My dad was chairman and CEO of a New York City savings bank. It wasn't always easy growing up as the son of a prominent and successful businessman. But all along I knew I wanted to be a banker.

Why? I was only an average math student. Still, I quickly figured out that in any business where government regulations provide that you "buy" your product at 5% and "sell" it at 8.5%, you don't have to be a math major to make money. As Woody Allen once said, "Eighty percent of life is just being there."

It should have been so easy.

Changes affecting the financial service industry over the past 20 years have been swift and dramatic.

A Simple Recognition

As if the oil price shocks of 1973 and 1979, the Eastern bloc debt crisis, and the hyperinflation of the 1970s weren't enough, federal regulators brilliantly deregulated the liability structure of banks before doing the same for assets.

While this permitted liquidity to return to the beleaguered thrifts, even a mediocre math student knows you can't buy product for 10% and sell it for 8.5% and make up the difference in volume. Deregulation offered the ultimate management challenge to the banking industry. Many wouldn't make it.

When I first entered the industry, John Bunting of First Pennsylvania Bank was heralded as a consumer banking genius, Franklin National Bank was forging an aggressive growth strategy via acquisition, and "everybank" was taking advantage of the asset growth opportunities in the emerging Latin American economies.

Roger Anderson, chief executive of Continental Illinois, was twice cited as "Banker of the Year," first, for his vision and Continental's rapid growth, and later for overseeing the largest bank failure of its time.

Meanwhile, John Reed was racking up losses while expanding Citibank's electronic capabilities.

Today, we know that First Pennsy succumbed to the dangers of investing in government bonds during volatile interest movements. Franklin National to a lack of controls, Continental to arrogance and the oil patch, and everybank to the risks of international lending. John Reed is still CEO of Citicorp.

An Industry Transformed

Change has completely overtaken the banking industry during the interim. It has affected the strategies, structure, management practices, and -- importantly -- the culture of the financial-service businesses.

What is this amorphous thing called "culture?" Is it definable? Does it really have any bearing on corporate performance? Is "changing corporate culture" merely the latest management fad?

Culture is generally acknowledged to be the collective values of any community of people that are passed from one generation to another. It is first developed and imprinted through the values passed on to us within the family.

Schools and teachers certainly play an important role in shaping who we are, as do our religious training and beliefs.

Increasingly we are becoming aware of the extraordinary impact of the cultural influence of business on our values and beliefs.

How does business culture manifest itself? The conservative dress of the IBM salesperson; the pin-striped suit of the commercial banker; the suspenders that distinguish the investment banker; the frenzied and salty approach of the futures trader; the Johnson & Johnson "way of doing things;" the Liz Claibornized employee; the environmental concern of Ben & Jerry's.

Or it can be seen in the actions of Ivan Boesky, in Salomon Brothers' manipulation of the Treasury auctions, and in the recent news regarding Sears Auto Centers.

Some corporate cultures may be bureaucratic, risk averse, controlled, secretive, hierarchal, or dispassionate; others may be risk-taking, trusting, open, empowering, compassionate, or pluralistic.

The culture of Citicorp is noticeable different from J.P. Morgan's. The culture of Salomon Brothers is different today than it was a year ago.

All companies have cultures, whether or not they are developed and articulated. In fact, there are usually multiple cultures within large firms, generally associated with different functional or geographic units.

Ultimately, there develops a "formal organization" based on a published and practiced set of norms, standards, structure, policies, and procedures, and an "informal organization" that learns the tacit, less visible way of "getting things done."

Until recently, corporate culture has been "managed" from within the company. Today, with the power of information and new technological delivery capabilities, new stories are being told from the outside. Gaps are emerging between the truth observed by employees, and what management says.

Anyone who has spent five minutes in the executive suite knows that a strategy that is incompatible with a firm's culture will be difficult, and perhaps impossible, to achieve.

A successful strategy requires not only the intellectual and physical commitment of people, but also their emotional and spiritual commitment as well.

As deregulation opens opportunities for mergers, acquisitions, and divestitures, bank executive needs to attend to the cultural integration of their work force with business and operating strategies. Without that integration, the strategies are sure to fail.

Consider the merger of Chemical Banking Corp. and Manufacturers Hanover Corp. The two companies were seemingly compatible: Both took deposits, made loans, had the same product lines, and operated in the same marketplace. But the differences in culture were enormous.

Their biggest challenge is to integrate these cultures into a homogenous understanding between people. Without it, they will wrestle with strategic implementation for many years.

Cultural Confusion

How about Nations Bank? The former NCNB merged with a major Florida bank, then merged again with C&S/Sovran. How's that for cross-cultural confusion? Sure, there are economies of scale that the company can leverage. The most important asset that it needs to leverage, however, is the human asset.

How long does the fear of losing one's job dominate the environment following a merger? How long are employees paralyzed by the changes that are taking place?

People today want to work for a company that believes in something. They want to find meaning at work. They want to take pride in what they produce. They want to admire the people they work with. They want to feel that what they do provides some benefit to society.

People want not only intellectual and physical stimulation at work, but also the opportunity for emotional and spiritual growth. Without it, the soul dies.

Changes in the financial industry will be no less profound going forward than they have been for the past 20 years. The blurring distinctions between banks, thrifts, insurance companies, brokerage firms, merchant and investment banks will continue. The uncertainties associated with such changes are high.

The impact on human capital is costly. The challenges are clear. The market leaders in the 21st century will learn how to create a strong sense of community -- built on shared values and a common understanding -- and integrate those values into the business and operating strategies of the firm.

Mr. Darcy, who has had careers in business and education, is president of the Foundation for Leadership Quality and Ethics Practice, New York.

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