Non-Financial Misconduct Miniseries: Episode 3 – Assessing Culture

On this third episode of Ropes & Gray’s Non-Financial Misconduct Miniseries, Amanda Raad, co-leader of the firm’s crisis management and global risk practices, is once again joined by asset management partner Eve Ellis as well as special guest Michelle DiMartino, an organizational research and design specialist at the R&G Insights Lab. Together, they explore the critical role of workplace culture in preventing and addressing non-financial misconduct, such as harassment, bullying, and discrimination, and examine why regulators like the UK’s Financial Conduct Authority (FCA) are increasingly focused on these issues. The discussion dives into how culture shapes behavior, influences misconduct, and serves as both a risk factor and a protective shield. Michelle explains how informal social cues and everyday interactions can quietly redefine what is considered acceptable, often before any formal rules are broken. The conversation highlights the importance of proactive culture assessment, using both quantitative and qualitative data, and introduces practical frameworks—like the “four I’s” of cultural psychology—to help organizations identify misalignments and drive meaningful change.

Transcript:

Amanda Raad: Hi, everyone. Welcome back to our Non-Financial Misconduct series for episode three. This is Amanda Raad from Ropes & Gray, and I am joined today again by Eve Ellis, who heads up our European regulatory practice here at the firm. And we have a special guest, Michelle DiMartino, who is R&G Insights Lab’s organizational research and design specialist. We’re here to talk today about culture.

Before we dive into that, I wanted to give a quick reminder of where we’ve been. So, as I mentioned, this is episode three. We spent the first episode catching up on the regulatory framework with regard to non-financial misconduct. The second episode, we were joined by Sharon Tan, and we talked about the employment impact and employment considerations when thinking about non-financial misconduct. And today, we’re going to talk about culture, assessing culture, thinking about culture from the perspective of misconduct and mindset, and how this all plays into non-financial misconduct and what we can be doing in this space to protect ourselves and the companies that we work for. So, with that background, why don’t we start first with you, Michelle—if you can just help us understand a little bit more about the link between culture and misconduct.

Michelle DiMartino: Thanks so much, Amanda. From a behavioral science, cultural psychology perspective, misconduct rarely starts with an explicit decision to break rules. “Today, I am going to commit misconduct. Today, I am going to defy our code.” It usually begins with small, everyday cues about what’s really valued, how people respond to pressure, what gets recognized, and what gets overlooked. Organizations teach people how to act, whether it’s through those codified policies and procedures, but a lot of times it’s through more informal social cues, what behaviors get modeled, etc.—so, again, what gets recognized, what gets overlooked, etc. And those kinds of signals quietly define those kinds of boundaries of what’s acceptable behavior long before anything crosses legal or policy lines, and often, those small behaviors can seem harmless in isolation. A manager overlooking an abrasive behavior because someone delivers results, or a team joking about stretching targets, or a colleague staying silent when they see conduct that feels off. But over time, those things become normal, and people stop noticing those lines shifting, and that’s where both non-financial and financial misconduct can take root in the same cultural soil or environment of pressure, fear, and silence. So, that’s the link that I see when guidance like this comes out.

My question back to you all based on the investigations that you’ve seen and you’re working on with the FCA is why might the FCA be interested in regulating non-financial misconduct? Have you seen patterns of non-financial misconduct consistently emerge alongside credible patterns of financial misconduct? Is this something that consistently emerges?

Amanda Raad: I think you’ll be happy to hear, Michelle, I don’t think I’m stretching this with the perspective that a healthy workplace culture, it is believed, is the best protectant against any kind of misconduct, whether it be financial or non-financial. And, I think, arguably, you can’t have a healthy workplace culture while you have non-financial misconduct happening. I really actually think it’s in part the link between the two, and I have to say, in the investigations that I work on, over years and years and years, one of the biggest things that I’ve warned people about is making sure that you aren’t only looking for one type of issue, because a lot of times, you’ll miss something else. So, if it comes in and it looks like it’s predominantly of a certain type of character, so it’s a non-financial type of issue, it may be handled according to one set of procedures by one team. If it’s a financial issue, because of the difference in regulatory frameworks, etc., it may have been handled by a completely different team. And the teams may not be trained to look for other issues. So, what starts as a non-financial misconduct issue, when you start to do the review and talk to people, what happens when they bring in a concern of financial fraud or some other area that isn’t technically in scope for the kinds of investigations that that team usually looks at? Then, you’re left with this opportunity, perhaps an opportunity to miss the ability to look deeper, but also, just the opportunity to learn more about how the culture is working overall. And so, I think, it’s the blend—I think that’s why they’re looking at it. The FCA’s been ahead of the curve of many regulators on looking at culture for quite a long time, and I think it is an opportunity for people to look more holistically at these kinds of risks. Eve, what do you think?

Eve Ellis: Thanks, Amanda. I think that that’s completely right. The FCA, weeks ago, there was a letter that they sent in response to the Select Treasury Committee in relation to the broader sexism in the city inquiry and review that’s being undertaken. And that letter was interesting, because it just restated a number of the key themes and approaches that the FCA has to non-financial misconduct, and they were really clear. They see this as a regulatory consideration. They consider non-financial misconduct like harassment, bullying, discrimination to be a serious regulatory concern. And they were very clear that if they hear reports of non-financial misconduct, however that may come to them, they will investigate. And actually, the letter talked about a number of open investigations that they have at the moment around non-financial misconduct, which, I think, was 76. There are a number of different claims within that, so that’s not the total number, and then they’ve got one open enforcement action in relation to non-financial misconduct. So, it clearly is a big focus for them, and everyone should definitely see it as a regulatory consideration.

Michelle DiMartino: When people are stretched in an uncertain way, they look for sideways cues. In the absence of more formal norms, they look for social norms. They look for what their peers are doing, what their seniors are doing, what the people around them are doing, and those kinds of norms win out over the policies, the procedures in uncertain times or when they’re stretched in competitive environments. And that’s why culture—what’s modeled, what’s tolerated, and what’s rewarded—ends up being the most powerful control in a system of any form. So, it makes sense that the FCA is seeking to step in and regulate this in some way. It’s a really, really powerful tool to make things better for the people that work in these systems, and I think it makes a lot of sense that they’re aiming to step in here.

Amanda Raad: We think sometimes about: Why do we need regulators to step in in the first place? Sometimes you hear, especially when resources are stretched, which they are for pretty much everyone at the moment: “Why are we focusing on culture?” “It’s a soft issue,” or “It’s not scientific enough or tangible enough,” or “We can’t get our arms around it.” That’s something that I’ve definitely heard before, and I do think that when you have a regulator, like the FCA, come in with very clear guidance in this regard and very clear expectations, it helps to rebut that. But what do you think, Michelle, on that front? How do you rebut that presumption that culture’s just too difficult to get at for a company to really focus on that?

Michelle DiMartino: I think that with any new regulation, there are going to be those kinds of arguments. There are all kinds of systems built around the data that you need to track in line with compliance with any regulation. A lot of the data that you can use to rigorously assess culture, which we can get into in a bit, is data that you’re already collecting. Performance reviews, employee engagement surveys, ethics and compliance surveys—and we can talk about how to make those more accurate to assess culture rigorously—it’s a lot of tools that you’re already using. You don’t have to reinvent the wheel to take a temperature check on culture. There are disciplines that have been in the social sciences that study culture rigorously—you just have to approach this with curiosity and borrow rigor from disciplines that maybe you’re not used to harnessing in the financial industry, in the legal industry. And that’s why at the R&G Insights Lab, we take the approach that we do from data science, from behavioral science—we borrow from these disciplines, because you can think about culture rigorously. It’s important. The FCA recognizes this. The same climate that silences bullying complaints can also silence risk concerns, so non-financial and financial misconduct are often symptoms of the same permission structure, and those links have been studied empirically. The same frameworks that have been used to study those empirically can be applied to your organization using behavioral indicators, using frameworks from cultural psychology that we at the Lab use to do culture assessments using interviews, focus groups, surveys, like I mentioned. So, it can be done—it’s just a matter of using your data differently and approaching things with a proactive curiosity mindset as opposed to—there’s obviously a place for investigations, but—a reactive mindset.

Amanda Raad: I think it’s arguable, based on some of the experience that I’ve had, that actually you save resources by proactively looking at culture and trying to figure out the role that it plays in the issues that you’re trying to solve for versus the reactive investigation model where you’re doing your best to solve each issue individually, but they keep coming up.

Michelle DiMartino: I think that that’s exactly right. An anecdote comes to mind. I have a friend who works for a bank here in the U.S., and she mentioned that she was talking to her manager, and he made some kind of sexist remark. And he does so regularly and, obviously, makes her uncomfortable—just things that pass off as jokes. I was, like, “Well, why don’t you just not laugh, or say something to him?” And she goes, “Well, he signs my checks.” These aren’t things that, in her mind, or even the rest of my group acknowledged, qualify as a formal complaint necessarily, but they are things that would make her less likely to report, let’s say, if she saw something off. She mentioned that there are guys on the team that laugh along with him, and that makes her feel even more on the outs. If you’re one of them, maybe you’re less likely to report something that seems off, whether it’s on the financial or non-financial side because you’re, like, “I’m one of the group. I don’t want to be outside the group.” Whether it’s sexism, feelings of non-belonging, or team dynamics, if you can catch those things and monitor for those kinds of team dynamics, that can preclude, as you were saying, whether it’s lack of speak-up based on the dynamics that I just covered, people not coming forward with things that they might notice, or non-financial misconduct for obvious reasons given the dynamic that I described.

Amanda Raad: I want to come back to the: How do we actually do this in practice? But before we do that, Eve, I thought maybe I could turn back to you for just a little bit more information on the recent FCA letter in response to the Treasury Select Committee, because I know that they have been quite verbal and active in their approach to non-financial misconduct. Is there anything else you want to share with us just about their position and where they are before we dive into what we should be doing?

Eve Ellis: There are definitely a few points. And actually, Michelle, what you were just saying there in terms of the approach and being more proactive rather than reactive, I think, one of the things that the FCA is focused on is detection of non-financial misconduct. It was one of the key topics in the survey that it published earlier last year, which we’ve spoken about before, but in the letter that was published a few weeks back, they reiterated that that is a key area. They’re actually going to do some supervisory work in the brokerage sector on detection. And I think their whole philosophy there is that if you can detect non-financial misconduct earlier, you can then breed a better culture, stop issues happening. So, that was interesting, and, I think, definitely reflects what you were just saying then, Michelle, in terms of trying to be more proactive.

Just the last thing, which I think probably links in quite nicely to some of the practical considerations is that the FCA has said that they have seen an improvement in how firms manage non-financial misconduct, and some of the areas that they flagged as improvement are better management information and reporting on non-financial misconduct data. So, again, Michelle, to what you were saying about firms having the data, it’s about using that and giving it to management so that they have that information, so very much focused around governance and ensuring that senior managers are aware and are engaged in the topic. Also emphasized the need for additional staff training, updating employee handbooks—and again, that goes to, I think, the point that we were talking about earlier about being holistic in terms of the approach. And we’ve mentioned this before, that all stakeholders need to be engaged, aligned, and working together in order to manage the non-financial misconduct topic.

Amanda Raad: To your point, Eve, about all stakeholders needing to be engaged, the culture point really brings that home for me, because the truth is, all of us—literally every person in the organization—are creating a culture. And so, how somebody responds in a room to a situation is creating an atmosphere which is going to have an impact, and if it runs counter to whatever policy and procedure or training you have, those policies and procedures and training become useless, honestly. So, I think it’s so important to talk about the role that everyone has to play in this journey, and I like tying that to the importance of culture, and a review and assessment of culture, and acting based on the data that comes from that as part of how to get there.

Michelle DiMartino: That’s a good segue, Amanda, into how we help organizations at the R&G Insights Lab assess culture rigorously. When clients come to us saying, “Okay, so how do we assess culture like we would do monitoring for other kinds of risk? Culture seems a little bit fuzzy. How do we do that in a rigorous, actionable way?” We look for those areas of misalignment or alignment between what is supposed to be done—what is on the page in terms of policies and procedures—and what is actually done. We use a framework called the “four I’s” from cultural psychology:

• Of the ideas: So, what are the values of the organization? What are the stated ideals? What might be in the mission/vision statement? What are people’s concepts of success? What is the tone from the top saying?
• At the institution’s level: What are the policies and procedures? What’s supposed to be done?
• The interactions. What’s happening between members of a team? What’s the modeled behavior?
• And then, at the individual level: What are people doing? How are people experiencing those policies and procedures?

And when there are conflicts between any of those things, that’s where you experience cultural risk. That’s where you experience moments. That’s where we produce recommendations for: Do you need to adjust your incentives? Do you need to update a training? Do you need to make your policies and procedures more readable or just more in line with how your teams are interacting realistically? Do you need to update your management training such that there are better job aids for situations that come up in real life? When we talk about realistic guidance for how to do on-the-ground culture transformation and culture assessment, that’s just one of the tools that we use.

Amanda Raad: What do you say to people, Michelle, that are afraid of doing a culture assessment because they’re afraid you’re going to tell them that they have a bad culture?

Michelle DiMartino: Culture is pretty fluid, and I don’t really think that there is an example of gold star, you have a perfect culture, or F-, you have a terrible culture. Usually what we do is, “Here are some strengths of areas where your organization is really gelling, and here’s why we think that things are working really, really well in this area of your organization. Here are some areas of alignment, and here are some areas where things are misaligned.” The way that at least at the R&G Insights Lab that we do things, it’s not like a rubric where you might see red, “Mayday, mayday, you have a bad culture,” or green, “Gold star, gold star, you have a super healthy culture,” mostly because that isn’t really actionable information. The goal is to give you information that you can use, again, about where you can make your policies and procedures more effective for how your organization actually functions and how people, your organization, and how the culture actually works. So, “good” or “bad” aren’t really words in the vocabulary that we use.

Amanda Raad: Now, data. Data is so important but such a big topic, because there’s so much of it. And even trying to figure out how to get it into the hands of the right people for the right use is enough to make us all get a little twisted up. What’s some of the data advice that you might give in this space? So, with regard to doing this kind of assessment, with regard to non-financial misconduct, what should we be thinking about on the data front?

Michelle DiMartino: The first instinct—and where a lot of people start for culture assessment—is employee engagement surveys or pulse surveys, which, I think, can be a strong start, but I’d really encourage qualitative data, or narrative or story collection. A lot of the “why” or “how” culture is experienced comes out in the stories that people tell. So, even the story that I shared about my friend and their experience at the bank. The way that might translate in a survey is a low sense of belonging, or “I don’t feel particularly safe speaking up,” but the “why” there, the connection to sexism, the connection to non-financial misconduct, I would never be able to interpret that from the survey findings, and I think that for this particular set of this guidance, that’s really, really important for an organization. I would really miss that had I not heard the story, so that’s just one example of why stories are really important. And there are rigorous ways to collect that information and ways to code that quantitatively, which at the Lab we do, and create corresponding dashboards that organizations can track over time. I know that the FCA signals that they’re interested in collecting the use of culture data, although I know they haven’t published guidance on the exact kind of data that they’re looking for yet—so, narrative data, story data, speak-up volumes, again, qualitative stories behind the numbers, surveys, exit interviews, informal listening sessions, anonymous reporting and hotline data. Eve, Amanda, any other data that you all would traditionally look to that you think that the regulator might find compelling in the way of culture-based evidence?

Amanda Raad: In the speak-up data, so whistleblower-type data that may come in, investigation trends, and data audits that happen within the company. Honestly, my biggest thing is, I think every company could use a holistic data mapping exercise to figure out what data exists so that they can then figure out how to use it, because the biggest risk I see is data getting used for one purpose but not another—not intentionally, just because someone didn’t know it existed. All of those I thought were really, really helpful, but I do encourage people to think about doing a data mapping exercise and looking at data, how it’s used for commercial purposes, for risk purposes, for employee engagement purposes. Looking across the board just to see what is there and how it is being used currently and just looking for opportunities. And not being afraid of what the story will tell, because the data is the data—it is what it is, it’s there, whether you’re looking at it or not.

Alright, Michelle. So, given the really important role that culture plays, both as a driver of misconduct and obviously a regulator focus, you’ve talked a little bit about what some of the framework looks like and what some of the tools should be, but can you just give us the overview one more time? What does this actually look like in practice?

Michelle DiMartino: I think the simple structure to remember is listen, triangulate, learn, and act visibly. So, you listen to multiple channels like surveys. These are the data sources: surveys, exit interviews, open text analysis, and the informal listening sessions. You triangulate across those, so looking at the various data sources and maybe using a dashboard, maybe just looking at those separately, whether it’s a PowerPoint presentation or just having a workshop during a retreat. Learn, identifying those misalignments, using that “four I’s” framework, for example, between those stated values and daily trade-offs. This one’s really important, but acting visibly, closing those feedback loops, communicating what’s changing and why, and then, visibly building trust. If people don’t believe that information is being acted upon, if there are issues or complaints, grievances, or even if their feelings of sense of belonging aren’t being heard, then they won’t use them. That kind of visible action, that step is really, really important—so, that listen, triangulate, learn, and act visibly framework is something I wanted to share out.

Amanda Raad: Thanks so much. Now, let’s go to our message that we leave our listeners with, and, Eve, I’ll start with you. What should we not leave here today without remembering?

Eve Ellis: Thanks, Amanda. I think the key thing from my perspective is that this is a clear regulatory focus and priority for the FCA, and now is the time to act. I think the FCA has made their expectations very clear, and so there is enough for firms to start to take action to ensure that they are mitigating risks along non-financial misconduct.

Amanda Raad: It is music to my ears, actually, Eve. I have been saying for quite some time, “We don’t have to wait for the regulators to tell us what to do. We just have to do it. If we wait for the regulators, we’ll be behind.” So, thank you. I feel very validated, actually. Michelle, what about you? What should we make sure we all remember? Help us boil it all down.

Michelle DiMartino: I would just say that culture assessment isn’t a grade, it’s a mirror, and the value is in how leaders respond to what they see.

Amanda Raad: I love that, because the grading part is something that I think people are genuinely intimidated by. For me, I love the practical tools that we talked about today. We talked about the “why,” but then, I feel like we spent a lot of time talking about how you can practically use culture. And I think you helped us, Michelle, really rebut this fear that culture can’t be measured, culture can’t be used, culture is too soft. I hesitate to say those things, but because I hear them so regularly, I just wanted to tackle them head-on, and so, thank you very much for helping us drill into that today.

And thank you, everyone for listening. It was wonderful to have you back for part three. Please join us for part four. You will be able to listen to this podcast, our Non-Financial Misconduct series, anywhere that you regularly listen to podcasts. Thank you so much.