The importance of leadership


For fear of stating the bloomin’ obvious, there are now fewer than six months to go before solo-regulated firms become subject to the Senior Managers and Certification Regime (SMCR). This should not come as a surprise to anyone reading this article; I sincerely hope not anyway!

While firms are busying themselves addressing the practicalities surrounding the likes of Certification, function-specific Conduct Rules training and fitness and propriety assessments, one hopes that they also take some time to consider one of the corner stones on which the Regime is built. If one takes a moment to step back from the hurly-burly of activity and considers the FCA’s pronouncements regarding individual accountability and healthy culture, one of the – if not THE – most prominent words is Leadership. It is the SMCR’s binding agent and in the FCA’s view it is one of the Regime’s three core components.

So why does the FCA set such great store by leadership? Well, according to Jonathan Davidson, FCA’s Director of Supervision’,

“Whichever way you look at it, leadership is vital to ensuring a firm’s purpose is the right one and setting the tone for the rest of the organisation and putting in place systems, controls, governance and training, and incentives to drive them through.”

The FCA is driving leaders in the industry towards promoting and maintaining ‘healthy’ cultures

Quite a long and rather breathless sentence, maybe, but the gist is clear. There is an inseparable bond between effective leadership and ‘healthy’ culture. The FCA is driving leaders in the industry towards promoting and maintaining ‘healthy’ cultures with much of the initial heavy lifting being achieved through SMCR’s implementation. Although the FCA does not and will not tell firms what sort of culture they should have, it does provide us with some quite clear pointers on what it expects to see. In doing so, it refers back to conversations it’s had with leaders in firms which are already within SMCR’s scope. From this feedback the FCA is of the view that mindsets are shifting, with the more enlightened amongst industry leaders recognising that culture is not – and must not be positioned as being – just a compliance exercise.

These leaders acknowledge the need to encourage and foster working environments in which diversity is seen as being valuable and, in consequence, valued and where employees feel comfortable challenging the status quo and speaking up when they feel the need to. These are environments where leaders are willing and enthusiastic role models who ‘walk the walk’ having ‘talked the talk’ when it comes to demonstrating the attitudes and behaviours they expect others to exhibit and where the onus is placed – individually and collectively – squarely on doing the right things right.

There has to be absolute authenticity in this. Any paying of lip service to the notion of ‘doing the right things right’ and of putting the customer at the heart of decision making will quickly be identified and emulated by those in subordinate roles – in short, the likelihood is that the behaviours and attitudes modelled by those at the top will be imitated by those lower down, to a greater or lesser extent.

“Leaders have to be beyond reproach in the example we set, and unfortunately I fell short of that standard …”

Jonathan Friedland – ex-Head of Communications, Netflix

Fired for using racially offensive language, June 2018

So with the increased emphasis on the fundamental importance of leadership, comes the need for firms to consider what this means in terms of training and development. Speaking in very general terms, firms have traditionally focused their attention and the bulk of their resources on management development. However, the fact that someone is a capable manager does not automatically mean that they are also an effective leader – and vice versa. There are subtle differences between the two.

“You manage things; you lead people”

Rear Admiral Grace Murray Hopper

A balance has to be struck with each firm determining its own requirements in relation to the management / leadership mix at organisational, as well as functional levels.

So, firms need to be giving thought as to how they may best develop and nurture their existing leaders, as well as those who will move into leadership positions in the future – i.e. the emerging talent. This is not a straightforward process and may be subject to variances caused by a number of internal and external factors.

To help stimulate discussion perhaps firms might take as their starting point the FCA’s endorsement of the concept of adaptive cultures and, by association, adaptive leadership.

What does ‘adaptiveness’ look like?

In a nutshell it can be summed up as:

  • Clarity around and acceptance of individual accountability
  • A desire for norms and the status quo to be challenged constructively
  • A willingness to embrace change and enable innovation
  • The ability to adapt quickly and effectively to internal and external pressures
  • Maintaining a balanced focus on success of customers, employees and share holders / investors
  • Engendering a sense of shared responsibility across all levels of the organisation
  • Being prepared to learn from experience(s) – even the bad!
  • Ensuring delegation is effective, with resourcefulness & initiative being actively encouraged
  • Openness and transparency being reflected in all communications (i.e. the ‘what, when, who and how’)

In developing effective and adaptive leaders time should also be taken to address areas such as personal resilience and authenticity, given that the most effective leaders will very often be those who understand their personal limitations and stress tolerances, and who are able to engage and motivate others in a natural and genuine way. If this comes across as being all a bit ‘airy-fairy’, remember – it’s not that long ago that ‘culture’, ‘personal accountability’, ‘vision’ and ‘values’ were also terms that were often treated with varying degrees of derision in certain quarters (perhaps they still are by some) – and just look at where we are now!


About Author

Richard Galley is Director of Learning at FSTP. Through our award winning training and consultancy partnership FSTP LLP we hope to become a trusted provider of services to client firms across Financial Services. Specialties: Training and consultancy, project and interim management from regulatory issues through to management development and board services. Chartered Member of the Chartered Institute of Securities & Investment

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