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Bankster

Organizational culture in Financial organizations: time for change

  • 10 May 2010
  • Posted by Marcella Bremer

Many people and organizations are still recovering from the credit crunch. The wrongdoers: banks and other financial organizations or banksters. Their image is cold, competitive, hungry for power, and even greedy. President Obama announced strong measures to control banks.

So what would the overall organizational culture be in Dutch financial organizations? We dived into our database and calculated the profiles for the financial sector: a results-oriented business indeed, but there’s more focus on people than expected…. Striking is their strong wish for less focus on performance and more emphasis on innovation. But should we support that?

About the Organizational Culture Assessment

The Organizational Culture Assessment Instrument (OCAI) was completed around September 2009 by 133 respondents. They all work in the industry group Financial and insurance activities. Subdivisions are

  • Financial service activities, except insurance and pension funding
  • Insurance, reinsurance and pension funding, except compulsory social security
  • Activities auxiliary to financial service and insurance activities

Because all these subdivisions show the same trends in their profiles, we’ll discuss them as one.
The OCAI measures the scores on four culture types: the people-oriented Clan culture, the innovative Adhocracy culture, the results-oriented Market culture, and the control-oriented Hierarchy culture, check out our page about OCAI and see the profiles below.

Exchange rates and fighting your way up

In the current financial culture, the results-oriented market culture is most dominant (27,68 out of 100 points). This culture values winning, reputation, competition, and achieving goals and targets. Outpacing the competition and gaining market share are important. Getting things done is what counts. Productivity and profits are important. Leaders are hard-driving producers and competitors.

For most people who commented on the assessment, this is recognizable. Pauline van der Meer Mohr, former Chief HR Officer at ABN-AMRO Bank, looked back in an interview. She says that “it was top priority to stabilize the exchange rates of the shares.” It was a “work hard, play hard” culture with huge bonuses. The board of directors consisted of successful males that were all very ambitious and dominant. They had a fighting spirit and bravura. Indeed, profits and productivity ruled.

Concern for people and procedures

But this is only part of the picture. It’s the part that is exaggerated in the media and that is judged as having caused the credit crunch. The real profile is much more balanced with hierarchy culture counting for 27,30 points. This culture type cares for control, structure, careful planning, clear procedures and efficiency, standardized rules, and stability. Success is sticking to the rules, delivering on time and with reliable quality. The executives operate as coordinators: they monitor the working process.

Also, clan culture scores 25,23 points. This people-oriented culture is flexible and friendly. Colleagues have a lot in common. Their managers behave like mentors and are sometimes seen as father figures. Loyalty and tradition are important, as are a concern for people, teamwork and participation, and consensus.

Least prominent in the current culture is the innovative adhocracy culture: 19,78 points. The financial sector is not a dynamic, entrepreneurial, and creative workplace right now. Though some top bankers have been proven to be very creative with numbers, the average employee doesn’t exhibit much creativity. Risks, flexibility, experiments, individual initiatives, and renewal are less appreciated.

As you can see in the profiles below, the red current profile shows the pattern of more mature, stabilized, often larger organizations, focused on results and structure.
Compare the red profile with the blue preferred profile. Financials are ready for change. They would like to loosen up a bit.

Financials Total
  now preferred
clan 25.23 29.04
adhocracy 19.78 31.48
market 27.68 21.20
hierarchy 27.30 18.27

Financial profile, September 2009

Less performance and procedures, please

It’s an interesting discrepancy with the preferred future culture. Financial people desire an upward shift to more flexibility. Clan culture increases with almost 4 points; adhocracy culture 11,7 points.
Respondents would like to see 6,48 points less market culture and 9 points less hierarchy culture.

These are rather outspoken changes in the OCAI model. With a difference of 10 points or more, it’s often urgent to take action. It means that something hurts, something really needs to be changed, and it needs attention right now. From 5 to 10 points, change is also required but less urgent. These scores illustrate dissatisfaction or readiness to change, and you can see them as a call to action.

The six key dimensions of culture show the same trends. Dominant characteristics of Financial and insurance activities are market culture, closely followed by hierarchy culture. Respondents ask for a dramatic change. They give 19,02 points more to adhocracy culture in the preferred situation compared to the current situation. In the future, they would like a dynamic workplace, where innovation and initiatives are appreciated.

Financials Dominant Characteristics
  now preferred
clan 23.94 22.29
adhocracy 17.62 36.64
market 29.51 24.57
hierarchy 28.93 16.50

Financial profile, Dominant characteristics

The same strong wish is visible at the dimensions Management of employees, Organization glue, and Strategic emphases. More innovation please, less performance and procedures.

More innovation: desirable?

Both managers and employees vote for more innovation and entrepreneurship. Like all higher-educated professionals, they prefer the flexibility and dynamic of adhocracy culture that values initiatives, professional freedom, experimenting, and so on. It’s the culture that encourages you to work the way you like it, not unnecessarily hindered by formalities, positions, procedures, or performance targets. As long as you innovate and deliver quality, it’s OK.

It may be understandable that individual financial professionals like this. But should we favor this culture type for our financial institutions? It seems that banks have been too innovative already, creating financial constructions that no one could control, and taking too much risk.

On the other hand, innovation is necessary indeed in the financial sector. We could also argue that a new way of working is desirable: another culture type could become a healthy focus point for the future. Financial organizations could start to value other things as well, next to profits and money. Some European Banks have started to work on a culture that takes ethical issues into account, a working climate that enhances dialogue and allows critical thinking—also about bonuses (which used to be taboo).

It’s an interesting process. The financial professionals that we interviewed in the Netherlands recognize the current and preferred organizational culture. They see the call for more adhocracy culture coming from employees who have little space to breathe and sometimes feel crushed by their production targets and a flood of procedures. All say that the sector is very conservative and lacks good, let alone inspiring leadership in many places. So, maybe, it’s time for innovation indeed. Obama has started to blow the winds of change.