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:
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!
“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
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.