Cyclists and bankers – tainted by the same brush? 0

Posted on 22, April 2013

in Category bsg insight

There’s been a lot of banter recently about ‘banking culture’, how it’s all wrong and it’s at the heart of many of the bank’s problems – particularly that of investment banks.

The industry has become synonymous with society’s ills – greed, immorality, recklessness – and bankers are emblazoned in scandal. They’re responsible for everything from miss-selling insurance products to being conduits for money laundering and rigging Libor (or, if you like, Lie-bor). All of this comes in the wake of a financial meltdown. Caused by bankers. Saved by the taxpayer.

In some ways, banking and cycling have been hit by the same blow. For years, problems have been building and they’ve finally surfaced, smothering any positive practices which may indeed lie beneath.

Armstrong has said that for him, it was about “winning at all costs”. He was prepared to do whatever it took to keep winning and keep yellow. And it seems some bankers will do whatever it takes to avoid red.

But these scandals aren’t isolated. They’ve weaved their way throughout the financial industry and spilled over into the shadow banking system (hedge funds, money market funds etc). In cycling, Armstrong had a network of doctors and team managers involved in what’s been labelled the ‘most sophisticated doping programme in the history of sport’ by USADA.

Throughout, their reputations have been tainted and the people running the teams and organisations are less respected. We only have to look at the spate of resignations from senior players in the banking industry to know they don’t feel the love. Something needs to change at the very core.

Slow and steady wins the race. Culture doesn’t have a quick fix

An organisation’s culture is the shared belief of ‘why’ the organisation exists – it’s reason for being. It is the collective behaviour of the people who are part of it, and it’s the values, visions and habits which drive those behaviours.

A bank’s culture is passed down from long standing employees to newer employees and it affects the way people interact within the organisation, with their industry partners and with their clients.

In my organisation, our reason for being is clear. It’s evident in every internal meeting and every client meeting. As Business Analysts we’re all driven by the same passion for positive change. We talk about our ‘why’ and share our organisational values.

But cultures, by their very nature are evolving things and they take time to develop and change. Changing the culture of banking will take time. In the view of Stephen Hester (CEO of RBS) it will ‘take a generation’ and it doesn’t have a quick solution.

Regulate to renovate. What role do rules and regulations play in changing culture?

There’s a minefield of new regulations on the radar. Regulations designed to increase transparency and reduce risk in the banking system. To prevent ‘too big to fail’ and protect consumers. Banks are coping with so much change in order to comply, but will these changes bring about a cultural shift? Or even, can they bring about a cultural shift?

We create rules for the things we think we need rules for. We cannot identify every eventuality.

In cycling there are rules about the weight of your bike, what gear ratios are allowed and when you can use race radios. There are also unwritten rules about racing on the last day of ‘Le Tour’ and when to slow for a ‘comfort break’. But when new performance enhancing drugs come about, and the line becomes just that little bit greyer, we have to write up new rules.

In banking there are rules about which trades must be cleared centrally, how much capital must be held, what you can and can’t advise customers and even how many hours you have to report incidents to the regulators. But when we identify that traders have manipulated the Libor, will we have to write another regulation? Can a fraud exist even if has not yet been identified in a regulation?

Blind spots will inevitably exist and we don’t know what we don’t know. In the “conscious competence” learning model  there are places where we’re unconsciously unskilled. Because our industry is forever changing, these will always exist.

But rules exist as in a cultural context too. They’re not created for the rule’s own sake, but because of a broader intention. In sport, typically, the broader intention is fair play. In business, it’s usually about enabling fair markets and protecting the consumer. But in both sport and business, it’s the culture which guides us through the blind spots. It is the cultural principals which ensure that we navigate in the right direction and which give us clarity in the decisions we make.

We’re just touching the surface. But, as BAs, we’re still touching it.

Regulations play an important role in building a more stable and transparent financial market, and I’m not for one moment implying they’re not crucial to the future of the banking world. But we also need to keep a wider viewpoint about what motivates people and organisations to do what they do. And so something far deeper and more fundamental has to change. Something which affects every aspect of our work.

It’s easy to view regulatory change projects as purely about responding to external forces and just about being compliant or ‘ticking the boxes’. For us, whilst it is about all of these things, it’s also about understanding the broader context of what the regulation is trying to achieve and why. The key to successful regulatory change projects is about communicating this broader regulatory message and in keeping the organisational culture in mind throughout. For example, if the broader framework of the European Markets Infrastructure Regulation (EMIR) is about having more transparency in the OTC derivatives markets in order to reduce risk in the market place, then, if people understand ‘why’ this is important in the context of their organisational culture, it aids the implementation and shapes the resulting projects.

As BAs, part of our job is to challenge assumptions, question how things are done, why it’s important to store this data here and whether this procedure could be run like this, rather than that. As agents of change however, our broader role is to help organisations effect cultural change. We have a role to play in questioning motives, or at least in understanding the reasons people do what they do in the context of the organisational culture. Only when we understand this can we truly effect meaningful organisational change.