Robert Dellner, a former Managing Director and global unit head in a merchant bank and now an organisational and cultural development specialist, calls for a new culture in banking that encourages the human development of bank staff.

Robert DellnerSince the financial crisis of 2008, it is becoming apparent that despite the significant amount of support to the sector and some lessons learned, the industry at large seems to have remained unreformed, resists change and as a result continues to operate along the same business principles, assumptions and drivers as pre-crisis. The recent events at the Swiss bank UBS confirm that areas such as risk management and organisational culture require urgent additional attention.

Much has been written about the possible origins of the crisis, what went wrong with the financial models and the culture that operates within the banking industry and the world economic model as a whole. The end of capitalism as we know it has been voiced as a real possibility now that we have reached the point where the drives of economic growth and self-gratification meet their limitations: unfettered leverage and natural resources.

Governments and central banks have now stepped in as the final domino in the “lender of last resort” game and the recent announcement at the Conservative party conference to engage in “credit easing” indicates government believes it can manipulate, even in part, the system. Across the world but in particular in the Euro zone, markets are shuddering as we recognise the limitations and ability of governments to tackle the financial imbalances. The credibility of the political system and the intertwined government-limited financial capacity to control overall indebtedness is now at stake as markets re-price the credit curve for all.

The latest news with regards to the establishment of the European rescue fund confirms the attempts to correct a flawed system by using the very technology that caused the crisis, namely using special purpose vehicle technology and “off balance sheet” leverage to avert the possible credit contagion onto governments’ credit curves. This is unlikely to succeed as it is again ultimately governments’ ability to raise funding from future taxpayers that will determine its actual viability.

The recent acceleration and contagion of the European crisis indicate that we can no longer view our policies in isolation. Cross contamination has become epidemic and should put an end to the notion that we can operate without understanding our connectedness as we enter the last and highest layers of institutional risk correlation via our central banks and supranational financial organisations.

We need, however, to recognise our collective responsibility in influencing the leadership community to evolve in their thinking and change the locus of operation from the pure economic driven motives to a more integral approach to business conduct. The banking industry needs to recognise the need to move from a product driven model to a client and people-centric model.

The good news is that in the greater schema and post crisis, we are evolving, developing as a society and culture in quite a predictable, but as yet in not an inevitable, way. What we have learned from research over the past decades is that cultures remain static to a greater degree until the existential limits have been reached within the system that eventually force the culture to break out from its flawed systems. It then changes and evolves into new areas and higher levels of thinking and behaviour. Looking at such developmental models as Dr Clare Grave’s “Spiral Dynamics”, and later incorporated into the work of Ken Wilber with the “All Quadrants, All levels” model of culture and human development, we can get an indication of what the next stages might look like. I would recommend each reader to look into the integral model for their further personal understanding.

It seems, however, to the casual observer that there are some common themes within society rooted in lack of moral development across society such as the MPs’ expenses scandal, the News of the World affair and the recent riots in the UK.

These lead us to focus on the area of leadership in general and the question: where do we go from here? The prime driver for all leadership development is personal growth. Unfortunately, most of our current organisational culture and hiring processes do not seem to value individuals’ personal development. Recruitment criteria seldom include personal information or requirements apart from academic qualifications and the historical abilities to perform within previous employments. History is littered with examples where technological advancements have run ahead of moral development with disastrous consequences.

The banking industry and the agencies that support recruitment in general put almost exclusive value on personal technical proficiency as the sole standard and criterion for operational excellence. This has had disastrous consequences, as in the recent case at UBS and elsewhere. In the banking firms I have worked with, senior management rarely encouraged and engaged with personal development and often actually self selected away from participating in such “lesser” development activities, increasing instead the cultural and management power gap.

The implied message to employees and the leadership community is that there is no need/requirement to take responsibility for and invest in your own personal development. This is contradictory to what we know is true and to be required.

Leadership and organisational culture start with the top management layers and it’s time for leaders in industry to step up to their roles of fiduciary responsibility of managing the human resource as whole human beings and not just hired hands. This requires leaders to take personal responsibility to evolve above their current thinking and prioritise strategically the need for cultural development. However, the recent bank rescue and regulatory regime has done little if anything to change the status quo and homeostasis.

Any change will be difficult. As Peter Drucker said in his book Managing for result:

“Finding and realising the potential of a business is psychologically difficult. It will always be opposed from within because it means breaking with old established habits and is therefore likely to be resented by its most accomplished people as a direct attack on their position, pride and power.”

During my discussions with several banks over the past year, it’s difficult not to conclude that today’s banking leadership community is all but reluctant and even opposed to most changes in this direction. In discussions with bank staff in general it is clear that current HR strategy and the banks’ commercial policy require significant financial overcompensation for disaffected and de-motivated staff and to counterbalance work-related risks and the lack of collective cohesion and culture. No intention to place blame here, just a statement of the situation.

The banks are also perpetuating the circular financial motivation as the only operating model for motivation. Recent research suggests that this model is flawed and shows that higher rewards actually lower individual performance and reinforce the belief and justification of entitlement.

A possible psychological explanation for this phenomenon is that financial rewards are limited to the extent we feel deserving of such rewards. If we feel guilt and shame ridden by the rewards we receive, we subconsciously are likely to manipulate the situation/result so we become “worthy”, even if this means lowered performance or engineering another form of justification.

To my knowledge, many people in the banking industry today feel guilt and shame around their profession and now work almost exclusively for the financial rewards. They would actually rather do something more meaningful with their lives given a valid choice. For the industry, this represents a major challenge over the next years as a new generation of “entitled” recruits enters the system, even more fuelled towards the potential financial rewards in their knowledge of the success drivers post crisis.

During my own career it was quite self-evident that to have career progress in the upper echelons of management one would have to assimilate to whatever culture was prevalent. The very nature of the perceived career progression inside a firm forms, over time, the leadership qualities that people will aspire to and adopt as their success principles. This has created a circular, self-selecting process of employment criteria, personal characteristics, career progress and compensation/reward. So- called “servant leadership” principles are rarely applied in the banking industry as these qualities do not seem to underpin or be valued in leadership progression, thereby creating or perpetuating the self-actualised culture of its historical drivers.

To be aligned with the current climate and to thrive and prosper within the new economy, I believe that personal and cultural development should therefore be the “new” leadership paradigm and challenge going forward within the banking industry.

There is of course nothing “new” about this at all; we have however forgotten that our history shows us that moral development beyond the existential limitations that caused the problem is a key component to build sustainable solutions. Understanding the larger perspectives that come from our actions and behaviour are the linear extensions that drive this development. It’s not beyond possibility that the leadership community can rise to the challenges we face as a financial collective system and take their roles seriously as pathfinders to develop programs for positive change within their individual institutions. We wish them all the courage to change and the leadership required to succeed.

Robert Dellner is a former Managing Director and Global Unit Head in Merchant Banking. He is now an Organisational and Cultural Development Specialist, and Psychotherapist.

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