The term "culture" is certainly one of the most often used — and perhaps misused — words in the corporate lexicon.

In the banking industry we often hear the terms "credit culture," a strong "ethical culture" or a "workplace friendly culture" used to develop corporate goals. But as widely used as the term is, bankers and regulators alike admit that "culture" is hard to define, and even harder to identify. The difficulty may be a result of the misapplication of the term.

In 1999, when the merger of oil giants Exxon and Mobil took place and the new management was examining the components of successful mergers, they wrestled with how to establish a "culture" that would help unite the two former competitors into one effectively managed organization. Recall if you will that the merger followed by just over a decade the disastrous Exxon-Valdez oil spill off the coast of Alaska, and the combined new management was conscious of undertaking whatever was necessary to avoid any encore of that experience.

The combined new Exxon-Mobil management, according to people who were party to those discussions, made an important key decision. Rather than thinking they could choose or pick a culture, they recognized instead that they could pick and define "values" and "goals" around which the combined new management teams could coalesce. And if that was done effectively, they would create an environment for a positive culture to flourish.

Unlike many common uses of the term, this approach is consistent with the origin of the term "culture." The origin of the word culture, going back to its early Greek usage, is a derivation of the term "cultivation of the soul," which combines metaphoric references to agriculture and personal growth. It presumes multiple influences that, when taken together, cause something to grow and flourish.

What Exxon-Mobil and many other successful companies have discovered is that a culture cannot be chosen. But values and goals can. And an appropriate combination of values and goals then creates the environment to achieve a positive and lasting culture.

In today’s world, where mergers are common, this understanding is increasingly important. Banking industry managements typically identify goals and values by fairly standard categories. In defining how they want the bank managed and operated, they will identify such topics as credit and interest rate risk parameters; lines of business or financial products; and management organizational structure, among others.

A second common category is a commitment to their communities or markets. Elements of this topic are required by Community Reinvestment Act rules, but many banks go beyond the statutory requirement and identify community interests or needs that they want to address.

A third category, and the one most likely to shape culture, is workplace environment. Elements of this category include the bank’s approach to diversity, work-life balance, promotional philosophy, and managerial leadership style.

While each of these broad categories is easy enough to define, implementation or adherence can vary widely. Indeed, it is entirely possible for two different companies to define their goals and values identically but have them produce vastly different cultural environments. The inverse is also true. Banks with vastly different cultures can each be successful in their separate markets or areas of expertise. The key difference between success and failure is the extent to which an organization — and particularly senior management — makes adherence a true commitment as opposed to just window dressing or lip service.

So if bank regulatory agencies, bank management, or potential merger partners are looking for evidence of "culture" in written documents, policy guidelines, or employee handbooks, they will have fundamentally missed the point. The prevailing culture is evident in criteria such as employee retention, stability of earnings, and asset quality. Does the institution retain its best people through economic cycles? Does asset quality meet or exceed that of its marketplace peers? Is the institution’s growth consistent with its capital position and how does it compare to the overall growth of bank assets in its marketplace?

Perhaps most important of all, does the institution ask for feedback from its customers and employees, and if so, how does it respond to suggestions or recommendations?

In looking for evidence of positive or negative culture it is important to go back to the origin of the term — cultivate. Institutions with enviable cultures are ones that have first thoughtfully and carefully defined their values and goals. They then make clear that effective management is defined by adherence to those standards. Finally, to ensure that an appropriate culture is maintained, they encourage dialogue between employees and management and between the institution and the communities they serve.

Mark W. Olson is chairman of Treliant Risk Advisors LLC and can be reached at His former positions include Federal Reserve Board Governor, chairman of the Public Company Accounting Oversight Board, chairman of the American Bankers Association and bank president and CEO.