Heidrick & Struggles: Changing Bank Culture: Lessons From The Financial Crisis

The financial crisis exposed the weaknesses in many financial institutions. It showed that some banks had lost their way. Since the crisis, many institutions have recognized that there is an issue with their internal cultures, and management behaviors. Understanding that you have an issue is the first step toward change.

The financial crisis exposed the weaknesses in many financial institutions. It showed that some banks had lost their way. Customers were no longer the focus. Making money had become the objective, rather than taking care of your customers or clients, and doing what was right for them.

A number of financial institutions started designing things for a counterparty rather than the customer. Because the counterparty was often faceless, these banks lost the personal connections with their core stakeholder—the customer.

These banks gradually shifted their thinking from the traditional perspective of customers and clients to a trading perspective. Financial services in general might have lost sight of all of the stakeholders, even shareholders, in the decisions that they made.

There is some discussion about whether changes in the structure of some firms contributed to the problems. Some shifted from partnership-like structures to corporate structures as they went public, and some moved to emphasize their trading businesses; both of these shifts may have contributed to how the internal workings of the firm changed, and how the mind-set and focus changed.

There seemed to be awareness that risk was building up in the system, and yet nobody was willing to take that first step off. And so it was: “I’ve got to keep playing because everybody else is playing­—otherwise, I’m going to lose.” It was go, go, go, and then the hammer came down.

Since the crisis, many institutions have recognized that there is an issue with their internal cultures, and management behaviors. Understanding that you have an issue is the first step toward change.

Many firms have started culture programs. They may call them something else, but it really is about the internal workings of the firm—all the way from how they acquire talent, what processes they use, how they develop their people, what incentives and disincentives they use, and how they make all of that transparent. This goes to the top of the house. How do we make sure that we are walking the talk? We have seen organizations start to embrace that. Most organizations are probably within the first year or so of really implementing their culture-change programs, and we will probably need another year or so to see whether some of those changes have started to take hold.