Three simple practices for cultural reform in banks: face-time, Facebook and personal meetings
December 4, 2013
A recent panel session on bank culture at the LSE has unearthed three intriguing practices that could make a difference in reforming the City.
As readers of this blog know, I have become very interested in the problem of cultural reform at banks. Bank culture presents a notable paradox — it is perceived by specialists to be a key cause of the credit crisis, but the solutions that those same specialists propose are purely formal and structural, ignoring the role of people, social interaction, existing beliefs, values, etc. (See more on this paradox here).
How to make culture a central part of bank reform? Nina Andreeva, Jean Pierre Zigrand and I recently organized a panel event abut this very issue. This was composed of four academics and four practitioners. It included bankers but also a consultant, a journalist and a regulator. Its aim was to discuss what was working and what was not in bank reform. See here for a description of the event (thanks to Neguine Zoka). And see here an article about it.
As it is inevitable among academics, the discussion at the panel sometimes took a philosophical turn. “What is culture?” one attendee asked. Is it just a wishy-washy idea (as some economists argue), meant to allow banks escape caps on bonuses? Or is it a set of abstract beliefs that magically snatch the minds of individuals and control their actions? While I take delight in such cogitations, my instinct is to keep things real. And go back to the original question, namely, how to reform the banks in the City. What practices are banks putting in place that work? What problems do they address? In this regard, the panel offered three original ideas.
The first one, known as “facetime,” comes from Goldman Sachs. The bank is pushing its employees to take the weekend off. And to make sure that this happens, it is closing off its offices during Friday night and Saturday, and shutting off its intranet so people cannot work from home. The policy is intriguing in that it could remedy what one panelist –Joris Luyendijk– rightly called the problem of “social atrophy” among bankers (another panelists, Jean-Peter Onstwedder, calls this the “finance bubble”): by virtue of their work hours, bankers are socially disconnected from their family, friends and ultimately from society. This disconnectedness makes it easier to ignore the impact of their activity on society.
Another panelist put forth a related policy that is impressive in its simplicity: allow bankers to use Facebook and social media at work. This need not mean installing apps in the bankers’ Blackberrys, the all-time worst nightmare of the security-obsessed IT personnel. It just requires banks to recognize that, for the most part, bankers already carry their own iPhones (in addition to their work Blackberry) to use social media apps. In fact, bankers already are discreetly checking their private Facebook and Twitter accounts; they just do so under their desks. The only required change is thus to officially let them use those iPhones at work. That is, bring Facebook to the top of the desk. As with FaceTime, this would re-embed bankers in society.
A third practice that will make a difference is, again, simple but powerful, and was put in place at Goldman. To communicate the changes the bank was instituting post-crisis (a new code of conduct), its CEO met in person with each and every senior manager of the bank — about thousand of them. Those face-to-face meetings are crucial to signal the bank’s resolve to its employees (a fellow panelist, Quentin Millington, also commented on the importance of bank’s resolve), as well as to convey the meaning of the new practices. This is what sociologists call sensemaking, and it allows employees to give meaning to the new policies. I saw its importance firsthand, when a university I worked for underwent a scandal. A review was commissioned. Small changes in practices were instituted. But they were never explained in person by the heads of departments, or the leading administrators. As a result, the changes remained meaningless bureaucratic hurdles that the faculty complied with, but never embraced. Indeed, Nina Andreeva gave an excellent example of this in her presentation on stress testing: the implementation of stress testing is creating a culture of either box-ticking or game playing, and this cannot be useful to manage risks.
Taken together, practices like face-time, Facebook and personal meetings underscore to the importance of culture in reforming banks. As a colleague of mine used to say, “it’s the soft stuff that is hard.” And indeed, one can already discern some banks (Goldman?) doing better than others at this. And those that do may well be able to turn their cultural response to the crisis into a basis for competitive advantage in a post-crisis financial industry.