A Better Financial Sector?

Tom Marsden, CEO of Saberr, discusses what financial services firms can learn from the rise of technology firms

Graduates from the world’s top 10 MBA schools are 40 per cent less likely to go into investment banking than they were before the financial crisis. This analysis by the Financial Times raises some interesting questions. Where are they going? What’s causing the shift?

Tom Marsden

David MacLeod, co-founder of Engage for Success commented on the trend. “In banking I don’t think they’ve done a great job of explaining the importance of it to society and therefore the purpose of the job, where things went wrong, and what’s being done to ensure it won’t go wrong again.” I agree. It’s clear to me that banking can and should play an important purposeful role in the global economy. Allocating resources efficiently has a critical and fundamental role for society to function well. But it seems as though banks haven’t worked out how to communicate this yet. The challenges of rebuilding reputation and managing regulation that financial institutions face are significant. But it feels like it’s time for optimism. Many of these top graduates are, it turns out, looking to join technology companies. Where is the Elon Musk of the financial services world?

Defining purpose is no easy undertaking. It’s hard to translate mission statements into realistic and meaningful actions on the ground. Too often mission statements (or values on the wall) resemble the backdrop for a Dilbert cartoon. Dilbert culture is not the culture of choice for millennials. How can financial institutions recapture some of their allure from the technology firms?

Focus on building great teams

This became clear to me in a recent conversation. I am the CEO of a company that has created a team profile tool. The aim of the tool is to help you predict which people are likely to work best together. It is used for recruitment and/or team design. I was discussing the benefits of building great teams when I heard an unusual reaction. “We are quite concerned when teams become too strong.” This was the managing director of an investment bank responding. “It’s a sign that the collective bargaining of the team will be too strong at bonus round”. He lowered his voice.  “Or worse, the team may leave en-masse to another bank”. He paused. “We try and split up strong teams”.  I’ve never heard that at a technology company.

So why are teams so important?

Teams help build strong cultures. Teams are a good organisation unit to discuss purpose. It’s hard for an individual to link their daily activities to a mission statement. It’s much easier for a team to attempt to do this.  Building strong trust-based team cultures are how you build strong organisation cultures. Teams will support the organisation purpose in different ways. To let organisation culture thrive you need to let team culture thrive. Risk management team will identify their mission one way. A sales trading team will define their mission another way. Defining that connection – in the context of the organisation’s mission – is an important task.

Strong teams attract talent – especially millennials.  Millennials have grown up collaborating. This is fuelled – in part – by how technology enables collaboration to happen. The mind-set of breaking up teams before they become too strong is alien. 88% of millennials prefer a collaborative work culture rather than a competitive one (source: intelligence group). If banks don’t offer these collaborative environments they will struggle to compete for talent.

Teams can make better decisions. There is sometimes skepticism that teams lead to “group-think” or “management by committee”. But the evidence is growing that well designed teams make better decisions. Michael Mauboussin is the Head of Global Financial Strategies at Credit Suisse. He has identified the drivers behind high performing investment committees.  “Ideally, you want a team to have high cognitive diversity and low value diversity. High cognitive diversity ensures that the team has the requisite tools and information to solve problems effectively, and low value diversity means the team is unified in its purpose.” At Saberr, we’ve found that team-members who are aligned on values – i.e. have a common purpose – work together collaboratively and produce better results. A group without alignment of values lack that shared motivation which can often lead to lower performance.

Diverse teams may manage risk better. In this September FT report, women were claimed to make better risk managers. They are “less prone to wild gambles, much less likely to trade in and out of positions in response to market volatility and generally more likely to take a long-term view”.  John Coates wrote a fascinating account, in his book “The Hour Between Dog and Wolf”, of how biology affected market sentiment in the financial crash. He drew on research in neuroscience and medicine. He investigated how the body’s natural reaction to stress may have fuelled the crisis. The hypothesis was that different levels of chemicals in men and women may have affected attitudes to risk. In particular, he observed that men and women produce different levels of testosterone and cortisol. “Testosterone was likely to rise in a bull market, increase risk taking and exaggerate the rally. “Cortisol is likely to rise in a bear market, making traders dramatically and irrationally risk averse and exaggerate the sell-off.” Coates urged a “frank discussion of the pressures that chemicals bring to bear in extreme moments of our lives”. One emerging conclusion: that teams with a gender balance may manage risk better.

How do we balance the role of an outstanding individual with the role of a team? Those who work in finance are accustomed to the fast-paced, high-pressured environment. It is a culture that typically attracts super-driven, headstrong individuals. The contract to date has been clear for employees.  Work hard for an interesting career with extraordinary financial returns. But recent evidence indicates that the contract needs to change to attract the best. Encouraging strong teams to develop is a big part of the answer.

Tom Marsden, CEO of Saberr, discusses what financial services firms can learn from the rise of technology firms

Graduates from the world’s top 10 MBA schools are 40 per cent less likely to go into investment banking than they were before the financial crisis. This analysis by the Financial Times raises some interesting questions. Where are they going? What’s causing the shift?

Tom Marsden

David MacLeod, co-founder of Engage for Success commented on the trend. “In banking I don’t think they’ve done a great job of explaining the importance of it to society and therefore the purpose of the job, where things went wrong, and what’s being done to ensure it won’t go wrong again.” I agree. It’s clear to me that banking can and should play an important purposeful role in the global economy. Allocating resources efficiently has a critical and fundamental role for society to function well. But it seems as though banks haven’t worked out how to communicate this yet. The challenges of rebuilding reputation and managing regulation that financial institutions face are significant. But it feels like it’s time for optimism. Many of these top graduates are, it turns out, looking to join technology companies. Where is the Elon Musk of the financial services world?

Defining purpose is no easy undertaking. It’s hard to translate mission statements into realistic and meaningful actions on the ground. Too often mission statements (or values on the wall) resemble the backdrop for a Dilbert cartoon. Dilbert culture is not the culture of choice for millennials. How can financial institutions recapture some of their allure from the technology firms?

Focus on building great teams

This became clear to me in a recent conversation. I am the CEO of a company that has created a team profile tool. The aim of the tool is to help you predict which people are likely to work best together. It is used for recruitment and/or team design. I was discussing the benefits of building great teams when I heard an unusual reaction. “We are quite concerned when teams become too strong.” This was the managing director of an investment bank responding. “It’s a sign that the collective bargaining of the team will be too strong at bonus round”. He lowered his voice.  “Or worse, the team may leave en-masse to another bank”. He paused. “We try and split up strong teams”.  I’ve never heard that at a technology company.

So why are teams so important?

Teams help build strong cultures. Teams are a good organisation unit to discuss purpose. It’s hard for an individual to link their daily activities to a mission statement. It’s much easier for a team to attempt to do this.  Building strong trust-based team cultures are how you build strong organisation cultures. Teams will support the organisation purpose in different ways. To let organisation culture thrive you need to let team culture thrive. Risk management team will identify their mission one way. A sales trading team will define their mission another way. Defining that connection – in the context of the organisation’s mission – is an important task.

Strong teams attract talent – especially millennials.  Millennials have grown up collaborating. This is fuelled – in part – by how technology enables collaboration to happen. The mind-set of breaking up teams before they become too strong is alien. 88% of millennials prefer a collaborative work culture rather than a competitive one (source: intelligence group). If banks don’t offer these collaborative environments they will struggle to compete for talent.

Teams can make better decisions. There is sometimes skepticism that teams lead to “group-think” or “management by committee”. But the evidence is growing that well designed teams make better decisions. Michael Mauboussin is the Head of Global Financial Strategies at Credit Suisse. He has identified the drivers behind high performing investment committees.  “Ideally, you want a team to have high cognitive diversity and low value diversity. High cognitive diversity ensures that the team has the requisite tools and information to solve problems effectively, and low value diversity means the team is unified in its purpose.” At Saberr, we’ve found that team-members who are aligned on values – i.e. have a common purpose – work together collaboratively and produce better results. A group without alignment of values lack that shared motivation which can often lead to lower performance.

Diverse teams may manage risk better. In this September FT report, women were claimed to make better risk managers. They are “less prone to wild gambles, much less likely to trade in and out of positions in response to market volatility and generally more likely to take a long-term view”.  John Coates wrote a fascinating account, in his book “The Hour Between Dog and Wolf”, of how biology affected market sentiment in the financial crash. He drew on research in neuroscience and medicine. He investigated how the body’s natural reaction to stress may have fuelled the crisis. The hypothesis was that different levels of chemicals in men and women may have affected attitudes to risk. In particular, he observed that men and women produce different levels of testosterone and cortisol. “Testosterone was likely to rise in a bull market, increase risk taking and exaggerate the rally. “Cortisol is likely to rise in a bear market, making traders dramatically and irrationally risk averse and exaggerate the sell-off.” Coates urged a “frank discussion of the pressures that chemicals bring to bear in extreme moments of our lives”. One emerging conclusion: that teams with a gender balance may manage risk better.

How do we balance the role of an outstanding individual with the role of a team? Those who work in finance are accustomed to the fast-paced, high-pressured environment. It is a culture that typically attracts super-driven, headstrong individuals. The contract to date has been clear for employees.  Work hard for an interesting career with extraordinary financial returns. But recent evidence indicates that the contract needs to change to attract the best. Encouraging strong teams to develop is a big part of the answer.