Why Banks Should Focus on Culture, Now More Than Ever

Over the past several months government agencies and business leaders have begun an intense and very public debate about how to prevent another financial meltdown, and another bailout, now that the global economy seems to be headed for recovery.  The big issue concerning governments and regulators is that unless real change is implemented in how branks conduct their business and how they are regulated, the world could easily find itself in the same situation as before; the combination of excessive risk taking and lax regulation leading to another global financial crisis.

While everyone seems to be focusing on regulation as the key strategy for bringing the situation under control, we believe that other avenues should be both understood and explored if a sustainable solution is to be created.  One of these important avenues is corporate culture. Warren Buffet, one of the more savvy investors of the past three decades made a bold and profound statement in his recent annual letter to the Berkshire Hathaway shareholders:

“Culture, more than rule books, determines how an organization behaves.” – Warren Buffet

In addition, another insightful comment comes from Paul Moore, former head of risk for HBOS, now part of Lloyds TSB.

“There is no doubt that you can have the best governance processes in the world, but if they are carried out in conditions of greed, unethical behaviour and an indisposition to challenge they will fail.” – Paul Moore, former head of risk, HBOS

Paul Moore got fired for his comments at the time; a testament to the openness of the previous banking culture to criticism about its internal culture and ways of working.

We strongly believe that reshaping corporate culture, in conjunction with prudent regulatory changes can work together to help build a stronger, more responsive and responsible banking industry.  One of the challenges in this approach is that the importance and business impact of corporate culture is not well understood.  Too many refer to culture as the “soft stuff” with little relevance to the analytical business world of global finance.

To help those in the banking industry and the regulators to better understand corporate culture and its value to business performance, we have prepared a series of four articles, entitled: Why Banks Should Focus on Culture, Now More Than Ever. Each article builds upon the previous one, and should be read in succession. The four articles focus on:

  • Article One:  What is Corporate Culture and Why it Matters to the Bottom Line?
  • Article Two:  The Determinants of Corporate Culture.
  • Article Three:  Is the Culture of Banking Broken?
  • Article Four: How to Reshape Corporate Culture

This entire series is focused primarily on the banking industry, but has insights and application for all other industries struggling to remain relevant in a changing global landscape.

For those who need a better understanding of how the financial services industry has changed from the publia “public service” into a “corporate pirate”, you should read the informative article by Demetrie Comnas on The Origins of the Banking Crisis.

Tight Lines . . .

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
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5 Responses to Why Banks Should Focus on Culture, Now More Than Ever

  1. chapter18 says:

    Nice to know that there is so much focus on ethics in business. Politics without morality and business without ethics is not only useless but positively harmful to the society.

    Narayanan

    Like

  2. Paul R Hofer says:

    Dear John, I appreciate your work on trying to bet banks “back under control” – the bottom line issue in my view remains greed. I am therefore very supportive of the thought of increasing real equity (core tier one equity) to the levels of the Swiss regulators. No wunder then that Ossi Grübel (now UBS) is threatening to move certain businesses abroad.
    Question: who is really worth making more than US 1mio per year?
    I hope you are all well, best wishes, Paul

    Like

  3. Pingback: Culture Matters – Big Time | John R Childress . . . rethinking

  4. Pingback: Another clue that big banks are doomed . . . | John R Childress . . . rethinking leadership

  5. Pingback: Bankers “must be better citizens” says Bob Diamond, Barclays CEO | John R Childress . . . rethinking leadership

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