Why Banks Should Focus on Culture Now More Than Ever!

Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.   ~ Gordon Gecko

It has  been three and a half years now since the fall of Lehman Brothers and the beginning of the global financial crisis. All during this time there has been an intense and often public debate (and more recently the demonstrations of the global Occupy movement) about how to prevent another financial meltdown and more bailouts. The big issue worrying the tax paying public and businesses the world over is unless real change is implemented in how banks 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, I believe that other avenues should be both understood and explored if a sustainable solution is to be created.  One of these important avenues is the corporate culture within banks and large financial institutions. Warren Buffet, one of the more savvy investors of the past three decades made a bold and profound statement in a 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.

And just yesterday another condemnation of the culture of greed and self-interest within banking burst upon the news media and immediately went viral.  Greg Smith, Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa, abruptly resigned and a copy of his resignation letter was published in the New York Times – Why I am Leaving Goldman Sachs.  It’s all about the shift from a former culture of “service to clients” to a culture of excessive greed and profiteering.

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 written an article entitled: Why Banks Should Focus on Culture, Now More Than Ever.  This article focus on:

While primarily focused on the banking industry, there are insights andapplication for all other industries struggling to remain relevant in a changing global landscape.

As I have been following the “antics” of the big banks and their leadership, I have posted a few observations and comments on my leadership blog about culture and leadership in banking:

In each case the culture is a direct reflection of the leaders and illustrates one of the key principles of corporate culture:

“Organisations quickly become shadows of their leaders – that’s the good news and the bad news!”

For those who need a better understanding of how the financial services industry has changed from a highly professional institution of “public service” into a “corporate pirate” (or as they call Goldman Sachs: The Vampire Squid), you should read the informative article by Demetrie Comnas on The Origins of the Banking Crisis.

Culture can change, but it takes leadership!

Tight Lines . . .

John R Childress

john@johnrchildress.com

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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2 Responses to Why Banks Should Focus on Culture Now More Than Ever!

  1. You would think after all that happened, that now would be the time that banks would be getting the message and realigning their objectives. I don’t think that any change is happening. I am not sure what it will take to change the financial services industry, but I think it is going to get worse before it gets better.

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  2. wendymc12 says:

    Hi John,
    Just doing some late night blog reading and came across your blog. I am enjoying several of your articles. Your bank article was especially good. Looking forward to future posts.

    Sincerely,
    Wendy M.

    Like

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