Changing the Culture of Banking, Before It’s Too Late

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Physicians the world over follow the Hippocratic Oath, which basically says: “Do no harm”. Many bank employees believe their executives follow the “Hypocritical Oath”.

Consistent wrongdoing, on any level, is a clear indication of a dysfunctional culture.  Even the best cultures shift over time when leadership is more concerned with profit-making and bonuses than customer service and stewardship of other people’s money. And once a culture begins to shift from high-performance down to just functional and then to dysfunctional, the next stop on this slippery slope is “toxic”. And since over the past couple of decades the leadership of the big banks have taken their eyes off of proper behaviors and onto balance sheets and bonus checks, the slide has turned into an avalanche.

Clearly there is ample evidence that the “culture of banking is broken”. Here are the fines paid out by just one of the global banks, J P Morgan Chase, between 2010 and 2013:

fines

I am not bank basher!  In fact, just the opposite.  I happen to believe that Banking, in all forms (retail, commercial, investment, private, etc.) is one of the key ingredients for a strong and robust economy and the only way to effectively support the growth and development of businesses and individuals. The banking and financial services industry is vital to the world economy as well as to families. And for the most part, it works well, with proper checks and balances to mitigate risk and guard against criminal and negligent behavior.

But it is definitely time for a change, to bring the “brand of banking” back into respectability and service to the customer. It is past time for a change in culture!

But How?

“We simply do not know if we have the tools to change the culture of banking!” Lord Turner, FSA Chairman

Of course bankers don’t know much about corporate culture, they are bankers, astute in risk assessment and deal making, not organizational behavior.  So, when it comes to reshaping culture, they do the best they know how.  Some change the CEO, bringing in someone from the more conservative Retail banking ranks to replace the gamblers from Investment banking.  They hive off their “toxic” assets to special workout groups so the rest of the organization can focus on “doing good business”.  And a few even rewrite and publish their Core Values and make declarations about “living the values”.

These actions are sensible, logical, and even consistent with what the “culture literature” says about culture change.  But the fact is, most of the literature is dead wrong. When the facts are that 80% of culture change programs fail, the culture doctors don’t really know what they are doing.

“Would you schedule yourself for an operation with an 80% chance of failure?”

And most of those writing and speaking about culture change don’t really understand what culture is, where it comes from, and the key principles of culture change.

A Few Culture Change Principles for Bankers to Think About

  • Most Culture Surveys don’t really measure culture.
  • Culture is the biggest single “hidden risk” to banks and financial institutions.
  • There is no one corporate culture inside a big institution like global banks.  It’s all about subcultures that are strong and in most cases, invisible to senior management.
  • The CEO has very little influence in the culture change process, it’s all about peer pressure and “strong influencers” who control the subcultures.
  • Most senior executives don’t even know who the “strong influencers” are or where they are in the organization. (Psst: the secretaries know, but no one asks them!)
  • Daily work processes and formal and informal business practices drive employee behaviors far more than values statements (Enron had values statements, too)
  • Senior executives, department heads and managers get the culture they ignore! But not catching and stopping bad behavior, by allowing it to continue, gives everyone a clue as to what is acceptable.
  • The Board of Directors doesn’t pay enough attention to leadership behaviors and corporate culture. (Hence we get cases like the Cooperative Bank debacle. Boards have turned a blind eye to bad behavior more than once!)
  • Real and effective culture shifts are the accountability of every employee, no one is exempt from living, teaching and coaching the culture.

I personally wouldn’t think of assessing the risk on a multinational construction investment; it’s not my skill set.  Before bankers set out to “change their culture”, they should get the right skills on board.

John R Childress

john@johnrchildress.com

NOTE: The above thoughts are taken from my new book,  LEVERAGE: The CEO’s Guide to Corporate Culture, which is now available in paperback from Amazon.

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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