Thought Leaders
The Story of Two Banks: The Role of Uncertainty in Ensuring Survival
When they wrote their detailed study of how two prominent investment banks address learning and uncertainty in their organizations, Alexandra Michel and Stanton Wortham could not have known the depth of the uncertainty that would come to Wall Street around the time of the release of their book. In Bullish on Uncertainty: How Organizational Cultures Transform Participants, they describe their study of the way two successful investment banks have built very different cultures, and the impact of these cultures on their employees. While the authors do not reveal the names of the banks, Wortham did say that they have fared quite differently in the current economic climate.
Michel, a former investment banker now at the University of Southern California, spent thousands of hours shadowing banking teams at both banks and interviewing hundreds of employees. She gained extraordinary access into the inner workings and thinking of these organizations. Wortham, a professor at Penn’s Graduate School of Education, worked with Michel to extract insights on organizational culture and learning. The two authors are on the faculty of Penn’s Executive Program in Work-Based Learning Leadership, a degree program designed to prepare the Chief Learning Officer (CLO) and other senior-level executives for success.
They did not just develop new skills or new knowledge, they changed fundamentally how they thought about themselves. The work environment has the power to change who these people are.
–Stanton Wortham, Judy & Howard Berkowitz Professor, Graduate School of Education; Faculty Member, Executive Program in Work-Based Learning Leadership; and co-author, Bullish on Uncertainty
Wortham says he was struck by the difference in the way the two organizations they studied approached uncertainty, as well as the extent of the impact of organizational culture on shaping the views and behaviors of new employees.
Rites of Passage
The first bank, which the authors call “Individual Bank,” took a traditional approach to managing and developing employees, similar to the approach of many Wall Street rivals. The second bank, which they call "Organization Bank," had a very different strategy and culture.
Organization Bank exposed employees to unsettling and uncertain situations, experiences that made employees feel “helpless and incompetent.” This process, the authors write, “purposefully broadened the amount of information that its inundated bankers had to attend to, it withheld clear goals and directives, and it did not give bankers the training they needed to do their jobs.” These employees were thrown into water over their heads, and forced to swim. Young employees were assigned to projects that were not in their areas of strength, so they had to reach out to other experts in the organization. Rather than sending its best experts into the room to meet with clients, the organization tried to harness the knowledge of the entire organization. While Individual Bank saw knowledge as something that individual experts possess, Organization Bank saw knowledge as something that individuals access.
“While many organizations try to control and manage uncertainty, I hadn’t thought about organizations that would try to augment uncertainty,” Wortham says. He compares the unsettling experiences of employees in Organization Bank to “rites of passage” in anthropology, where young men or women may be placed in an uncertain environment as a way to move from one developmental stage to another.
A Different View of Learning
Given this view of knowledge, Organization Bank had a different view of learning. “Learning is normally conceived as the accumulation of scripts, concepts, or texts that people build up through their participation in an organization, possessions that the individual can then use in new situations,” the authors write. “At Organization Bank, in contrast, bankers learned by clearing away preexisting concepts and identities, such that they were free to recognize situation-specific resources and devise unique solutions.”
In contrast, Individual Bank “treats individuals as bearers of expertise who independently represent the world.” Individual Bank saw identity as tied to a specific area of expertise such as mergers. But the researchers found that identity can sometimes get in the way. “Their abstract identities distracted them from concrete problems and thus, ironically, undermined the achievement of these goals.”
The Power to Change
The different cultures of the banks nourished a very different set of employees. This was particularly surprising because there was no clear difference in the set of employees who were hired. New employees who joined both banks came from roughly the same set of schools and similar backgrounds. They had the same types of egos and expectations. Many of them had interviewed at both companies. Yet the organizations they joined shaped a very different set of behaviors and expectations.
“The depth of the change was striking to me,” Wortham says. “I have a doctorate in human development, but I had no idea that you could build an environment like this that would have such an influence on the kind of people these bankers were. They did not just develop new skills or new knowledge. They changed fundamentally how they thought about themselves. You can’t think of processes like identity, knowledge, and cognition separate from social context. Their identity or self is bound up in the context they are in. The work environment has the power to change who these people are.”
In their early training, Organization Bank intentionally withheld guidelines and forced bankers to think, feel, and act to meet specific challenges. Some employees were frustrated by the lack of specificity of the introductory sessions, which consisted primarily of meetings with different parts of the organization. But this gave them the resources to draw upon later and made them more sensitive to the unique aspects of each client problem. It helped employees in “noticing changes in the environment and rapidly marshaling organizational resources to assemble unique solutions.”
As one example of how the employees were changed as a result, Wortham pointed to the difference in response to a negative client comment during a meeting. Individual Bankers would typically take personal offense and become defensive, since their expertise was being challenged. Organization Bankers in the same situation would not be offended. Instead, they would address the client’s concern and explain their processes.
Organizing for Uncertainty
Both banks were highly successful, which means that the more traditional uncertainty reduction practiced by Individual Bank can be a viable strategy even in rapidly changing environments. Wortham also stresses that organizations cannot apply this approach piecemeal. Their staffing, compensation, training, leadership, and other factors need to fit with a culture that embraces uncertainty.
The experience of Organization Bank shows, however, that for organizations in highly uncertain environments, creating more uncertainty inside the organization may help them survive and succeed. Organization Bank created its distinctive approach during a crisis and brutal restructuring in the 1990s. It created a flexible organization that would help it better meet future changes. “If the environment is stable enough, maximizing efficiency might be the most profitable way to go,” Wortham says, “but for more uncertain environments, typical ways of training people and rewarding people often get in the way of the kind of creativity and flexibility that you want.”
Organization bank seemed better prepared to meet the uncertainty of the recent crisis on Wall Street. As Wortham notes, “In an environment of extreme uncertainty Organization Bank is doing fine, although all stocks in the sector are down. But Individual Bank has taken a severe hit.”
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