When Greg Smith left Goldman Sachs last week, he didn’t leave without settling old scores. In an article that got published in the New York Times he describes the corporate culture at the firm as one that had mutated from positive to ‘toxic’, mainly due to its shift from a client focus to the pure profit pursuit. The “decline in the firm’s moral fiber”, Smith writes, is threatening its survival and he, for one, no longer wants to be part of it. Congratulations to Mr. Smith on his decision, and thanks for confirming some of our worst suspicions about the industry. But he is by far not the first investment banker who allows mere mortals a glimpse into the way things work in the money business.
The discussion around culture and values in investment banking is all too familiar to me. In a conference paper that I wrote with a colleague in 2011 we looked at several insider-reports by British ex-investment bankers - whole books have been dedicated to the very same phenomenon. One of the questions we raised was: “Whose fault is it anyway?” – Is it the organizational culture that instils bad behavior in - otherwise fine - individuals, or does a certain malicious breed of people create this very culture? In other words:
„The perennial question that has been posed at dinner parties across London for decades is: does the City attract arrogant tossers or do they become so as a result of their job?“[1]
Organizational Culture and Identity: a systemic view
There seems to be no clear-cut answer to the crucial question whether people just fit into such conditions or whether they are changed by the very circumstances in profound ways. Organizational culture and individual identity are tightly interwoven and caught in a mutual interdependence, because “who we are is reflected in what we are doing and how others interpret who we are and what we are doing.”[2] If a culture holds strong influence on its members, as is often the case in the investment banking industry, one can be deceived to thinking of individuals as puppets of the system, victims of the circumstances forced to forget about their responsibilities to humankind. Such a view is also implied by social identity theory (SIT) holding that, when people begin to adopt prototypical group norms through adjusting their behaviours, they slowly start to negate their personal identity and experience a form of depersonalization.
We don’t agree with this view that people’s identity may be overruled by a new social context. We believe that the influence between culture and individual doesn’t follow a one-way street, but works more like a busy intersection of collectives, individuals, different values and beliefs. In other words, our investment bankers are not just thrown into a destructive culture and struggling to survive. They co-create and maintain this culture as they go along.
Nobody is off the hook – ever
We think that individual identity is self-constructed which means that it holds certain values that are already associated with the respective environment. In simple terms, even before entering the investment banking industry, people are attracted to it because they want to unify their personal identity with the collective identity of their future employer. Whilst this hints toward an agency of individuals who are driven by certain goals, this agency is tightly interwoven with its environment. Of course, once they are integrated in the organization and sucked up by the culture, its practices and processes, symbols and rewards, the influence is immeasurably stronger and develops momentum that is hard to resist.
In an attempt to answer the question whether the investment banking industry attracts a certain breed of people or whether they become so after working there, our answer would be a careful: both. Personally, I cannot but argue that we have to understand the system before the individual. If we want to change an industry we cannot expect the change process beginning with the individuals caught up in the system. We have to make change happen in the system first, through better policies, regulations, processes, reward systems which will create different cultures, which in turn will encourage individuals adapt to the new ways.
Why? - Because there are simply not enough Greg Smiths around.
Please post your comments, or send me an email: andrea.derler@gmail.com
[2] Hatch, M. J., & Schultz, M. (1997), Relations between organizational culture, identity and image. European Journal of Marketing 31(5/6), 356-365
