Covid-19 has amplified tenfold the conduct regulator's call for us to take a fresh look at how we report value and purpose in our businesses. Other stakeholders (customers, clients, staff and suppliers), along with society as a whole, are also looking more sceptically at financial providers for evidence of ?exemplary conduct? and leadership.

These calls emphasise the need to a) embed clear accountability (remember the Senior Managers and Certification Regime (SMCR)?) in day-to-day management and b) report more clearly on actions taken.

The latter is a challenge. Previously, firms used available indicators of business health such as capitalisation, efficiency, solvency, profitability - reassuring but backward-looking financial metrics. Enlightened stakeholders (including staff and regulators) now look for assurance that the business is looking after its human relationships with everyone. Firms must be able to show a culture based on psychological safety: how comfortable is each member of staff, in their routine team setting, that they can ask a serious question without fear of reprisal? For this, several underlying factors must be present including cognitive diversity, moral courage, and a personal yet firm-wide understanding of social licence. Ask yourself, how attuned are staff and senior managers to the topics that customers, investors, regulators, supply-chain partners and fellow employees most care about, right now? How do they share and use this knowledge?

In this context, the regulator is reporting all-time record levels of whistle-blowing and grievance raising. Websites have emerged that ?call out? careless corporate responses, and there have been widespread street protests over diversity, inclusion, and ethical agendas. All of these reveal a human evolutionary tension, exacerbated by virtual tele-conferences as never before. We engage in many group activities, including virtual socialising, social clubs, or (imagine!) going to work in an office because we evolved as sociable creatures who tend to function most effectively by living in tribes. It comforts us to be surrounded by people who think the same way, who reflect our perspectives, who confirm our views.  Of course, there's a problem with this; the cultural echo-chamber. Since our brain chemistry rewards us with pleasure signals for ?belonging in the tribe?, it doesn't like any challenge to our unconscious biases against other possible ways of living. Whilst many unconscious biases are harmless some are not, ranging from careless micro-aggressions to more hurtful blind spots in empathy. Ironically, these undermine the sense of common purpose that a tribal social structure evolved to develop.

It can be hard but necessary to look beyond our innate preference for ?more of the same? and to welcome challenge from diverse thinkers. If the whole team has a similar view of how the world works nobody will raise an alternative viewpoint, let alone consider what a ?competing interest? might do. The alternative is to surround ourselves with constructive dissenters, so we can spot and solve problems far earlier. Healthy challenge prevents group think and overconfidence; even better, it can be transformative. In conduct-speak, verify that your ?challenge function? is really working. Whilst this keeps regulators happy, far more importantly it strengthens business resilience.  Though hard, after a while it becomes gratifyingly stimulating as new opportunities open up. This is what drives innovation and creativity and can result in real value creation.

As we look for other conduct indicators, it may help to frame them as positive ?virtues? or negative ?vices?. Desired and valuable virtues include psychological safety, moral courage, reflexivity, cognitive diversity and intellectual humility. Vices include abusiveness, bystanding, pointless habits (e.g. perverse incentives, ?box-tick? audits), stereotyping and motivated reasoning.

At the upcoming UK Finance Conduct and Culture Academy (22 September) we?ll be expanding on using related academic resources to detect, measure and report these virtues and vices - though in ways that require a just little thought and creativity (plus some influence), rather than fancy academic or expensive consulting models. It is perfectly possible to put together meaningful observation-based MI for everything, without a PhD or MBA in sight, and this is something we will show you.
 

Roger will be hosting a Q&A on the learning outcomes of the Academy on 19 August - register for your free place here.

The latest cohort of our in-depth Conduct and Culture Academy? now delivered to over 100 participants - will run over the course of four virtual workshops (22 September ? 11 November) and will be supplemented by interactive webinars, podcasts, plus e-learning, reading lists and downloadable resources.