By Chairman and Chief Executive Officer Marc Cooper
Culture is not a soft management variable in financial services. It is the operating system.
Strategy, scale and profitability matter, of course. But culture determines how decisions are made
when markets turn volatile and short-term gain tempts long-term compromise.
It is the invisible architecture that keeps an institution centered under pressure. Yet the concept is
widely misunderstood, especially when it is equated with collegiality or a pleasant work
environment.
That misses the point. Culture is knowing who you are—and being true to it. It is the shared code
that governs behavior when no one is watching. You may admire a firm’s culture or dislike it, but if
it is widely understood and reinforced with continuity over time, it can be a source of enormous
strength.
Cultural drift begins when that shared vision weakens. The shift is rarely dramatic. It is
incremental. Advice slowly turns into salesmanship. Discipline shades into complacency.
Confidence hardens into entitlement.
When Culture Starts to Drift
Bear Stearns, for instance, was defined by its scrappy entrepreneurial intensity and trading
prowess. Returns were robust. Risk-taking was disciplined—until it wasn’t. Leverage accumulated.
Exposures concentrated. What had once been calculated risk became normalized risk. Earnings
did not signal the fragility building beneath the surface. When liquidity vanished, the edifice
collapsed. Lehman Brothers illustrates the pattern in a different way. It had a fiercely competitive,
high-performance culture—demanding, even ruthless—but authentic to itself. That identity
functioned effectively for years. The drift occurred when individual ambition, amplified by leverage
and complexity, began to overpower institutional guardrails. We all remember what followed.
Forgetting your innovative roots isn’t just a risk for financial firms. Consider Eastman Kodak, an
early pioneer of digital imaging. It did not abandon its culture so much as cling to the wrong
version of it. The company failed to see emerging risks to its high-margin film business, even as
digital photography—and then smartphones—reshaped the market. By the time the shift became
undeniable, its inventive heritage had fractured. Kodak filed for bankruptcy protection in January
2012 and later reemerged as a far smaller industrial technology company—a survivor to be sure,
but no longer the force it once was.
The Risks of An Unmoored Culture
Effective CEOs understand the existential risk of a culture that becomes unmoored. Leaders must
continually ask: What are we? What made us successful? And how do we grow without
compromising the core that defines us?
Market cycles test that discipline. Bull markets are dangerous because success breeds
overconfidence and, at times, avarice. Firms expand too quickly, dilute standards and normalize
incremental risk. Down cycles are no safer. Retrenchment can strip away the very people and
capabilities that once differentiated the organization.
Strategic mergers amplify cultural risk further. Integration is not primarily about cost synergies or
overlapping offices. It is about people. You are asking individuals shaped by one code to adopt
another. Culture does not average out. It either coheres or fragments. Mishandled integration
weakens internal trust long before clients detect it externally.
Another recurring hazard is promoting prolific producers into leadership roles without assessing
whether they can steward an institution. Superstardom confers credibility. It does not automatically
grant judgment, patience or organizational discipline.
Compounding Trust Across Decades
An institution cannot become a federation of personal franchises. Continuity of standards,
incentives and decision-making norms is what allows a firm to compound trust across decades.
Leadership requires both commercial credibility and the ability to build and manage a durable
enterprise—a combination rarer than some firms care to admit.
Preventing drift requires deliberate leadership. CEOs cannot assume culture will sustain itself
through slogans or town halls. It must be embedded in how people are hired, rewarded and
promoted. Leaders should regularly ask not just whether the firm is performing well, but whether it
is succeeding in ways consistent with its founding discipline. When culture is treated as a living
system—reinforced through continuity of standards, leadership example and institutional memory
—it becomes far more resilient to the pressures of market cycles.
Embracing Cultural Stewardship
In finance, clients seek counsel, not merely execution. When cultural identity frays, advice subtly
changes in tone. It becomes more transactional, more aggressive and less anchored in long-term
relationships.
Cultural failure happens slowly, then all at once. Trust, once fractured, is painstaking to rebuild
and never quite the same. Cultural stewardship is not optional. It is the difference between an
institution that compounds strength over decades and one that ultimately unravels.
Marc Cooper is a Member of the Forbes Finance Council and this article originally appeared on Forbes.com