Culture as a measurable edge (2016 London roundtable)

(This is post 2 of 7 on the 2016 Thinking Ahead Institute global roundtable, held in London on 2 and 3 November. The theme of the event was “Fuller measurement, broader integration, better decisions”)

Tim Hodgson presented his experience of working with AMP Capital to measure their culture through the employee value proposition (EVP) and client value proposition (CVP) framework. One of the key conclusions of the Institute culture research is that proper culture assessment can be more accurate and unlock change opportunities – “measurement gives the subject respect”. AMP Capital has been on a journey of transitioning from only serving one client (its parent company) to competing in the market globally. This has been accompanied by a major culture shift with many issues emerging from the transition. AMP Capital under its new leadership has recently started a process of culture “renewal”, an analysis of the gap between current culture and desired culture at all levels from board through collective leadership to individual staff. The TAI culture assessment framework provided a valuable tool to assess its current state of culture. According to Sean Henaghan, CIO of AMP Capital’s multi-asset group, undertaking the project had been “painless”, with a simple and straightforward process to follow. As a result, when Sean presented in the last Institute roundtable in New York, he strongly encouraged other members to undertake a similar exercise. AMP Capital believed that there is value in running this type of assessment on a periodic basis to look into the progress they are making on the transition.

Based on insights gained from this exercise, AMP Capital plan to undertake the following actions:

• Revamping key processes and systems (including planning, resourcing, remuneration and communication) to better align with client needs, values and outcomes

• Greater sharing of intellectual capital with clients to build trust and strengthen relationships

• The need to reframe the discussion around their ownership structure (as it is not in their power to change the structure, they intend to identify and emphasise its positive aspects)

• Accelerated commitment to diversity and inclusiveness of different ideas and styles

• Greater empowerment and trust at the local team level.

In the second part of the session, Luba Nikulina, global head of manager research at Willis Towers Watson (WTW), spoke about how WTW apply findings and learnings from the culture research to manager research process. While WTW’s process has always had strong emphasis on the qualitative factors such as culture as part of the due diligence, Luba believes that culture had not been as clearly defined as it should have in the past. The EVP and CVP framework helped strengthen the courage and conviction for researchers to act, having better understood what constitutes good culture. The culture assessment has also become an integrated part of the monitoring process. Members raised the concern whether explicit assessment / measurement can be an “overkill” in an area that is inherently soft like culture. Case studies like AMP Capital and WTW manager research support the case that proper culture assessment can provide valuable insights, most importantly leading to effective actions.

Towards the end of this session, attendees were asked to give their views on a few questions via electronic voting. About half of the attendees agreed or strongly agreed that their own organisations could benefit from a similar culture assessment exercise. There was very strong support (89% “strongly agree” or “agree”) for culture assessment to be an explicit part of the evaluation process when hiring external asset managers. Looking forward, 43% of the attendees believed that in five years’ time the EVP score of the entire investment industry would move slightly lower while 24% believed that it would remain the same. In terms of the CVP score, there was more optimism in the room that our industry would improve our value propositions to our clients in five years’ time – in total 57% expected the CVP score to move higher.