Culture can be a measurable edge for investment organisations

Think of the organisation you work for. If I wanted to understand it – its strength, its durability – would I learn more from studying its strategy, or its culture?

We asked a version of that question to attendees at a recent Thinking Ahead Institute public forum – and roughly 90% chose culture.[1] As the old saying goes: “Culture eats strategy for breakfast”.[2] Strategy is, obviously, important. So is breakfast. But culture… well, that’s where it really all begins.

The importance of culture for investment organisations – both asset owners and asset managers – is something that few in the industry would deny. But culture has tended not to be consciously nurtured, or even given much thought most of the time. That’s a shame, and there are signs that this is changing.

Perhaps the reason culture stayed largely off the radar for so long is that any measures of culture are inevitably associated with soft, rather than hard, data. It’s a bit squishy. But many of the most important things are. 

Culture is finding its way onto the radar at an increasing number of investment organisations. Its potential to offer an edge is being taken more seriously, and measurement (albeit soft) is playing a part in that.

The Thinking Ahead Institute’s 2015 paper The impact of culture on institutional investors lays the groundwork for organisations who want to be more deliberate in their approach to this area. Drawing on several case studies, this paper found no single best practice – the right culture is context-dependent – but plenty of themes.

One application of that work is described in a new paper Measuring culture in asset managers from Willis Towers Watson. The WTW manager research process now formally incorporates an assessment of culture.

Culture begins with values and beliefs. As David Pitt-Watson and Hari Mann noted in the pension insurance corporation’s 2017 The Purpose of Finance, “strong culture comes from a strong sense of purpose”. The link between leadership and culture is important, but, unlike strategy, culture is not centrally dictated. It is not amenable to heavy-handed manipulation: leadership’s actions matter far more than its words in determining culture.

As Roger Urwin points out: “Good culture gets to a sweet spot; it is not a respecter of excess. And good culture regresses if it is neglected.” The necessary conditions for a good culture can arise as a by-product of enlightened leadership, but when a conscious and deliberate effort is made those conditions are more likely to arise, more likely to extend throughout the organisation, and more likely to persist.

Looking at investment organisation culture in 2018, two themes have become more prominent since the Institute’s 2015 paper was published.

One theme is diversity, a topic that has moved up the agenda of many organisations in the past couple of years. Culture and diversity are strongly linked. Efforts to improve diversity in the industry are unlikely to be effective if not supported by a shift to a more inclusive culture; respect and common sense go a long way.

The second theme is technology. Here, the link to culture is less direct. But as technology re-writes the rules of how the investment industry operates, there is the potential for a significant knock-on effect in how organisations interact with and deliver value to their clients. And their employees, too.

We have continued to explore the nature and the role of culture within investment organisations, with tools including culture assessment questionnaires and workshops now available. We expect the areas of emphasis to continue to evolve (as they have done in the past few years), but the overall trend is one in which culture is moving from being a by-product to being explicit and by design.


[1] Thinking Ahead breakfast seminar, October 2nd 2018. In response to the statement: “To judge the strength of an organisation, culture tells you more than strategy”, 37 of 102 respondents (36%) responded “strongly agree”; 53 (52%) “agree”; 7 “neutral”; 3 “disagree”; and 2 “strongly disagree”.

[2] This quote is often attributed to Peter Drucker, and I won’t use up my word count dissecting its true provenance here.