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The Problem with Banks’ Results-Driven Culture

results-drivenA steady stream of headlines brings near-constant reports on banks running afoul of laws and regulations. Recent evidence includes the mortgage-securities settlements of Bank of America and Citigroup, and Barclays stands accused of misleading investors about its dark-pool trading.

What makes banks particularly susceptible to such issues? Their standard practice of managing by the numbers is a key contributor. The reason for this practice is simple: Results are black and white. Employees are either ahead of the curve or behind it.

Unfortunately, this managing approach can encourage employees to go to extremes – including lying and covering up subpar results – to reach key performance goals. Bank employees aren’t inherently duplicitous, but pressure from top management can make them fear for their jobs, and those who might otherwise oppose questionable behavior are daunted by the threat of punishment.

A results-driven culture also makes it harder to identify problems and successes.

The solution? Management needs to develop and apply a scientific understanding of behavior. Bank overseers are already focusing on this issue, and all bank managers need to understand the positive and negative behavior that drives results. By positively reinforcing actions that truly improve performance, they can increase the strength and stability of their banks.

Here are some ways to do that:

  • Pinpoint specific behaviors consistent with the desired culture at all organizational levels.
  • Deliberately reinforce the behaviors you want.
  • Correct any instances of unwanted behaviors.
  • Don’t celebrate good results until you really know what behaviors produced them.
  • Hold everyone accountable for demonstrating the right behaviors.
  • Solicit anonymous feedback from employees and customers on how a bank is doing in living its stated values.

Read my original, longer post on this topic at American Banker

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