Jeff Judy

Jeff's Thoughts - July 21, 2010

Culture Definitely Matters

Do you think that "culture" is a nice, soft concept that you can only afford to pay attention to in good times?

If you do, I couldn't disagree with you more! I believe that your bank's culture does much to determine your success. Time spent in explicitly managing and nurturing a tight company culture will pay significant dividends in your financial performance.

It may even determine your ability to survive, much less thrive, in these troubled economic times.

Now, when I talk about "culture," I am referring to the consistency of the bank's responses, through their employees, to common business situations when compared across different levels of the organization, different business locations and markets, and different functions within the bank. Basically, I am asking whether the same situation or customer need, handled by different staff, will be resolved in more or less the same way.

This question is particularly interesting when the situation cannot be resolved by a hard-and-fast rule, a line in a procedure manual, or the outcome of a software algorithm. When there is a judgment call -- make the loan or not when the score is right on the threshold, take action when a customer's financial health is worrisome, lean in favor of being a good corporate citizen versus making a quick profit for shareholders -- that's when we really see if everyone shares the same vision, the same standards, the same values, the same understanding of what it means to work for the bank.

Often, when clients talk to me about culture, they use words like "aggressive" or "conservative," or they talk about long-term and short-term objectives. They explain their values and what they expect in terms of ethical behavior from their employees.

All of that is important, but consistency across the bank, that similarity of vision and of behavior, matters more.

When everyone makes pretty similar judgment calls, when everyone has the same view of what is supposed to happen, it means that the bank's leadership is truly successful not only in sharing their goals and standards and strategies, but in holding all levels and units within the bank accountable for acting upon that shared vision. It means that the Board and the executive team have -- as is all too rare -- worked hard not only to communicate how things are to be done, but have paid attention to what really happens, and made corrections where they are needed.

That's what I call a "tight" culture, one where the view from the top and the view from the front lines are very similar. And, most crucially, a tight culture is one where a change in the view from the top is reflected, very quickly, in how business is done at every level, location, and department of the bank.

Just about all of us have encountered some ugly surprises in the last couple of years. Even the best-behaved, most prudent of banks have to respond to changes in the economy, customer needs, and regulatory oversight these days.

The ones with tight cultures respond to surprises quickly and effectively. When new conditions arise, they develop new strategies, or revised objectives, or updated standards, and promulgate them throughout the institution in record time.

The banks who do not take culture seriously, as a business matter, flounder about, trying to get control of what their people are doing. They waste enormous time and energy in their efforts to focus employee attention on what needs to be done, and how it should be accomplished.

Which kind of bank do you have? One that adapts nimbly to changing conditions? Or one that struggles to deal with change?

The answer is in your culture.