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ormer chairman and CEO of IBM, Lou
Gerstner, said: “I came to see in my time
at IBM that culture isn’t just one aspect
of the game, it is the game.”
Gerstner drove IBM from a company on the
brink of bankruptcy to one at the forefront of
the technology industry by the time he retired in
2002, and he did it by changing its culture.
Culture matters — and it really matters when it
comes to managing investments.
David Murray’s Financial System Inquiry (FSI)
Final Report, which was published in December,
was just as clear about what is at stake, stating:
“Without a culture supporting appropriate risk
taking and the fair treatment of consumers,
financial firms will continue to fall short of
Put simply, culture needs to drive what we do
and how we do it. It plays a pivotal role in how
organisations make decisions to achieve their
business objectives. But it is often ignored, or seen
as a ‘tick in the box’ exercise, by organisations
that don’t see that the right culture can make or
break a business.
The right culture gives investment firms a
competitive advantage. It starts with talented
teams, who can interact and collaborate to make
the right decisions, and ends with a business
strategy and the performance of the firm as a
But what are the key drivers for creating a
COLLABORATION AND MUTUAL RESPECT
Hiring the right talent is often at the top of a
board’s concerns. After all, unless you have the
right skills, it is impossible to get the job done.
Nurturing individual talent is a short-term solution,
however. Nurturing teams means that individuals
are mentored to enable them to integrate and
develop. The culture of a firm sets the stage for
how investors collaborate with their colleagues to
make investment decisions. It is this culture that
ensures the right business decisions are made.
How organisations deal with talent is also
crucial to the culture created. It determines
the staff you hire, how you hire them, your
expectations of them and their expectations of
you. It determines how you give them incentives.
The FSI recommended aligning the interests
of financial firms and consumers by improving
culture, in order to build consumer confidence
and trust. It also suggested aligning remuneration
structures with a consumer-focused culture.
It stated: “An organisation’s culture reflects
its accumulated knowledge, beliefs and values
in a way that sets norms for the behaviour
of its employees and their decision making.
Organisational objectives, business strategies and
systems all influence employees’ behaviour, which
reflects on an organisation’s culture. Leaders and
their governing bodies determine organisational
culture through their own conduct and design
of objectives, strategies and systems. This creates
Creating a team culture doesn’t necessarily
mean creating a mould and then trying to
shoehorn in the right people. A team is like a
building: the bricks are mutually supportive but
they should also have a degree of flexibility. The
Burj Khalifa, the tallest building in the world, sways
two metres at the top. If it didn’t, it would break.
Teams are the same. They shouldn’t be so
rigid that they are unable to absorb new ideas.
Individuals are just that: they bring individual ideas
and perspectives. The team’s job is to collaborate,
debate, challenge, guide and decide whether the
idea can be used in its current form, adapted or
rejected. In a team of equals, there is a healthy
exchange of ideas. It is the team’s job to learn
from the individual and grow stronger: Each part
is equal and remuneration is equal. Individuals
are then in a position to make better investment
decisions for their clients, knowing they are not
on their own and have the collective knowledge
of the team behind them.
James Surowiecki’s famous 2004 book, The
Wisdom of Crowds: Why the many are smarter
than a few and how collective wisdom shapes
business, economies, societies and nations, put
this theory to the test. His argument is that the
aggregation of information in groups results in
better decision-making. A Massachusetts Institute
of Technology (MIT) study also found evidence
to support a collective intelligence factor. This
was not based on the average intelligence of the
group, but rather their average social sensitivity,
or emotional intelligence. This plays a role in how
you operate with others in a group.
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