A Bank’s Most Valuable — and Riskiest — Asset

“Culture should be viewed as an asset, similar to an organization’s human, physical, intellectual, technological, and other assets. … Oversight of corporate culture should be among the top governance imperatives for every board, regardless of its size or sector.” – National Association of Corporate Directors’ Blue Ribbon Commission

A strong, clear culture that aligns performance to shared goals is the hallmark of a thriving and sustainable organization. Such a culture boosts performance and long-term value creation. It’s a non-replicable competitive advantage.

Culture is a substantial asset. Like all other assets – loans, cash, investments or fixed assets – banks should have a proper valuation of their culture asset and know what their return on that asset is. It is incumbent on them to proactively identify strategic cultural risks and opportunities to optimize asset performance.

The chief executive officer is responsible for shaping and managing the bank’s culture, but the board ensures that they do so effectively. The ultimate responsibility for a thriving and sustainable culture sits squarely with the bank’s board.

A board should never be surprised by culture-related issues – yet these often only reach the boardroom when there are problems. Recent scandals have brought culture to the forefront for companies, and many boards and executive teams want to know exactly how – or, alarmingly, what – their culture is doing.

An Incomplete View of Culture
It can be difficult for bank boards to assess a seemingly “soft” issue like culture. They typically rely on disparate and indirect metrics such as employee engagement surveys and comments, hiring, promotion and turnover data, net promoter scores, and leaderships’ opinions to form some notion of cultural health. Many banks have done some form of “culture work” as well. In Gallup’s experience, these efforts tend to be episodic and narrowly focused on a desired aspirational state, such as being “agile,” “innovative,” “customer-centric” or “inclusive.”

The results are drastically – and worryingly – incomplete. Directors are becoming increasingly aware that their efforts to assess their culture asset lack a meaningful perspective on the risks, performance or asset value of the culture overall.

Culture Asset Management
Gallup’s experience is that most organizations struggle to define their culture – much less understand and harness effective levers for shaping it. Most banks and boards manage culture by default rather than by design.

We regularly observe high levels of angst and frustration from board members and executives who know there should be predictive signals, but don’t know where or what to look for.

Bank boards need an objective and reliable approach to managing culture risk and maximizing the return on their greatest – and riskiest – asset to effectively govern and guide corporate strategy.

In partnership with bank executives and boards, and leveraging tens of millions of data points, Gallup has developed a solution called Culture Asset Management to help boards measure and strengthen their cultures. We’ve found the 10 most influential factors of a healthy culture that are predictive of positive business outcomes:

• Ethics and compliance
• Diversity and inclusion
• Leadership trust
• Leadership inspiration
• Disruption
• Employee engagement
• Performance management
• Well-being
• Sustainability
• Mission and purpose

These 10 dimensions serve as a framework for determining the real value of culture as an asset and for diagnosing the performance and risk factors in managing that asset.

Bank boards are ultimately responsible for the culture of the organization; they must elevate the way they manage culture to fulfill their duty to steward and guide the long-term sustainability of the organization. Culture is a bank’s most valuable and riskiest asset, and should be treated as such. Yet, boards lack reliable, valid and comprehensive tools to understand the risks and strategic opportunities of their culture, which often leads to surprises.

Bank boards should never be surprised. They need a predictive, clear and holistic view of their bank’s culture to understand what the actual value of the culture asset is – just like every other critical asset.

Jennifer Robison contributed to this article.