The FCA changed the rules on 1 September. But the policy was never the problem.
By Steve Lewis a Leadership & Culture Consultant and founder of Co Lab People.Â
Imagine you are sitting in a small meeting.
A senior leader has recently joined the organisation, taking responsibility for a significant part of the business. The organisation has clear values. Respect matters. Bullying is unacceptable. The policies are unambiguous, and people have been trained.
During the meeting, the new leader turns on one of your colleagues. This is more than a robust challenge, more than an uncomfortable piece of feedback. The colleague is belittled and humiliated in front of the room.
Everyone sees it.
What happens next?
Does somebody challenge it there and then? Does someone speak to the leader afterwards, or raise it with their manager, with HR, with another senior leader? Or does everyone leave the room, talk about it privately and carry on?
Because what happens next will tell you far more about the culture of that organisation than its policy ever could.
A generation of change
I have spent much of my working life in financial services, and over those years I have watched culture change enormously. Behaviours that were once tolerated, even rewarded, would rightly be considered completely unacceptable today.
The FCA’s new rules on non-financial misconduct, which came into effect on 1 September, are part of that long arc. Serious bullying, harassment and violence can now fall within the Conduct Rules, and firms are rightly reviewing their policies, their training and their processes in response.
All of that matters. But when I look back over my career, I keep returning to one uncomfortable observation.
Very often, people knew.
They knew a particular behaviour was inappropriate. They knew when someone had crossed a line. They knew when a colleague had been treated badly. Sometimes they said nothing; and when they did, too often nothing was done.
It was rarely because there was no policy. It was because that was simply the way things were.
That is culture.
Structure and culture are not the same thing
At Co-Lab People, we draw a distinction that feels particularly relevant now.
Structure defines how work should happen. Culture influences how it actually happens.
Policies, processes and formal controls sit on one side. Behaviours, judgement and the hundreds of small decisions people make every day sit on the other. The FCA is regulating conduct – and conduct lives firmly on the second side of that line.
Which is why, to my mind, the most important leadership question raised by these new rules is not “do we have the right policy?” We probably do. It is: what is happening within our culture that makes unacceptable conduct more or less likely – and that shapes what people do when they see it?
Think back to that meeting. Whether anyone speaks up will depend on trust and psychological safety. It will depend on how the other leaders in the room behave. It will depend on what happened the last time someone challenged a senior person – and whether that person welcomed it or punished it. Does seniority quietly change the rules? Do people believe there will be consequences? Are the values on the wall actually visible in how leaders behave on an ordinary Tuesday?
These are not policy questions. They are culture questions. And in my experience they are the ones that decide what actually happens.
Awareness comes first
When I think about the cultural problems I have seen over the years, many could have been addressed through three fairly straightforward stages: awareness, agreed actions, and implementation.
It is the first that tends to get skipped.
Before leaders can change a culture, they have to understand the culture they genuinely have. Not the culture on the website. Not the values on the wall. Not even the culture the executive team believes exists. The culture people actually experience – whether they feel respected, whether they trust their leaders, whether they feel able to challenge, whether accountability lands consistently, whether they can speak up when something does not feel right.
That is harder than it sounds, because most of us, as leaders, are working from fragments. The loudest voices. A conversation in a corridor. The version of events that reaches us after it has travelled up through several layers of an organisation, softening a little at each step. It is rarely the whole picture. It is usually the comfortable one.
In our Culture-Performance System, we describe culture as a chain: the conditions people experience shape their behaviours, and those behaviours shape outcomes – performance, wellbeing, and yes, conduct and regulatory outcomes too. Culture, in other words, is better understood as a performance system than as an HR initiative.
The real test
So by all means review the policy. Update the training. Tighten the processes. That work is necessary, and the regulator expects it.
But I would gently suggest that the new rules are an invitation to ask a more searching question than any of those.
What happens, in your organisation, when someone crosses the line?
Do people speak up? Does someone call it out? Do leaders act? Or does everyone know — and nothing happens?
Because the real test of a culture is not what you say should happen.
It is what actually happens.
That question is exactly what I have been exploring with the team at Cultiv8tiv – and I will come back to it.