On 15 September 2008 Lehman Brothers filed for bankruptcy. The collapse of the banking giant was the largest corporate failing in history and a trigger for a global economic meltdown. But the impact was not only felt financially. To this day, consumer trust in business has been rocked. Employees and customers alike are demanding transparency and social responsibility from leaders like never before.
As set out in CMI’s Management Manifesto, Leadership for Change, reforming business culture and governance is key to rebuilding trust. This means curbing runaway executive pay and rewards for failure, and instead rewarding leaders on how they deliver company purpose and value to all stakeholders including customers, employees and communities. In the CMI’s recent white paper, The What, The Why and The How of Purpose: A guide for Leaders, managers from PwC, Unilever and Marks & Spencer were among those to assert the increased importance of purpose in business. At its heart is a belief that purpose directs companies to pursue objectives with a strong intention to serve the wellbeing of others – including the public.
Of course, many people were personally affected by the financial crisis. While the reflections from former Lehman Brothers employees highlight their learnings: in the importance of working culture, and of transparency, the biggest lesson must be in their resilience.
These are managers that have triumphed over adversity and have now built supportive environments around them. And their experiences echo those shared by managers in CMI’s Bouncing Back series: it is possible to succeed and learn from difficult times, including business collapse.
Life Since Lehman:
“trust in Leadership is Driven by Relationships and Core Values”
The day that Lehman Brothers collapsed was a big day. Virtually no player inside of financial services was untouched, and the ripple effect reverberated around the world, regardless of sector.
The biggest shift for management teams since then is in knowledge: knowing [a crash] can happen. Though it was – and still remains – painful for many, it was one of the biggest learnings for a generation.
The culture of business has changed fairly significantly since the economic crisis. Risk and control are not only core to the operations of financial services, but have also emerged as having a central role in planning and strategy. This is evidenced by the introduction of significant capital requirements, which are meant to ensure sufficient operating capital to prevent situations like Lehman, but that force institutions to be more creative around funding in a regulatory environment that demands accountability.
There are certainly other learnings that I communicate to my coaching clients from that time. Having had a front seat at the collapse of Lehman and the government bailout of RBS immediately thereafter, the lessons I often share are about resilience, transparency and determination.
I don't necessarily believe that an outcome of the Lehman collapse was a loss of faith in leadership. Whilst that may have been a manifestation of the core problem, trust in leadership – at least on the inside of an organisation – is driven by relationships and perceived core values. I don’t believe that people are wearier of their leadership but I do believe they are a lot less likely to accept behaviour that will create the type of risk we saw during the time of the Lehman collapse without calling it out. Good people can have bad practices.
India Gary Martin is an executive management coach, leadershipforexecs.com
“if People Like the Culture You’ve Created, That’s What Keeps Them in Place”
I worked in banking for eight years; I liked the culture at Lehman Brothers. Even though we didn’t have a [conscious] pro-women stance in business back then, it was a friendly and supportive place to be, and the management were approachable.
I don’t think senior managers below director-level knew about the bankruptcy [beforehand] at Lehman Brothers, but we all saw that the share price started to go down dramatically: people are quite smart in that situation, so you can’t necessarily reassure them. We were waiting for a buyer.
My husband and I are now directors of Italian food business The Seriously Italian Company. I manage two teams: production and sales. I’ve learned that you have to recruit like-minded people. If people like the culture you’ve created, that’s what keeps them in place. That’s particularly true with the younger generation of employees. People who work for us are proud of our values: we create high-quality produce.
I took from my time at Lehman the need to be agile in business: I worked on the trading floor and it was exciting. This year at The Seriously Italian Company we are expanding our production capabilities, but we will always do so sustainably, working with local suppliers and those who are around us.
Natalia Rogoff is a partner of Seriously Italian, seriouslyitalian.com
“I Focus on Collaboration Rather Than Hierarchy”
I joined Lehman as an analyst, far detached from the hierarchy of the bank. It was very much a top-down culture. Everyone was very tunnel-visioned, teams were a collection of individuals who focussed on their personal ambitions – be that promotion, bonuses or recognition.
The Lehman experience has shaped so many of my views on people, culture and management. I went on to become an entrepreneur and co-founded MarketInvoice, where I am also the CEO.
For me, a customer-first approach, along with transparency, have been the biggest lessons. When I started my career, there was a complete disconnect between the bank and its customers. Internally, the disconnect between junior staff and senior management was just as apparent. Decisions were made a world away from ours and we couldn’t ask questions of the highest level. This is why the majority of Lehman Brothers staff were just as surprised as its customers when the bank came crashing down. They simply had no idea what was going on behind closed doors.
My style? I have an open-door policy to everyone in the business and a focus on collaboration rather than hierarchy.
Anil Stocker is CEO and cofounder of MarketInvoice, marketinvoice.com
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