How Workplace Culture Enables Investment Firms to Do Better

By Matt Dallisson, 07/06/2021

In today’s highly competitive business environment, workplace culture is becoming increasingly recognized as a source of competitive advantage.

What does this mean for the investment industry, and how can asset managers use it to improve performance?

The Top Cultural Edges to Develop

Workplace culture was gaining traction for several years prior to COVID-19, but after the disruptions experienced in 2020, its perceived importance has quickly escalated.

In light of this situation, the Thinking Ahead Institute, a non-profit dedicated to improving the efficacy of the investment industry, surveyed 27 asset managers on what they believe are the most important cultural edges to develop.

#1: Diversity, Equity & Inclusion (DE&I)

92% of respondents

DE&I was the top cultural priority by a wide margin, and it’s easy to see why given the industry’s well-documented lack of diversity. Boosting DE&I isn’t just about optics, however.

In a 2018 study, the Boston Consulting Group (BCG) surveyed 1,700 companies globally to learn how diversity affected their performance. They found that firms with above-average diversity on their management teams reported average innovation revenue of 45%, while those with below-average diversity reported it to be about 26%.

#2: Innovation

62% of respondents

Asset managers frequently apply innovative techniques within their portfolios. When it comes to business and operating models, however, innovation is much harder to come by.

The Thinking Ahead Institute identifies a number of characteristics that an innovative culture should possess:

Characteristic Description
Incentives The degree to which innovation is rewarded
Time scales Whether the long time horizon associated with innovation is recognized and honored
Judgement capacity Leadership is willing to challenge the status quo and make uncomfortable changes
Structure Whether roles and organizational design allow innovation to flourish

#3: Transparency

42% of respondents

In a recent survey of 300 asset owners, trust was identified as the most important factor for choosing an asset manager, even coming ahead of performance and fees.

Factor % of Respondents*
Trust 47%
Good investment track record 42%
Personalized service 39%
Customer service 28%
Low or no fees 21%
Social responsibility 10%

*Question: Why did you originally select your financial advisor?

By fostering a culture of transparency, asset managers will find themselves better positioned to build deeper, more meaningful relationships with clients and prospects.

Four Insights Regarding the Workplace Culture of the Future

Lessons learned during the COVID-19 pandemic are likely to have a lasting impact on the way businesses operate. To get an idea of what this may look like, here are four insights regarding the workplace culture of the future.

#1: Health and wellness determine business success

Disruptions to normal life were a drain on U.S. workers, with 46% reporting mental health issues during the pandemic—an 18% increase over the prior year.

Moving forward, businesses that focus on wellness may find themselves with a more effective and resilient workforce. In one 2017 study, participation in employee wellness programs was found to increase productivity by 5% to 11%.

#2: Remote work continues to play a role

Over the course of the pandemic, businesses have learned that many of their normal operations can be conducted remotely.

To understand this operating model better, McKinsey & Company analyzed each industry’s potential for remote work. This was defined as the % of time spent on activities that can be done remotely, without any losses in productivity.

Industry Effective Potential (no productivity loss)  Theoretical Maximum
Finance & Insurance 76% 86%
IT and Telecommunications 58% 69%
Education 33% 69%
Real estate 32% 44%
Arts, Entertainment, and Recreation 19% 32%
Retail  18% 28%

The Finance & Insurance industry has the highest potential for remote work, which is understandable given the industry’s large reliance on office jobs. Sectors such as Retail, which rely heavily on in-store workers, were among the least likely to benefit.

#3: Accelerated adoption of digital strategy

Lockdowns during the pandemic appear to have fundamentally changed the way businesses and consumers interact, resulting in a greater reliance on technology.

To compensate, executives from a variety of industries have reported making larger investments in digitization, particularly in terms of automation and employee communications.

#4: ESG investors pay greater attention to culture

As the benefits of culture become more well-known, investors are likely to give it a more significant weighting when analyzing the environmental, social, and governance (ESG) aspects of a business.

In a 2020 survey on responsible investment, 53% of respondents agreed that after the events of COVID-19, companies should disclose more details about their workplace culture and other social factors.

 

This content was originally published here.

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