succeeded through (1) recruiting outstanding talent, partly by
offering these talented individuals wealth creation opportunities
superior to those of other industries; (2) having them learn key
technical skills on the job from experienced master practitioners;
and (3) engaging the entrepreneurial energy of business unit
leaders by allowing them considerable autonomy to manage their
businesses and relate to other parts of their firms.
The obstacles financial services firms face can be divided into
two related but distinct categories: those relating to the nature of
the organizations and those relating to the type of professionals
who tend to work in them. On the organizational level, firms tend
to define success predominantly in quantitative terms. Sales func-
tions are focused on their annual sales numbers; trading desks tally
their profit and loss at the end of each day; clients analyze the
returns in their portfolio or the price at which their companies will
be sold; and financial service CEOs scrutinize their earnings per
share. In an industry obsessed with numbers, initiatives relating to
the exchange of knowledge and ideas, where benefits are often real-
ized over the long term and are difficult to quantify even then, tend
to be underappreciated.
Furthermore, many investment banks are under regulatory
obligation to set up formal barriers between securities underwriting
and advisory units. These barriers tend to create silos within
firms and inhibit communication. Much of the recent publicity
about investment banks relates to these barriers and the extent to
which they have or have not functioned effectively in recent years.
(As we write this chapter, it is unclear what effect this increased
public scrutiny will have on financial service firms’ receptivity to
outside ideas and internal information sharing.)
Another feature of these firms that can inhibit the free flow of
ideas pertains to their decision-making processes. There is an inter-
esting paradox in the process through which decisions are made in
financial service firms. Because of the nature of the business, quick
decisions are often needed. On a trading desk, decisions are made
318 LEADINGORGANIZATIONALLEARNING