The new normal includes more flexible working approaches for employees – both in location and hours. During the pandemic, restrictions pushed everyone to virtual alternatives, but now firms have shifted to a hybrid model where employees have more choice in how they work. While this can bring many benefits to both a firm and its people, having a workforce split between the office and remote locations can risk a fragmentation of culture.
The FCA is also focusing on this through its guidelines on hybrid and remote working – last updated in February 2022. With increased regulatory scrutiny, the role of people and culture must be more widely accepted as an integral part of commercial success and supervisory compliance, rather than as an afterthought.
Firms must have robust plans to ensure they continue to meet regulatory expectations while using new working approaches. This involves identifying and minimising culture risks, addressing hybrid workforce challenges and taking a holistic approach that accounts for the role of people and culture in regulatory compliance.
Identifying increased risk taking and culture splits
Developing and embedding culture is a strategic, operational and individual endeavour, meaning several layers must be addressed. Building a robust and healthy firm-wide culture takes a long time, while losing it can be almost immediate – meaning firms must take great care to ensure it stays intact.
Even with the best employees, a disjointed culture can pose productivity and conduct risks, but also broader reputational risk that can affect the whole firm or industry. Subcultures can start to develop in firms that do not have a sufficiently robust hybrid working model and offer alternative channels of support and communication, which may push employees away from the firm’s core values.
Firms must consider whether employees have the necessary skills and expertise to make the 'right' decision in difficult and complex circumstances. This type of learning may have previously occurred through face-to-face discussions or experiencing how other employees handle similar situations in practice - employees in a hybrid environment may have limited exposure to this. Additionally, reduced in-person supervision may result in a feeling of less accountability and could increase risk-taking in decisions over time.
Firms will also want to develop and maintain a ‘speak-up’ culture with input from a diverse group of employees. Creating and embedding this type of behaviour across a workforce is difficult and it must be framed to include all workers.
This is where communicating, understanding and embedding the firm's culture and purpose is key.
Of course, culture is influenced by many factors, but firms must understand that their policies and hybrid working frameworks will directly impact their people and culture – from the senior leadership team to the most junior employee. Governance will be closely linked with managing culture and requires ongoing oversight and frequent reviews.
This also requires recognising that some people are not comfortable with office work, while others do not have adequate 'home office' spaces. Firms must find what works best for them and their employees, ensuring that people are equipped to both work from home and in the office. This also raises potential health and safety implications.
Addressing hybrid workforce challenges
First, employees must have a sense of purpose for coming into the office. This raises the question: what is the underlying reason for having people in the office? If firms cannot clearly articulate an answer to this, employees will struggle to accept that they ‘need’ to come in and feel it is pointless.
To support this, firms must be very well organised to make sure teams come in together on set days – to be collaborative and productive. This includes cross-team meetings to prevent the creation of siloes.
Firms must spark a wider mindset shift that's as much top down as it is bottom up. People managers are a key part of this, and it's important that they don't only focus on people that are physically present in the office.
This leads to the ongoing redefinition and professionalisation of role of the people manager – it's critical in maintaining culture. Firms must develop and hire valuable people managers. The culture-building people manager not only manages performance, development and team issues, but also provides pastoral care, and wellbeing.
They also want to look at roles and consider approaches to minimise risk, considering whether it's process-driven or knowledge-driven to decide which working approach works best.
Additionally, firms must take a holistic approach, asking questions such as: what is it impacting? How does it affect talent strategy or overall strategy? What impact does this have on the operating model, regulation or financial exclusion/inclusion?
What can firms do now?
Firms must respond to the FCA’s guidelines. Those considering remote or hybrid working must be evaluated on a case-by-case basis and consider how they operate their business. This is difficult as culture remains an evolving landscape and it could be too early to make a final decision. Firms need to experiment and see what works best to transition to a new working approach.
They should also be able to prove that the new working approaches does not or is unlikely to affect the firm’s location in the UK, or its ability to meet and continue to meet the threshold conditions for the regulated activities it has or will have permission for.
The FCA requires firms to prove that there is satisfactory planning. This includes ensuring that there is a plan in place, which has been reviewed before making any temporary arrangements permanent and is reviewed periodically to identify new risk, the firm has considered the effect on staff, including wellbeing, training and diversity and inclusion matters, as well as considering the operational and legal risks of employees working abroad.
You must ensure firm-wide policies, supervisory requirements and risk management processes are communicated clearly and followed daily. These should be aligned to hybrid working models to ensure employees have access to the same level of communication and support from the firm.
It's essential to take a holistic approach. You must be clear on why you are taking a certain course of action – monitor its impact and listen to people. Firms must review people managers and their level of development to make sure the decision is aligned with commercial strategy and is compliant with regulatory expectations.
To find out more about how we can help you prepare for, manage, and embed culture across new working approaches, contact Sylvia Ashley.
