Newsnight’s economics editor Paul Mason is presenting a programme called Credit Crash Britain on BBC2 this evening. As part of his investigation, he discovered an internal document from HBOS, written in 2004, which shows:
– the bank knew there was a mismatch between the sales culture and the risk controls: the risk controls had “not kept pace” with the sales culture.
– that the regulator was worried about this – and about the potential development of a culture that was “overly sales focused and gives inadequate priority to risk”.
He continues:
Of course, HBOS was not destroyed by aggressive selling. It was destroyed by lending long term and borrowing short term. But it’s clear to me, from reading the report, that the regulator was aware of a cultural problem at the heart of HBOS: that the balance of management experience lay in the direction of sales, and that those with risk control functions were having difficulty slowing the bank down.
Paul Mason is probably right but have you noticed how often, when things go pear-shaped, the culture of an organisation is blamed?
Mergers and acquisitions are the classic cases. Senior executives get very gung-ho, talking about ‘synergies’ and the opportunity to ‘leverage each others market positions’ – you know the stuff. Bosses get very excited about takeovers. But the minute everything goes sour, as sure as the sun is going to rise, they will blame ‘cultural misalignment’ for the merger’s failure to deliver the promised benefits.
How often, though, do firms really try to get to grips organisational culture? If it’s such a stumbling block for mergers, why don’t companies tackle it during the merger process?
I have been asked to do assessments of company cultures during mergers. The results are often surprising for senior managers when they realise that integrating two organisations is going to be more difficult than they thought. But, to quote an old saying, forewarned is forearmed. Once you know where the cultural pitfalls are likely to be, you can do something about them.
But the companies that do this are an exception. Most simply ignore organisational culture until they need to use it as an excuse for why something has failed. Perhaps that is because it is such a hazy concept. It can be difficult to get to grips with and so people often over-simplify it.
If I hear one more person say that ‘Culture is the way we do things around here’ I will be sick. As a definition of culture it is all but useless. If that’s all it is, you’d just change the way you do things and be done with it.
Culture is made up of beliefs and assumptions. These direct ‘the way people do things round here’. Until you change those assumptions, you can’t change a culture. Beliefs and assumptions are mostly unconscious but are shared by a group. It’s almost like the group’s hidden operating system or its rules of the game. When one set of unspoken assumptions meets another set of unspoken assumptions, you get a culture clash. That’s what happens when companies merge.
It is only by surfacing a group’s cultural beliefs, which will often come as more of a surprise to those that hold them than to an outside observer, that they can be understood and managed. Just being aware of the unconscious rules of the game in each other’s companies can help groups of managers work together more quickly. If you handle it carefully, you can even get them to have a laugh about it.
If, four years ago, senior executives at HBOS were worried that the bank’s aggressive sales culture had got out of control and was leaving the rest of the firm behind, they should have done something about it. It would not have been easy but it would, with the right approach, have been possible.
If business leaders insist on blaming organisational culture when things go wrong, shouldn’t they be taking a more proactive approach to it? In any other situation, blaming something you have consistently failed to manage for your failure would surely be regarded as negligence.
Flip Chart Fairy Tales 
Good points. If the managerial details are true, it seems culture was not the issue – it was plain old fashioned controls.
Where were the Directors in all this? And the auditors?
Second point – would you be interested in contributing to a book on Tengagement. David Zinger is looking for submissions structured as 10 points on Employee Engagement. I thought you could offer a wry take?
Great post Rick. Thanks, E.
Hi, I am very intrigued by your post. I agree with you about the way we do things as the default definition and it is so unhelpful – the number of times I have heard people talk about their wonderful systems for knowledge management, or remuneration, or reporting on data, and then culture takes the blame for why it didn’t work.
You mention that you have been called on to assess company cultures. I have been thinking about whether there is any such thing as company culture. I think that the concept of company culture makes it seem like a big invisible thing that gets in the way, that stands outside of the people in the company and acts on them at the same time as it is formed by them. The concept of culture also implies that it is something that can be “managed.”
My opinion is that there is no such thing as company culture. What does exist is patterns of human interaction, that can be very stable or can change immediately. What we cannot do is stand outside of human relating and manage “culture.”
I am pleased I discovered your blog.
Regards, Stephen Billing http://www.changingorganisations.com
Thanks Stephen. I should warn you that I did my Master’s thesis on organisational culture so I can bore for England on the subject. And often do.
For me, the key question was that posed by Linda Smircich nearly 25 years ago. Is an organisational culture something an organisation HAS or something an organisation IS?
If it’s something an organisation has, you can chuck it away and get a new one. If it’s something an organisation is, then changing it goes to the heart of the organisation and is much more difficult.
In my view, culture is very much the latter – something an organisation is.
In that sense, it is similar to any society. People within it share assumptions, beliefs and meanings that are not shared by those outside it. They are usually unconscious in that people don’t realise they share them until an outsider points it out.
You are absoultely right to say that we can’t use culture as an external tool to manage people, because the culture is part of the people.
Can it be managed? Probably not in the way many managers would like to think. Changing assumptions sounds easy but it’s actually damned difficult. But, by making people aware of their assumptions and how they can get in the way of what they need to do in the future, you can get people to start doing things differently. What you can’t do, though, is say “From next month we are going to ditch our old command and control culture for one that favours personal initiative and empowerment”. It takes much longer to change mind sets in that way.
Does organisational culture exist? Well organisations don’t really exist in any tangible sense. They are human constructs; they only exist because we all belive them to exist. In the sense that people have shared assumptions and shared understandings of the organisations they are in, which outsiders don’t share, then , yes, culture exists.
And, while it might be difficult to manage, we ignore it at our peril. If you ever get into trouble abroad, it’s usually because you haven’t understood something about the local culture. The same is true in organisations.
There! I told you I could bore for England about it.
Hi Rick, Sorry to disappoint, but I did not find this boring at all. Quite the contrary – I would be interested in having a look at your thesis – I think we are in email contact.
I am familiar with the question of whether culture is or belongs to the organisation. Both these questions assume there is such a thing as organisational culture and address themselves to what it might be. My question is outside that. My question is, is there such a thing as organisational culture?
You raise a very interesting question about organisations and how they are a convenient fiction for humans in making sense of their lives. As you mention, both organisations and cultures are human constructs that exist in our thinking. And it is no doubt useful in many circumstances to think in this way.
I think the question of what culture is also raises the question of what an organisation is. I have discussed this at http://www.changingorganisations.com/2008/08/what-is-an-organisation/. Essentially, we tend to think of organisations as ‘things’ outside of the humans involved, in the same way that we tend to think of ‘culture’ as a thing outside of us. We then tend to think of these
‘things’ (i.e. organisation and culture) as amenable to the dictates of the will of those designated as managers. And this gives the illusion that we can control them.
I think you might be arguing in your second to last paragraph that because organisations exist and they are human constructs, that means that culture exists, which is also a human construct. You then go on to say that we shouldn’t ignore culture and compare it to going to another country.
My position is that what you think is the nature of organisations will affect your position on organisational culture. I think that organisations are not ‘things’ and neither are ‘cultures,’ rather both are patterns of human interaction. They exhibit qualities of self organisation and so are not subject to the management of the coalition of the most powerful.
In no way am I saying we should ignore either organisation or culture. I am saying that we should understand these concepts as patterns of interaction, not as ‘wholes’ called organisation or culture that we can then manage to achieve our strategies or objectives.
This obviously raises questions about strategy and implementation which we can save for another day.
Regards, Stephen