Sunday, October 26, 2008

Who Do You Trust?

It all comes down to trust. Banks have money to lend; if they don't lend it they don't make a profit. Yet, they refuse to lend, or they impose such onerous conditions that very few people can qualify.

Wise people have explained it thusly: banks no longer trust anyone. In the good old days they would dole out money to just about anyone. Now they trust almost no one.

This swing between two extremes was the byproduct of a specific culture, the culture of Wall Street. Not a Wall Street made up of Ivy League Republican males sipping martinis, smoking Cuban cigars, and reminiscing about the good old days at Hotchkiss. Not at all.

Nowadays, Wall Street is a model of socio-cultural diversity. It is perfectly heterogeneous. Its denizens come from all over the nation and the world. They represent every religion, race, ethnic group, nationality.. you name it. Wall Street has Democrats, Republicans, and Independents, in roughly equal numbers. For every Henry Paulson you can easily find a Robert Rubin or Jon Corzine.

Since we live in a flat world, a world that has become a great financial bazaar, it is not surprising that financial institutions that lend and borrow everywhere should look like the world. They are necessarily diverse, for better or for worse.

Diversity is not a flaw; it is a challenge. A firm that fails to meet that challenge will get mired in the problems diversity creates without being able to profit from the advantages it offers.

Reflecting on these issues, I recalled the recent research of Harvard political scientist, Robert Putnam. You may have heard of Putnam, author of the best selling, "Bowling Alone."

Last year Putnam published the results of a multi-year study on cultural and social diversity. Link here.

He concludes: "In the short run... immigration and ethnic diversity tend to reduce social solidarity and social capital. New evidence from the US suggests that in ethnically diverse neighborhoods residents tend to 'hunker down.' Trust (even of one's own race) is lower; altruism and community cooperation rarer; friends fewer."

So, more diversity leads to less trust. We tend to trust people we know. And we trust people within whom we have the most in common. Absent that, we suffer anomie. We lose our cultural moorings and feel less secure, more threatened.

Adrift we swing between offering too much trust to too many people and not enough trust to too few people.

The challenge is: how do you manufacture trust... within a neighborhood or within a corporation. Putnam's answer: by creating a strong, unified, inclusive culture.

The institutions that have been most successful at it, from the military to the football team to the marching band, impose their values, their rituals, their ceremonies, and their customs on everyone equally.

Let's call this the uni-cultural solution. Dov Seidman's LRN is a consulting group that facilitates this uni-cultural approach. It has much in common with what an executive coach does on the micro level.

The alternative is the multicultural morass. This approach pretends that no one needs to conform to the customs and values of the strong culture; everyone should be able to bring his own habits into the institution, and be respected for as much.

Rather than promote conformity and group loyalty, this kind of workplace makes a fetish of non-conformity and ancestor worship.

Instead of fostering group solidarity through training exercises, a multiculti group sends everyone off to therapy, through one of the bastard children of the therapy culture: sensitivity training.

There a group of people gets together to share feelings, to vent, and, ultimately, to humiliate themselves and each other. If you want to undermine trust, if you want to create a culture of individualism and anomie, where everyone really is out only for him or her self, then sensitivity training is the way to go.

Its message is simple: we may come from different cultures, but that does not matter. Nor does it matter if we conform to our new firm's culture. No, we are all human beings, we all have feelings, we all have the same feelings, we all feel pain, and we have all been humiliated.

It is not just the emperor who has no clothes; we are all naked before our colleagues. Systematically stripped of our dignity and self-respect we are either going to hunker down or take care of Number 1.

If you are an executive in a company ask yourself whether you are working to create a strong culture, one where all of your employees share the same customs, participate in the same ceremonies, trust each other, feel an abiding loyalty to the group, and gain social capital from being part of it.

Because, rest assured, this takes work. And it takes time. The least I can say is that it begins with the example the chief executive sets. It is top-down cultural management.

Otherwise you will find yourself with a culture where everyone wants to get his and get out. Doesn't this resemble what was happening in the high-flying risk-taking financial firms. Some of them even tried to emphasize loyalty to tradition... at the same time that they allowed rogue traders to go off and do as they pleased... judging them on how much they produced?

These everyman-for-himself cultures seem to have been transformed into cultures where no one trust anyone. In reality, these are simply two sides of the same coin, the coin where loyalty has been erased in favor of the new virtue of getting out in time.

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