Recently one of the London papers ran an article about how grease, baby wipes and other gunk is clogging up the sewers under London, significantly reducing the flow of water and sewage to treatment plants.  The clogged pipes and sewers were causing toilets to back up and manhole covers to explode (don’t like that visual image at all!).

And then came the big find!  A 15-ton plug of grease and coagulated fats the size of a double-decker London bus was found blocking one of the main sewers.  The papers nicknamed it the “Fatberg” in reference to its iceberg-like size.

How do these things form?

If you follow the trail of human behaviours from the sewer cleaners right on back to those who live in houses and work in restaurants, the cause becomes evident.  It’s not old or too-small sewer pipes, its people flushing household grease and baby wipes (plus sanitary napkins, etc.) down home sinks and toilets combined with restaurants who dump cooking fat down the drains. When warm it is a liquid but as it cools in the cold sewers, it congeals into hard lumps that stick to the walls of sewer pipes, eventually creating clogs and “fatbergs” and reducing the efficiency of the sewer system to only about 5% of its capacity.

The cost?  Thames Water spends about £1 million a month unplugging sewers of grease, wet-wipes and other stuff!

Culture of Banking?

Okay, interesting (and a little bit disgusting). But what has this got to do with the culture of banking?

Everyone knows, especially senior banking management, that the current culture of banking played a big role in the 2008 global financial meltdown, as well as the continuing saga of banking fraud, insider trading, reckless investing and rampant profiteering resulting in recent record fines handed down to most of the global banks. Recently, JP Morgan Chase was fined $13 billion over improper and toxic mortgages.

So just what is the problem with the current culture of banking?  Most business school academics and popular writers on corporate culture put the blame on “bad” leadership, and believe that getting rid of the CEO is the answer.  “Banking needs new leadership!” is the frequent cry from government and regulatory agencies.  The other “solution” is weeding out those few rotten eggs who perpetrated the bad deals or fraudulent schemes. Of course the guilty should be held accountable, but these two approaches actually do very little to fix the problem of a toxic and dysfunctional corporate culture.

A big part of the solution lies in understanding human behaviour and how to create sustainable behaviour change in large populations.  HSBC has over 260,000 employees worldwide.  Just replacing a few people at the top is not going to shift the behaviour of a large group of people, just as replacing one administration or Prime Minister with another will not dramatically shift the way hundreds of thousands of government worker go about their day-to-day business. And rolling out a new set of Value Statements does little good in changing day-to-day work behaviours.

The key to unblocking the non-productive and dysfunctional culture in many of today’s global banks is to follow the trail of management and employee behaviours back to the source(s), just like the only way to reduce “fatbergs” in the sewers is to go to the behavioural source, residents and restaurants who dump bad stuff into the sewers.

After many talks with senior banking executives and others in banking, as well as professional and hourly staff, the trail leads to middle management.  The role of middle management in any organisation is critical to the effective up and down flow of communications and critical business information. And middle managers have influence over a large number of employees.  This is the good news and the bad news! But in many banks, this layer has become the bottleneck and it is here that the effective flow of vital information becomes restricted and where the culture is most constipated.

I am not blaming middle managers! (or anyone else for that matter since blaming is not a sustainable strategy or a solution).  Being a middle manager is one of the most difficult, and critically important, positions in most organizations, yet this group typically gets the least management development, coaching and mentoring.  These are the people who know how things “really work” inside the company and who is doing what.  They know the stars from the blowhards and sluggards. They know the bosses who lead and develop people, and those who just pontificate and scream. And they are key to a high-performance culture that works well for all stakeholders.

What I am saying is that in many banks the middle management layer is under tremendous pressure and has been for years, and they get little positive coaching or support.  Since the crisis in 2008, management training budgets have been slashed while at the same time the pressure from above for cost reduction and profit improvement has been intense. Many of those in middle management ranks in the large global banks are long tenure employees in jobs without much promotional opportunity. It is easy in this stressful and pressurised situation to become cynical, tired of the grind, and even easier to develop bad management habits, especially when they have senior bosses with poor people management skills.  Senior executives and directors may know the business of banking, but most are poor at people-management skills. And with the pressure on everyone for increased profits and cost containment, the stress mounts and bad habits develop.

So, we have a lethal cocktail situation, much like the lethal combination of household grease, cooking oils and baby wipes that form the “fatbergs” in sewers.  The healthy flow of unfiltered information up and down most banking organisations is clogged in the middle.

Here’s what really happens.  In a culture where performance and profit (which in turn results in bonus $$) are what really matters, middle managers who see problems or unethical behaviour happening in their areas have been conditioned over the years to “not pass bad news upwards”.  Besides, accusing co-workers or others of unethical or fraudulent behaviour is not easy, and definitely not popular.

In the heydays of the late 1990’s and early 2000’s everyone in banking was making easy money and pushing the envelope to make even more. The norm was to “not rock the boat”. Then when the global economic crisis hit in 2008, there was even more pressure inside the banks for profitability.  So over the years habits of not speaking up, not passing bad news upwards, keeping your head down, and turning a blind eye to the behaviour of others developed as “the way we do things” among middle managers. Even those with the courage and conviction to stand up and point out improprieties were not often listened to by their bosses. It’s easy to see how bad habits become institutionalised over time.

A Behaviour-Based, Sustainable Process for Culture Change in Banking

Shifting corporate culture is not simply about issuing new Values Statements or firing problem employees, but can be accomplished by applying evidence-based interventions that help people behave differently.  Recently, Anglian Water reduced the amount of clogged sewers and burst pipes by over 50% by applying evidence-based, behaviour change approaches involving assessment, education, communication and senior leadership. The same can be done within banking.

The key to reshaping culture in banking is to develop a sustainable process for improving culture.  And the first step is for everyone, at all levels, to understand how their daily working behaviours have helped to create the current unproductive (even toxic) banking culture. Then for every level to accept the accountability for helping each other establish and perpetuate new behaviours, especially in how we manage and treat each other inside the bank. Next is to use evidence-based internal communication campaigns to raise the awareness of bad and good behaviours.  In addition, management must search out and change work procedures and internal policies that promote unhealthy or toxic behaviours.

And most importantly, senior leadership must display, encourage, promote and support new, high-performance behaviours, and at the same time coach or remove those who choose not to help shift the culture. In such a behaviour change business process, relevant metrics and frequent feedback on progress is also critical.

With the appropriately designed behaviour change business process and engaged leadership, banks can return their brand image to one of trust, fiscal responsibility and customer service.  It will also reduce costs (especially mega-fines) and improve performance on all levels.

And if you don’t think that reshaping culture is possible, or that building a high-performance culture can have a significant positive impact on performance, productivity, efficiency, profitability and customer satisfaction, then you may be part of the problem!

You get the culture you ignore!

PS;  If you know someone in banking, send this blog to them.  Let’s kick start a conversation about culture change in banking.

John R Childress

Author of LEVERAGE: The CEO’s Guide to Corporate Culture, and FASTBREAK: The CEO’s Guide to Strategy Execution, available from Amazon in paperback and eBook formats.

See the review of LEVERAGE in The Economist (January 9, 2014.