Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
184
humans and created a distance between banker and customer and banker and
regulator, giving a sense of independence from normal subjective interactions.
Culturally, financial service organisations were led by those whose basic assumptions were
founded on money as the goal; numbers as the answers, and technology as the
intermediary. The implications of replacing people with technology, judgment with money,
and leadership with those skilled only in money making went unrecognised. Understanding
how technology and mathematical judgments impact the social context is a daunting task,
but the alternative, as we have seen, is not an option. Currently there is a social-technical
gap. 270
The study identified that the behaviours that drove culture presented a paradox to leaders
of financial services. On the one hand, they recognised and associated numerical
competence, regulatory lenience and the pace of business transaction as positive underlying
reasons for their success. On the other hand, they realised that these cultural norms may
have played a far greater role in the crisis than they were able to comprehend. The role of
leadership in understanding and engineering the systemic cultural forces was missing.
Those who benefited the most probably still have the most to unlearn and relearn if change
is to be achieved.
Culture and Value Creation
Organisation culture is often talked about as a soft concept. In financial services
particularly, culture has not been on the radar as a profit driver. However, there is
increasingly a body of research which indicates the impact of culture on profitability.
Research by Heskett (2011) 271 indicates that ’culturally unremarkable; competitors suffer a
20-30% drop in performance.
Heskett’s research claims to establish cause-and-effect relationships that are crucial to
shaping effective cultures, and demonstrates how to calculate culture's economic value
through ‘Four Rs’: referrals, retention, returns to labour, and relationships. The ‘Four Rs’
can be measured by combining the organisation’s employee engagement metrics, customer
loyalty metrics and brand loyalty metrics. Companies who intentionally managed their
cultures effectively outperformed similar companies that did not.
Other researchers have similarly identified culture as a key contributor to corporate
performance. In 2006, Sackman and Stiftung conducted a detailed analysis of the culture of
six companies: The BMW Group, Deutsche Lufthansa, Grundfos, Henkel, Hilti and Novo
Nordisk. They concluded that “the corporate culture that distinguishes each of them today
has, on the one hand contributed to their success and, on the other hand, placed them in a
strong position as they face challenges to come.” 272
Culture has also been studied empirically as to its role in corporate failure. Joel Bankan’s
The Corporation 273 is a meta-study of corporate failure. His basic hypothesis is that corporate
270 Brian Whitworth, Socio-Technical Systems, 2006.
271 James L. Heskett, The Culture Cycle, 2011.
272 Sonya Sackman and Bertlesman Stiftung, Corporate Culture and Leadership Behaviour, 2006.
273 Joel Bankan, The Corporation: The Pathological Pursuit of Profit and Power, 2005.