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A Toxic Culture Can Be Hazardous to Your Bank's Balance Sheet

Banks regularly take active measures to manage and minimize risks that are inherent in our industry. These include credit risks, interest rate risks, operational risks, compliance risks, legal risks and even reputational risks. 

However, I believe there is one key risk that is the most neglected risk of all from a performance management standpoint: internal political risk.

What is internal political risk? It's a very weak operating culture, and it results from ongoing and unsettled disputes among different departments and individuals within the bank. Poor communication and weak leadership are to blame, as it nurtures the constant quarreling, disgruntled relationships and failure to fulfill organizational goals.

I have noted in my years of consulting experience that less than 10% of banks have a truly effective culture, while the rest are inhibited by selfish attitudes and organizational ineffectiveness. Banks must take a stand against this shattered culture syndrome or suffer the repercussions of a fractured chain of command, low employee morale, reduced productivity, high employee turnover, weak customer service and poor work quality.

Establishing a solid operating culture starts at the very top of the organization. The board of directors and senior management must come together to define the values and characteristics the bank intends to operate under and grow with long term. More specifically, values need to be integrated with shared beliefs and a powerful business mission into an energizing narrative that uniquely positions the bank for growth and profitability. Without this integration, real change is unlikely to occur, leaving the bank to continue floundering in a toxic culture that will undoubtedly preclude it from reaching its full potential.

Once a cultural framework is established and corporate values are identified, a detailed plan can be constructed to fully immerse all relevant parties in the new culture.  Coordinated, purposeful and comprehensive internal communication must be established to signal to the staff that a meaningful cultural change is underway.  A key element of this plan may be a companywide employee engagement event focused on getting staff to also serve as brand advocates. This will instill a strong sense of employee pride in the organization and build a deeper emotional connection between the employee and the bank. 

Additionally, efforts to reward sound values and behaviors, in the form of an established employee recognition program, can contribute to strengthening your culture. In my opinion, these steps counteract the most widespread banking industry weakness:  a lack of accountability for results.

I urge you to actively and thoughtfully design the culture you want, one that promotes your values, teamwork, customer satisfaction, innovation, change, accountability, employee achievement and effective communication. Build it into your branding and marketing efforts. Feel and see the difference. Make the message of your strong culture resonate profoundly with your customers.  Keep it vibrant, trendy, topical and fresh.  Make it fun.  Renovating your bank's culture will elevate your bank's performance.  And in the process, you will have one less risk to worry about.          

L. T. "Tom" Hall is president and CEO of Resurgent Performance Inc., a bank performance advisory firm.  


(11) Comments



Comments (11)
Posted by Showle | Friday, November 29 2013 at 5:50AM ET
I could not agree more with this article. Too often the approach that management takes is to shoot the messenger and then ignore the message. Banks could learn a lot by looking at companies such as Southwest Airlines on how to run a profitable business in a very difficult, overly regulated and competitive environment AND keep the majority of customers and employees satisfied and happy.
Posted by PRLynn | Monday, December 10 2012 at 5:44PM ET
Tom: I would like to speak with you at your convenience about your article. Please let me know when it would be convenient to call you.
Barbara Greenwald
703 451 8871
Posted by hshein | Sunday, December 09 2012 at 10:18AM ET
Tom: I would like to speak with you to discuss your article. My email is Please let me know a time when I can call you. Barbara Greenwald
Posted by hshein | Sunday, December 09 2012 at 10:15AM ET
After working in the banking industry for over 34 years, I know exactly what is going wrong. Management is totally out of touch with their employees and customers. Management hides behind more and more layers of management, justified by ever increasing numbers of meaningless reports, endless policy changes to make your head spin and overly complex software to run it all. So they hire consultants to figure a way out. Then we get insincere cheerleading sessions, mission statements that make you throw up and mindless slogans. Then banks
continue business unchanged. What a surprise.

Banks need to lighten up and realize that employees, and customers, are people with lives outside of the bank. They need to be responsive to what the customer needs and not what they think they need. Banks need to trust their employees while holding their employees accountable. It's all about going back to basics. Above all, banks need to simplify, simplify, simplify. Only then will banks return to prosperity.
Posted by T Jensen | Friday, December 07 2012 at 12:12PM ET
I have been trying to get a culture built at our bank for years. I'm hoping sharing this article will light a fire under the powers that be.

Posted by msimon | Wednesday, December 05 2012 at 5:22PM ET
I totally agree, the current culture in banking is basically demoralising and demotivating. Leaders are blamed for not performing well in their role and not managing performance effectively. yet no one would look back and ask the questions about poor performers in their previous roles and management. Office politics is a killer. I believe that all leaders/senior management should be asked to upgrade their skills and knowledge to enhance performance in their organisation...old school is no longer effective.Some leaders are even told at point blank that "you have failed as a leader" and terminated through retructure...what a shame this brings to an individuals career..a lost battle by a leader
Posted by Lalita | Wednesday, December 05 2012 at 5:11PM ET
This is a real life experience that happens in so many Banks world over. this culture just drove some of us out of a job after resisting the culture for over 3.5 yrs with no hope of change in sight. No communication, performance management proporsals remain in the board room etc. really i could not agree more than this.

Thank you
Posted by AdigaJ01 | Wednesday, December 05 2012 at 9:06AM ET
There cant be two opinions about this----internal political atmosphere
has a very detrimental effect on the productivity and overall pergfprmance of the organisation
Posted by zaidi | Wednesday, December 05 2012 at 1:23AM ET
I could not agree more, I've worked at a bank for 15yrs and recently came into work to find out I was redundant and my (IT) job was better done in India. The culture certainly has changed for the worse recently and this is not only my opinion. We were treated like numbered machinery instead of skilled, committed workers so the bank could declare a bigger profit next year. I was given a severance and (of course!!) the bank owes me nothing past my contract but this has really poisoned the environment (especially for those who are left). I was given the opportunity to reapply within this company but felt compelled to leave by the utter disregard for employees shown in the execution of this layoff and what it says about the current corporate culture at this bank. They may well find good IT support and development in India but I really was a company booster, someone who would work 24/7 if needed, and someone with considerable IT skill (programming since I was a kid!). I will find other work but they've lost a valuable resource and someone with 15yrs knowledge of their systems and people for a short term (questionable) gain. I don't see how they are further ahead now and they certainly aren't breeding company loyalty into their culture.

I find that my bank was doing a good job about speaking to many of your talking points but a piss poor job of actually executing and returning employee loyalty when you scratch the surface a little (actions louder than words)!!
Posted by BankIT | Tuesday, December 04 2012 at 10:29AM ET
I could not say it better myself. History proved it many times over that all empires collapsed from withinh!
Posted by Matilda Barbayanni | Tuesday, December 04 2012 at 8:38AM ET
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