It is easy to place blame on items outside of your control – competition, interest rates, bad luck or a million of other reasons. However, a hallmark of a good banker is their ability to take responsibility for actions, be humble and take steps to ensure future success. While there are qualitative reasons why this is true, in this article we will look into the quantifiable reasons why banks and bankers that take responsibility for their actions are better served.
Fiona Lee and Chris Peterson from the University of Michigan and Larissa Tiedens of Stanford University tested this thesis by looking at 14 companies over a 21-year period and ranked the attribution of under-performance. The study found that those companies that attributed poor performance to internal, controllable events had higher stock prices one year later. It turns out that by taking responsibility, banks can appear more in control, leading to more positive impressions.
The research team then tested this idea where participants reviewed one of two fictitious annual reports where the company did poorly. Half the readers got an annual report that blamed internal factors such as failure to execute or misreading the market. The other half of participants read a report where the cause of the poor performance was attributed to external, non-controllable factors such as strikes and weather. It turns out that the readers that reviewed reports where the managers took responsibility viewed the company in a more positive light on a number of measured dimensions such as trustworthiness and competence than compared to the second group.
Bankers that shift blame to external factors may feel better about themselves, but quantitatively end up hurting the perception of the organization and their bottom line. External factors can always be blamed but most of the time they are controllable. Competition can be managed with training and a brand, interest rates can be managed with tools and strategies and risks can be mitigated by better contingency planning. Most external factors are in fact, controllable to a large extent.
Placing blame on external factors even if true, gives you reasons not to solve a problem and leave outsiders wondering what will happen in the future. Taking accountability forces you to improve.
Community banking is blessed with many humble bankers that should take solace in the fact that the next time they make a mistake, their admission of responsibility, their demonstration that they are taking control of the situation and their action plan to correct the negative event will morally, and scientifically serve them well.
Submitted by Chris Nichols on October 16, 2017