Most technology books wouldn't dedicate a part to culture, and I think that mindset is a tremendous failure in other digital transformation approaches. Accessing and adjusting your culture is the most important step in your digital transformation process. The culture of your organization will dictate a great many things, such as your organization's willingness to accept innovation, your organization's ability to adapt to change, and the organization's ability to resolve internal conflicts. Culture will also dictate habits; your organization's muscle memory is dictated by your culture. Muscle memory is the default reaction for how an employee responds to a situation. For instance, I once worked with an organization that had a problem with reversing fees. Customers would call in to the organization and ask to have fees reversed, the call center representatives (CSR) would look to see if it qualified to be reversed based on rules set forth by the organization, and often the CSR would deny the reversal, only to have the customer ask to speak to the manager and the manager would override them and reverse it. After a while, the CSRs realized that the manager was going to override them every time and started reversing fees by default, which led to a loss of income for the organization. Reversing fees became muscle memory for the organization because the culture of the organization was to always give the customer what they wanted.

Where Does Culture Start?

I find that culture at a financial institution is established at the top of the organization and dwindles down to the various departments, sometimes getting changed, usually for the worse along the way, much like the old telephone game that we used to play where one person would whisper a story in the ear to the person next to them. This process would be continued person by person until the final person was reached. When that happened, the last person would repeat what he or she had been told and it would be compared to the original story, and of course the two stories would be drastically different. Here is an example of this happening at a typical financial institution.

• CEO → Senior VPs at executive meeting: It is important to get this project done on time and within the budget.
• Senior VP → VP: It's critical that we get this project done early under budget.
• VP → Managers: Either we get this project done two weeks early and under budget and or we are going to need to look at budget cuts.
• Managers → Employees: The CEO wants us all to work this weekend until we get this done.

Ok maybe it isn't quite this extreme, but it is a fact that communication changes as it filters through the organization. How people respond to these changes is dictated by their muscle memory from previous experiences. If the employees' experience has been that “every project” in the portfolio is considered critical, must be done early, and must be completed under budget, they will eventually just ignore the urgency. This creates the “organization that cries wolf all the time” culture. If the employees' experience is that when urgent communication is handed down, it should be taken seriously and they have seen people lose jobs, then they could either buckle down get the work done, or they could look for a new job. As you can see, there is an incredible need to cut out the middleman when communicating throughout the organization. In one place that I worked, the CEO installed a full video system and had everyone in the company come in early once a month to watch a well-produced show that included messages about the objectives and goals of the organization and upcoming events, and finally, it always ended with a direct message from the CEO. During the downturn of 2008, this communication channel became critical, as he used the medium to hold the organization together and guide us through very turbulent times. In the end, his direct communication became part of the culture, and as a result, the employees found him to be very approachable and they were willing to share their ideas and concerns directly with him.

An often overlooked tool to promote culture is storytelling. Story is an incredibly powerful tool to help employees understand how the organization should work, and what the value proposition of the organization really is. For instance, at Microsoft, there are many stories that are often told and retold about Bill Gates. Steve Jobs had almost a mythical status at Apple and Pixar. These stories or parables were often used as motivators in down times, or as a guide in a difficult situation. A story is a far better tool than any procedure manual or electronic process. I have been blessed to be around some amazing people in the credit union world who shared many stories about things that happened and how they handled them. Stories about customers that they helped, situations that they found themselves in, and problems they solved. As I mentioned in the previous paragraph, your employees need a measuring stick for the decisions that they have to make every day, the stories help the staff make these decisions. In my case, these stories stuck with me all throughout my career and often served as guidance in my own decision making in similar circumstances.

Culture starts from the first day the FI opens its doors. For example, during the genesis of an organization, culture is often created around the founder's values and morals. Much like a real birth, genesis can be a very turbulent time in the life of an organization, and in the case of most financial institutions, many of its current employees weren't present for the genesis process. During the genesis of the organization, many decisions are made that will forever become part of the organization's cultural DNA. For instance, in a financial institution model the decision as to whether to support commercial accounts can change the way the institution evolves culturally. A company that supports charitable events from the day it is established is more likely to have a charitable culture. These values are passed down from the top. The behavior modeled by senior leadership will serve as the guide for the rest of the organization. Like it or not, if you are in a leadership role, your behavior, decisions, and communication techniques serve as a guide for the rest of the organization. Culture always starts at the top.

Culture Breakdowns

Culture can evolve as the organization matures. During times of crisis, the culture is often either validated or in some cases it is forced to change. I witnessed an incredible example of culture in crisis during the 2008 recession. A large organization I worked with was experiencing the results of the recession and was faced with several options, one of which was reducing the number of staff that worked for the organization by closing branches. I spoke regularly with the CEO during this time and witnessed his profound concern at how letting go of people would affect the culture of the organization going forward. He was concerned that the move would run counter to the family culture that was core to the values and the mission of the organization—after all, you wouldn't stop taking care of your family in a crisis. In the end, the organization found a way to survive the downturn without closing a single branch or losing a single job. This move spoke volumes about the culture of the organization and more importantly sent a message to every employee about how important their contribution to the organization was.

Another culture trap that I often see financial institutions fall into is the sales-versus-service culture conundrum. The sales culture is defined as an organization that is always looking to sell the next product, and usually is equated with profits. A service culture is defined as an organization whose primary goal is to solve problems for their customers. The organization believes that providing good service will result in the customers' choosing to do more business with them. Each of these approaches has their strengths and weaknesses. An improperly managed sales culture can lead to situations like the most recent Wells Fargo incident, where employees felt compelled to open false accounts for customers because their quotas were unachievable. An improperly managed service culture can result in the situations where the financial institution's staff is giving away too much and directly impacting profitability because of the perceived service culture values that are expected of them.

I think that both approaches are a myth in the new world. A good organization will turn sales into service, and vice versa. The key to this kind of culture is ensuring that the moral compass of the organization is pointed to true north. If the employees have a measuring stick that they can use to gauge their behaviors as it relates to customers, and that measuring stick is rooted in finding a win for both the customer and the FI, then there is little chance that the organization will need to build a service or sales culture. This by no means exonerates an institution from having the ability to measure their success or failures, it also doesn't mean not setting goals. Simply put, it is aligning the organization's goals with the organization's stated values.

Culture and Talent

Why is culture important to digital transformation? The main reason is that your culture will dictate the type of talent that you attract. People tend to seek out organizations to work where they feel they would belong. A highly technical person might look at an organization's culture and see that they don't feel like there is a fit for an engineer or a fit for someone who thinks in the ways they do. They may also decide that the organization doesn't value technical contributions. Conversely, a highly skilled sales consultant doesn't want to work at a place where a high value isn't put on delivering sales (for instance, a service culture) and would not consider applying at an institution where there isn't a sales incentive program.

Young millennials seek out cultures where they believe they will be heard and their ideas will be embraced. Millennials possess a unique talent to sniff out hypocrisy in an organization. If your organization doesn't have consistent rules across the all departments, millennials will see this as hypocrisy and immediately dismiss the organization's values altogether.

An innovative culture will attract the future leaders of your organization. These innovators will have a growth mindset; a less than innovative culture will attract those with a fixed mindset. Fixed-mindset people like a consistent environment and look for structure supported by rigor and consistency. They are also highly resistant to change because they don't believe they can learn new skills—their belief is that they are either good at something or they are not. A growth mindset person believes that he or she is in constant evolution and enjoys the challenge of mastering something new. In the current evolving banking environment, there isn't much room for fixed mindset people, as all processes are subject to change based on the digital transformation that the industry is currently undergoing. So ask yourself this question: Would your 19- or 20-year-old kid want to work at your financial institution? It's a good way to understand how your culture is viewed from the outside. Your outward branding, technology, and services will all tell a story about your culture. If you still have pens chained to the desk at the teller line, this is a message to the average professional that your organization has not culturally evolved.

Evolution is inevitable. I have spoken with many leaders in the banking industry who have lamented over losing a talented employee to a “work at home” position. In many cases, these employees will take less compensation in order to work at home. When I questioned why they couldn't let the employee work at home as well and keep them, they either stated it was their belief that work-at-home employees were not as productive as those that came in to the office to work or that there was a barrier in human resources or some other department that prevented them from offering the option to work at home. In today's world, you can have a video conference with five people at once, share screens, collaborate all at once on a document, and do it all securely through VPNs or cloud-based systems. Sadly, many financial institutions have not embraced that fact that many of the organization's digital positions could be filled with top talent who want to stay home and work. For those who are concerned with the productivity of a work-at-home programmer or project manager, there are tools that will monitor the productivity of a remote worker by taking screen shots at various intervals and uploading them to that employee's “work diary” so that management can review their work at any time. Working 40 hours in 8-hour intervals from 9 to 5, five days a week, is fast becoming a thing of the past. It is more likely that a knowledge or digital worker will work 60 hours, spread out through various times of the week and do it all from the comfort of their home office, on the road, or at a sporting event. Organizations that cannot evolve to provide workers with these options will be viewed as less than desirable workplaces by highly technical and sought-after talent.

If having an innovation culture is important to attract the next generation leadership, how do you go about creating an innovative culture when one doesn't exist currently? The first and most important step to evolving an innovative culture is to remove the stigma of failure in your organization. A culture that doesn't tolerate failure is not innovative. Failure is a symptom of trying new things. To be clear, I am not talking about tolerating incompetence, I am talking about not punishing people for trying something new and failing.

Here are some examples of tolerable failure:

• Implementing a marketing campaign on Reddit and not meeting the expected goals.
• Changing a process after researching with the staff with an expectation that it would save time, only to find that it added time and the process had to be reverted.
• Implementing a new voice technology and not getting the adoption that was expected.

Examples of failures that should result in administrative action:

• Updating technology without testing and finding out that the new technology isn't compatible with the FI's current software and is causing a major service interruption.
• Implementing a new process without conferring with the stakeholders—expecting it to save time only to find out that it added time and had to be reverted back.

Recently, there has been a trend in technology circles of celebrating failures. Take, for instance, a recently formed group called f--- up nights (you can fill in the blanks here, this is a family book); this group meets regularly to share failures, and by sharing these failures they help others avoid the pitfalls that cratered their project as well as get ideas from others on how to pivot from a failure. Here would be a good place to calculate your failure tolerability index (FTI). (I just made this up but I am going to trademark it, so don't think about stealing it.)

A Harvard Business Review article titled “The Failure-Tolerant Leader” describes how to determine if failure was a result of mismanagement or just a simple failure by asking questions such as the ones below:¹

• Was the project designed conscientiously and vetted by the proper departments?
• Could additional research or preemptive feedback prevent the failure?
• Was the project developed collaboratively, or was important feedback rejected?
• Did others in the organization conspire to kill the project?
• Was the project propelled by its agreed-upon goals or was it taken over by special interests and individuals?
• Has anyone else anywhere else succeeded with a similar project?
• If so, what were the differences between the project at your FI and the project at the other organization?
• Were the mistakes repeated during the process?

Your FTI, combined with the attitude toward failure in your organization, will be the yardstick that innovation professionals use to measure your organization. An innovative person by nature will want to push the limits of the culture, and if he or she sees that is not possible that person will find another place to work.

Steps to an Innovative Culture

Now that we have covered failure, what else does it take to create an innovative culture? The next step is to make sure that it's okay to admit mistakes as long as you have a plan for fixing them. It's also okay to ask someone to help you. Employees or staff members should be the same heroes in the organization whether they solved a difficult challenge themselves or they reached out for help via Google, consultants, or other means to solve a problem. It's important to identify problems quickly and have a plan for resolution. Keep in mind that I didn't say resolve the problem quickly, just to have a plan.

An organization with an innovative culture will want to build a relationship with its consumers that is built on trust. A consumer that deals with an organization that is innovative will expect failures from time to time, and when the organization quickly acknowledges these failures and has a plan to make it right, then consumers can be very tolerant. This is because most people don't expect a quick fix to everything in life, but they do expect to be told the truth. If a problem arises and the organization says it will be fixed by a certain date, the consumer will expect this fix, and unless they hear otherwise, they will expect that it will work on the day that you promised.

An innovative culture teaches people not to dwell too long on a problem before they reach out for help. When I first started my job in the computer lab, I was a smoker; I used run into an issue dealing with the large Novell network I supported, step out for a smoke, and come back and fix it immediately. Because I was young and stupid, I thought that the nicotine was somehow stimulating my brain and giving me the power to solve the problem. In my latter years (I stopped smoking in 1995), I realized that it had nothing to do with smoking and everything to do with being willing to walk away from a problem for a while. In those days, Google didn't exist, and so I really didn't have much recourse but to figure out problems on my own. In today's world, there is no excuse not to use a tool like Google before you do anything else. If there is an error in a log, google it! If something weird happened while you were checking out of the local grocery store, google it! If you can't find a solution to a problem in your project, google it! Chances are that whatever you are experiencing, someone else has already been there and done that and wrote an article or created a video on how to get around it so that others who follow them don't have to suffer like they did. I don't care if you google it, call a friend, consult tea leaves or—gasp!—take a trip to the public library to fix your problem—you are still the same hero to me. In fact, your willingness to reach out for answers instead of feeding your ego by trying to fix it yourself makes you an even bigger hero!

Achievement versus Alignment

I have a friend who runs a large company, and she likes to emphasize that achievement is not always alignment. I find in financial institutions that many people struggle with this concept, especially when it comes to budget season and project management. How are you incentivizing the completion of projects? If it's based on quantity, then you may have a big issue. When you reward quantity, managers tend to pad the projects with achievable things, which is great, except when these things are not aligned with your strategy. This is a cultural thing as well: if we reward any achievement regardless of whether it was aligned with the goals of the organization (which is also human nature), then we are sending the wrong message in terms of alignment. When projects are reviewed in the PMO, it is important that the process includes a way to measure each project as it relates to the stated goals of the organization. Often, when you sift through the requests, you are forced to prioritize mandatory regulatory updates against new technology projects and balance each of those types of project with the various security “have to do it or we will be hacked” projects. The pressure to continually update the digital assets of the organization and to innovate to keep up with the competitors starts to feel like two hands around your neck. The fact is that there is too little budget, too little resources, and too many projects to do.

It's time to readdress our budgeting process and implement projects that meet our growth goals, save money, and/or create revenue to offset your expenses. Each regulatory expense or revenue neutral project should be balanced with a revenue-producing project (to feed your strategy and invest in the future). It's kind of like planting a tree every time you cut one down. It's good for the environment and for your soul. Much like our rewards and evaluation programs, our project list should reflect the strategy and culture of the organization. The project list will influence your culture greatly. The priority of the projects sends a message to the staff as to what is a priority within the organization. All too often, our project distributions come out looking something like this:

This formula often results in an organization getting stuck in a rut, since new features and services are not getting as much attention as operations. What is needed is a more balanced approach to the project categories. Consider the following approach:

This approach provides more balance across the categories while still acknowledging the disproportionate need for maintenance resources. It also better positions your organization to realize improved productivity, efficiency, strategic alignment, and revenue by more fully addressing these critical areas. I would also encourage organizations to do less in terms of project work, prioritizing quality over quantity for the next few years. Use the reclaimed time to work with consulting groups to retrain your organization in a new method of project management and implementation called agile. Organizations that embrace and master cross-functional agility will be better prepared to tackle even the most complex digital projects of the future. It's easier to train a group in new processes and procedures right now than in the crucible of a major technology expansion such as AI or analytics under duress from the market. Take the time to train and train with professionals to shorten your ramp up cycle. The issue isn't solely about budget dollars—even if funding were unlimited, there are only so many initiatives that can be realistically tackled at one time, not to mentioned a limited supply of skilled FTE with the knowledge base necessary to tackle these projects.

As I stated before, cultural muscle memory is the key to understanding your real cultural. What is your staff's default position in any given situation? In other words, how the staff reacts to adverse situations and their willingness to share their ideas is the true measure of culture.