Big Banking’s Achilles Heel

Achilles dipped

What defines us is how well we rise after falling!

According to Greek mythology, when Achilles, the son of the goddess Thetis and the Greek hero Peleus, was born it was foretold that he would die young. To protect him, Thetis took the infant Achilles to the River Styx, whose water had powers of invulnerability. She dipped him in the river, except for his heel.  Achilles grew up to be a great warrior and hero of many battles, but towards the end of the Trojan War he was shot in the heel with a poisonous arrow by Paris and died shortly after.

The modern phrase, “their Achilles heel” is used to refer to one’s single vulnerability in spite foot_achilles_tendon_anatomy01of all their other strong capabilities. Football coaches invoke the Achilles heel analogy when talking about the weakness of their rushing game. In business, while efficiency, productivity and cost control may be Samsung’s core strengths, innovation is often talked about as their Achilles heel. In anatomy,the Achilles tendon is a particularly important part of the body used for walking and running, and inflammation or a torn tendon incapacitates us.

Large global banks have many strengths; scope, scale, talented and smart people, strong relationships with businesses and governments, multiple products, global brands, deep pockets and of course the highly profitable investment banking business model. But we all have an “Achilles heel” and in the case of large global banks there seem to be not one, but several significant vulnerabilities to their continued success and sustainability.

 Achilles Heel Number One: Patchwork Technology

Bank-consolidation-530x421Over the past 30 years the global banking industry has gone through wave after wave of consolidation, mostly through the process of merger and acquisition. Local banks merging to create regional banks. Big regional banks buying other regional banks in order to grow their balance sheets and expand their scope. Then regional banks merge to become super regionals and, with the help of deregulation, big banks started acquiring and merging with other national and international banks and financial institutions until the global banking industry is controlled by a few mammoth organisations. In the US bank consolidation has been extreme and a similar trend has occurred in the UK and even in Spain.


While acquisitions bring expanded scale, scope and new customers, it nearly always means merging and integrating two different technology platforms, software and back office systems. Most of the major banks have duplicate and highly complex, inefficient back office technology systems. Since the cost of full technology integration following a significant acquisition is huge and disruptive, most bank leaders decide to go forward after the merger keeping the two separate systems and adding patchwork software on top to normalise the different data sets and the way they are presented.

ATM fleecingWhile this is the least costly option, it is far from optimal and requires more and more technology staff to “fix the fixes”, thus raising the overall cost of doing business, which is of course passed on to the customers, both retail and wholesale through various fees, etc.  And worse yet, too often the data extracted and integrated is less than accurate, thus making assumptions and modelling highly suspect.

At the beginning of December, 2013 all of RBS and NatWest’s systems went down for three hours on one of the busiest shopping days of the year. The group chief executive Ross McEwan described that glitch as “unacceptable” and added: “For decades, RBS failed to invest properly in its systems.” And it’s not the only bank to have had major interruptions in its online banking services.

Achilles Heel Number Two: Corporate Culture

“Risk professionals – on the whole a highly analytical, data driven, rational group – believe the banking crisis was caused not so much by technical failures (of risk analysis) but by  failures in corporate culture and ethics.” Risk Managers Survey, 2009

Public trust in banking as ethical and responsible institutions is at rock bottom, only barely above the score for politicians. The reason? Simple, a large number of fraudulent activities by almost all the big global banks with such actions as fixing the FX rate, rigging the LIBOR rates, mis-selling of pensions, money laundering for drug cartels, and developing highly complex derivative products to sell to unsuspecting customers. Since 2009 that total fines for unethical and fraudulent behaviour by banks has exceeded $ 150 billion and yet even with assurances that they are fixing the problem, recent scandals keep popping up.

Culture change is the replacement of one set of habitual and accepted behaviours for another.

Corporate culture is made up of the habitual and accepted behaviours, and work activities that employees use to solve problems, interact with each other and deal with customers and suppliers. While the culture of banking is definitely broken, it’s not that everyone working in a bank is a crook or dishonest.  In fact, just a few individuals are actually responsible for the actual fraudulent behaviour and wrong doing.

Yet we say the corporate culture is broken because even though people working with those few unethical individuals may have suspected or even known that negative activities were taking place (bankers and especially traders tend to brag a lot about deals and making money), few employees were willing to raise the issues to upper management. And in those cases where they did, managers routinely backed away from really investigating. Why? The internal subculture of that group, team or department had its own rules of “how to get along” and “how to be accepted in the group“.

The real cultural question is: “Even though people know something wrong might be going on, why don’t they speak up?”

The other difficulty in understanding corporate culture is its complexities. There is no single, big overall corporate culture, especially in the global banks.  Instead, there are numerous subcultures, usually headed by an informal leader whom people either trust and respect, or fear. And since most employees want to keep their job and be accepted by the team and the boss, peer pressure to conform, play along, don’t rock the boat, is great. And the sad truth is, most bank senior executives have no clue what the “real rules” are within these subcultures, or even that subcultures exist.

If you don’t understand your corporate culture (subcultures), you don’t really understand your business.

Another part of the broken banking culture is the relationship between the front office (client facing and traders) and the back office, support functions. It is no real exaggeration to say that this relationship is analogous to the caste system or the feudal system of Medieval Europe.

The traders and client facing teams get the accolades and the bonuses. The back office teams get yelled at, blamed for systems problems, receive little positive recognition from upper management, and are paid poorly in comparison to the front office staff.  I am not saying they should have equal salaries since their roles are very different, but there is zero teamwork or respect between these two very important and highly interconnected groups. Back office work in banking is considered the “crap” job and unfortunately they tend to be treated that way.  And we wonder why there is a lack of overall respect for management and poor teamwork within banks and why many bank employees consider the culture as “toxic”.

An effective solution to creating a more aligned and productive bank culture is to tie both business teamworkgroups’ variable compensation together as important parts of a single value chain, instead of treating them as vastly different departments. Basing variable compensation and bonuses on the entire value chain rather than on separate functional expertise has radically shifted the cultures of many technology and service organizations. Why not banking?

Perhaps the biggest Achilles Heel of all: The myth of the best and brightest

After years of studying corporate culture and business performance, along with human behaviour in groups, we have come to the conclusion that there is one great myth, or untruth, that seems to be driving the culture of modern banking. That myth goes like this:

Unless we pay big salaries and provide large bonus opportunities, we won’t get the best and brightest to run our banks!

With over $150 billion in fines for fraudulent activities I would say it is time to rethink the “best and brightest” myth. If you want a high performing bank, plus high ethical standards, hiring those with high IQ’s and a maniacal focus on earning lots of money at a young age is not a good answer.  In fact, $150+ billion in fines says just the opposite.

What about hiring for values?  What about hiring for teamwork and customer service?  What about hiring for a mindset of professionalism instead of a mindset of “making lots of money?”

Where is the proof that highly ethical, customer focused, financial professionals are any less smart or capable at running a large complex bank?  Where is the proof that reduced salaries and realistic work bonuses would lead to poor performance?  Fact is, there is no proof, just a cultural myth that is self perpetuated by those in the industry.

When the leadership of banking begins to adjust their hiring profiles to focus on values and professional attitudes along with IQ and sales capabilities, we will see a more effective and more ethical culture emerge within the global banking industry.

The Real Question?

Which bank CEO is going to be first to show real courage and accept the challenge of sustainable culture change in banking?

Posted by:  John R Childress

Senior Advisor on Corporate Culture, Leadership and Strategy Execution
Author of LEVERAGE: The CEO’s Guide to Corporate Culture
Visiting Professor, IE Business School, Madrid


PS: John also writes thriller novels

About johnrchildress

John Childress is 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 or
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