Banking: Unlocking Potential Through Purpose and Cultural Alignment

The importance of higher purpose and culture in banking is the focus of an article published in the Journal of Applied Corporate Finance by Anjan Thakor, the John E. Simon Professor of Finance at Olin Business School at Washington University in St. Louis. Thakor explains how having a strong culture and a sense of higher purpose can influence banking performance and discusses a framework for diagnosing an organization’s current culture and identifying its preferred corporate culture. Thakor also notes that culture became a mainstream concern in banking after the 2007-2009 financial crisis when regulators and researchers began exploring the role that culture played in contributing to elevated systemic risk. Thakor argues that culture and strategy must align for optimal success and that the Competing Values Framework provides a useful tool for identifying and changing organizational culture. The article also discusses how bank cultures have changed over the past 15 years and the benefits of adopting an authentic higher purpose in motivating employees and improving trust in leadership. While many banks have recognized the importance of articulating a purpose, Thakor notes that few leaders truly embrace the power of authentic purpose in motivating employees. Thakor concludes that organizations still have a long way to go in transitioning from transactional cultures to purpose-driven, relationship-oriented cultures.