Change, culture & risk: a primer for financial services executives with agendas

RMA Journal, The,  Dec, 2003  by Thomas R. Hofstedt

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Two observations are probably safe:

* A variant of the evolutionary approach often becomes an interesting debate on how these newly identified core values should be expressed and communicated. Do we want a highly catchy "bumper sticker," a list of "five core beliefs," or a Lucite[TM] cube with each of its surfaces bearing a maxim for officer behavior? Marshall McLuhan was right: The Medium is the Message.

* "You can have it fast, cheap, or good. Pick any two." The moral of this experientially based aphorism is that significant trade-offs will be required.

Suppose you opt for the dramatic intervention, for which an identifiable project is created, resources are assigned, etc. How do you actually change the values? This question is the subject matter of three copious subliteratures--change, leadership, and culture. Even a brief search confined to just the last few years of The RMA Journal will turn up dozens of relevant references, each with a particular slant.

It is an exquisitely managerial task--one that is enormously difficult but has the capacity to truly alter the course of the company far into the future. The following table is a vastly oversimplified checklist, an attempt to distill a few not-obviously-absurd ideas. These are expressed either as some generalized rules for managing a successful change project or--a very cynical adjunct--as reasons why you may not want to start.

The Good News:

We Know a Lot About How to Change Risk Cultures

* Focus on agendas and process, not structure or forms.

* Enlist and maintain the active support and involvement from the top down.

* Maintain an unrelenting focus on a few key values and vocabulary.

* Stay loose. Be prepared to adapt to changing views and circumstances.

* Create visible and continuous reinforcement of developing values.

Bad News: There Are a Number of Reasons to Think Twice Before Launching Such Projects

* It's hard to do.

* People will resist.

* It will entail painful decisions.

* It will take a long time.

* It will cost a lot.

* It will turn out differently from what you intended.

* There will be collateral damage and unintended consequences.

* The vested interests will wear you out.

* It will probably fail.

In Conclusion

We accept the verdict of the past until the need for change cries out loudly enough to force upon us a choice between the comforts of further inertia and the irksomeness of action.

--Judge Learned Hand (1872-1961)

The culture of risk is always a key determinant of success or failure for a financial institution. It drives behavior. Therefore, management must periodically assess the state of the culture. That assessment should lead to explicit change efforts at intervals during the history of the firm. Some of those changes will be incremental/evolutionary rather than revolutionary. Others will be organic, even inadvertent, as the organization simply adapts to stimuli. Perhaps these less obtrusive, everyday-tinkering kinds of adjustments will be the more powerful and long lasting--a testimonial to the "muddling through" style of management. As Sherlock Holmes observed, "It has long been an axiom of mine that the little things are infinitely the most important."