The purpose of the financial services industry, the culture and leadership of firms, and the role of this sector in wider society have all been the subject of ongoing debate since the Global Financial Crisis of 2008. London’s position as a global financial hub and the significance of financial services in the UK economy give discussion of UK finance particular importance. Regulatory reform following the crisis has been accompanied by attention to conduct, culture, and leadership. This report proposes an additional focus on character. The importance of good character in finance is sometimes referenced as a professional expectation,
but the deeper personal and developmental perspective that character brings into view has more value to add. In our research into character, culture, and leadership in UK finance, we included content analysis of organisational values, a prototype analysis survey exploring how good leadership is understood in UK finance, and semi-structured interviews with participants across leadership levels within six firms. Findings were discussed with research partners and industry bodies, including at a symposium and conference held at the University of Oxford.
Over the last three years, we have conducted a major research project on character, culture, and leadership in UK business, with the financial services sector a key area of focus. Our research partners were high street and commercial banks, as well as building societies and investment firms. We focused on four areas:
1. UK finance values survey
What are the most common values of UK firms? How are companies seeking to move values from aspiration to action? As part of our UK Business Values Survey, we analysed the stated values of 47 leading financial services firms. We conducted a content analysis of the annual reports and websites, identifying espoused values along with their definitions, the way firms are seeking to embed values in practice, and the benefits they report.
2. Good leadership in UK finance
What is the prototype of good leadership in finance? What aspects of character and competence are considered most important by those working within the sector? We surveyed 651 UK-based professionals across levels within five financial services firms to investigate perceptions of good leadership and the features that are considered most central.
3. Practitioner interviews and discussions
What does an emphasis on character contribute to existing work on culture and conduct? What kind of leaders do people look up to? What does character mean in practice? We conducted 33 semi-structured interviews with financial services professionals from six firms, including board members, executives, HR leaders, middle managers, and junior employees. The results were discussed with groups from five of these organisations. We also hosted a roundtable discussion and conference involving representatives from firms, regulators, and other industry bodies.
4. Character and leadership development programmes
How can character be developed in professional education and industry contexts? How can we assess character in order to track progress and focus our efforts? We have developed and delivered long and short-form character and leadership development programmes for emerging and experienced leaders, including MBA students, managers, and senior executives.
- Character, culture, and leadership are all essential for the future of finance but their importance depends on the narrative that frames the meaning and purpose of the sector itself.
- Culture and character are interdependent: culture shapes character and character, especially of leaders, can shape culture.
- The top five stated values of UK finance firms are integrity, collaboration, customer service, excellence, and passion.
- Virtues (excellences) of character enable values to move from principles to practice.
- Some organisational values, such as integrity, courage, and responsibility, are qualities of character. Other values require virtues of character in order to be consistently enacted.
6. UK firms consider their values important for culture and conduct but also as a driver of commercial success.
7. Participants identified 141 features of good leadership in finance, reflecting three dimensions: Character, professional competence, and interpersonal skills.
8. Interpersonal skills and character are central to good leadership in finance: 44% of features identified by participants relate to interpersonal skills, 43% to character, 13% to professional competence.
9. Character is essential for leaders to navigate present ‘tides of disruption’ identified by the Financial Services Skills Commission, particularly in the areas of digital technology, hybrid working patterns, sustainability, and diversity.
10. Leading with character involves building on values, acting as a positive role model, and learning the art of narrative communication.
How do financial firms embed their values?
Our research revealed that firms adopt the following five mechanisms to embed their values. Percentages reflect the proportion of companies’ websites and annual reports that mention each approach.
- Policy alignment (89%) — e.g. policies and practices set out in the code of conduct align with and support stated values and behaviours
- Responsible leadership (68%) — e.g. board oversight, leadership setting the tone, embedding values in leadership development
- Financial incentives (66%) — e.g. remuneration linked to values
- Measurement (62%) — e.g. conducting surveys, monitoring data, comparing with other organisations
- Employee engagement (55%) — e.g. embedding values in recruitment and retention strategies, staff training, coaching
Good leadership in Finance
Risk awareness is the most central feature of good leadership according to professionals we surveyed in the finance sector, featuring at the top of a list which includes integrity, responsibility, trustworthiness, and good judgement. These were found lacking in the analysis that followed in the aftermath of the 2008 Global Financial Crisis and subsequent scandals, and their identification may be aspirational. It may also reflect changes in culture and conduct that have taken place in the sector, driven within many firms and catalysed by the work of such organisations as the Financial Services Cultures Board and Financial Markets Standards Board. Comparing finance with other sectors, inclusivity is regarded as more central to good leadership, suggesting that efforts to promote greater diversity in the financial services industry may be taking root.
What does it mean to lead with character in Finance?
1. Double down on deeper values
To focus on character is to recognise the central importance of values that are deeper than financial value. Character drives success in business but it also re-defines success beyond the scope of the market. To lead with character requires commitment to purpose beyond profit and a willingness to invest in ongoing personal growth. Character can be developed over time through intentionally adopting strategies such as- habituation, reflection, and friendship. It is not easy, but it is worth the effort.
2. Lead with narrative and by example
To lead with character means to appeal to hearts as well as minds. Narratives and personal examples are key in this regard. As David Rouch puts it, “Narratives focus attention on some desires that people bring to finance over others (some purposes over others)... they frame the decisions people take in pursuing those desires… Finally, over time, the repetition of these behaviours in the context of the narrative forms the character of those involved and the culture of their institutions... That is why people often say that culture change in finance firms could take decades...”
If the stories leaders tell and the examples they highlight are powerful, the example they set has the power to strengthen or undermine their message. To lead with character does not mean leaders are models of perfection but rather that they model progress in character over time and a commitment to the practice that enables it.
3. Build culture and character together
Character is not static but dynamic, shaped over time by habitual practice and by the patterns of life that are coded into organisational cultures. Character is not binary; everyone is on a spectrum between virtue and vice, and not fully formed in either. Indeed, the benefit of character as a concept is this developmental dimension that supplements the focus of ethical compliance on whether the rules are being followed or not.
Culture exercises a powerful influence when it comes to shaping character for good or ill, and the more the culture in financial organisations is dominated by personal financial incentives and associated rivalries, the more it risks leaning towards the latter. Leaders have the opportunity to alter the dynamic by investing in character and culture together in order to help people and organisations to flourish into the future.