories/risks and intervene in advance of a problem manifesting.
So, instead of presiding over a culture where the employee base not only represents (perhaps) the largest single unquantified risk, the CROs working within the financial brands we support have the ability to dynamically scan employee risk and tune the AI to fix it.
* A helpful definition by Investopedia https://www.investopedia.com/terms/c/corporate-culture.asp