Bankers' Behaviors Lead to Surprises

The same "mindlessness" that left many bankers surprised by the financial crisis of 2007-2009 remains in some financial institutions, according to a recent study published in Information and Organization.

"Given the important role banks play in our world, the results are disturbing," said study co-author Richard Boland Jr., PhD (GRS '76, management), a professor of design and innovation at the Case Western Reserve Weatherhead School of Management.

Boland and Ronald Eastburn, DM (GRS '11, management), explored bankers' ability to interpret data—not by focusing on the financial crisis itself, but by asking 23 leaders of regional banking institutions in the southeastern United States to describe decisions they made between 2008 and 2010 in both crisis and non-crisis situations that resulted in negative surprises. Nearly all the interviews were conducted in person, the others by phone.

The authors initially expected outcomes to be shaped primarily by forces beyond the bankers' control. Not so.

Bank leaders attributed surprise outcomes from decisions to specific behaviors, including complacency, over-confidence, over-trusting others, diverting blame and lack of curiosity.

"Our findings revealed a deeply flawed process of collecting, analyzing and interpreting information," wrote Boland and Eastburn, a retired CEO of SunTrust BankCard, N.A., in Atlanta, whose work on the study began when he was a doctoral student here. That process, they wrote, "produced a chronic organizational and cultural susceptibility toward making decisions that resulted in surprises with negative outcomes."