Does More Uncertainty Make Better Bankers?

(MoneyWatch) 

• The Find: Rather than being paralyzing, a hefty dose of uncertainty actually boosts bankers' performance according to a new book.
• The Source: Bullish on Uncertainty: How Organizational Cultures Transform Participants from A. Alexandra Michel, assistant professor of management and organization at the USC Marshall School of Business, and Stanton Wortham of the School of Education at the University of Pennsylvania.

The Takeaway: In a timely new book, Michel compares the organizational culture at two unnamed major investment banks that employed very different management models:

At bank A: top management articulated a clear strategy that was translated into explicit roles and into revenue goals for bankers. New bankers were trained carefully to fill these roles, assigned work based on their relevant expertise and given targeted feedback.

At bank B: instead of receiving goals and roles, new bankers were deluged with statistics about the consequences of their actions ?€" ranging from cost of color copies to deals lost to the competition.

Bank A seems to have followed the textbook formula for solid management, but which bank performed better? The counter-intuitive answer, according to Michel, is the bank that fostered what must have been a truly uncomfortable level of uncertainty. The atmosphere of doubt at bank B led overwhelmed bankers to constantly reach out to colleagues "and the company consequently thrived by constant collective questioning and collaboration."

In bank A, the clearly defined rules and organization led to a culture "in which expertise is segmented and in which personal fiefdoms flourish." Did this confidence and segmentation contribute to the current blood-letting in the industry? Absolutely, says Michel. "Such expert cultures have contributed to the 'bad bets' that recently have rattled financial markets, resulted in thousands of layoffs and undone venerable institutions."

Read the book for the really deep dive, or more about the book at USC News.

The Question: Could some of the current market mayhem have been prevented by promoting uncertainty?

(Image of uncertain guy by Blyzz, CC 2.0)
This post first appeared on BNET's BNET1 blog.