Changing the banking culture — not quick or easy, but necessary

Out of the furore and fuss over Barclays’ under-reporting of its borrowing rates in its LIBOR submission and Bob Diamond’s management of the bank has come a loud and frequent call for the culture of banking to change.
On the face of it, it seems a fair, reasonable and probably necessary step. But how can it be done?
The answer is not quickly or easily, but it has to be done if the banks are to repair the reputational damage their behaviour over “pay for failure”, bonuses, misselling and the risk-taking that led to the global financial crisis over the last few years has done.
The problem is that changing in an individual organization is hard enough, let alone changing that of a whole industry.
The reason is how organizational and industry cultures are formed. Geert Hofstede’s work looking at the different cultures within the national subsidiaries of international organisations showed that an organisation’s culture comes only partly from the corporate culture (espoused values and behaviours) promoted from the top — the rest is derived from the beliefs and practices people bring with them from their upbringing and local culture, as well as the industry culture elsewhere.
So Barclays management alone can’t fairly take the blame for all of the flaws in its culture which led to the mispractices as some of them will have come with staff who joined from elsewhere or came in thinking cheating was ok.
The other complicating factor is that the industry culture is partially derived from the nature of the work, as Deal & Kennedy have shown. Their model shows that places with different levels of risk (uncertainty) and feedback (praise, bonuses, promotions) create different cultures and that the high risk, quick feedback situation encountered in trading in the City creates a “tough guy, macho” culture. Which is why those who enjoy managing risk, competing with others and receiving very tangible rewards fit in well with that kind of environment.
So what can be done? Whether or not you believe that the City’s leopards can change their spots, the least the banks can do is be seen to be making efforts to change their behaviour with culture change programmes both at each organisation and industry-wide through accredited training programmes.
Each needs to be seen to reward those who live the new espoused organisational values as well as reward (rather than attack or sack) the whistleblowers who report misdeeds. By rewarding and praising those who behave in the new way required, they can be seen to be pushing for positive change and encourage at least compliance, if not belief change, in the rest.
Whether or not individuals’ actual beliefs about what is and isn’t acceptable will be changed, compliance with the new way of behaving is what everyone wants to see. And only once behaviour is seen to have changed will the rest of society be happy and prepared to improve their view of the banks.