Ken Kraft on Leadership and Ethics Training in Financial Institutions

Dec 6, 2011

The two most important leadership attributes are empathy and humility, says Ken Kraft. He works with Bank of New York Mellon employees in 36 countries around the world to promote a culture of leadership and ethics within the organization.

JULIA KENNEDY: Welcome to Just Business, a series of interviews on global business ethics.

Today I'm talking about leadership and ethics training in financial institutions with Ken Kraft. He has worked in leadership development and training at Wachovia Bank, Bank of America, and now he is vice president of learning and an organizational development consultant of Bank of New York Mellon.

He works with BNY Mellon employees across the country and across the globe to promote a culture of leadership and ethics in the organization. And it's a big job. After all, the bank holds $26.3 trillion in assets and has more than 100 locations across 36 countries.

Ken Kraft, welcome to Just Business.

KEN KRAFT: Thank you.

JULIA KENNEDY: How does leadership training work in financial institutions? Let's start with a very broad question.

KEN KRAFT: That's fine.

Leadership training is actually pretty interesting, and it is probably broken into different fragments, if you will. There's leadership training that will be more at the mid-level management level. Then there are programs for executive development as well. So it's just a matter of where that individual fits as to which particular program might fit best for them, and what we might do for them as well.

JULIA KENNEDY: How often do these employees get training? Is it once a year, working very closely with specific executives? How does that work?

KEN KRAFT: We do it a little bit looser than that. It's more flexible.

We develop particular programs that they can themselves get involved in. So we may have development tracks at different levels for leaders. As they go through those particular tracks, then they are going to get a number of different courses and educational opportunities as part of those particular classes or those tracks.

The nice thing for them is they get to do it at their speed in a schedule that fits for them. And then, it also creates a minimal disturbance with what they do on a daily basis as well.

JULIA KENNEDY: They can work around other important meetings, etc.

KEN KRAFT: Absolutely.

We rarely have mandatory training. If a mandatory training is something that is asked for, then there is usually pretty good reason as to why we would need to do that. Most of this is just about them and developing personally so that they can exhibit the right behaviors within the work environment.

JULIA KENNEDY: How did you get into this business of leadership training?

KEN KRAFT: It started a long time ago. I became interested in education for corporations back when I worked for a company called American Arbitration Association. With that particular organization I really started out as a marketing coordinator. So I was dealing with a lot of their business pieces and going out and really working with companies and corporations to use arbitration clauses within their contracts.

I just happened to fall into the education component. We needed to do some education for a group of attorneys. At that particular point, I think I was the only one who raised my hand. As I did that, it began this journey, as I continued to do particular education programs in the legal industry itself that dealt with arbitration/mediation as I obtained my MBA and found myself really being attracted to organizational development and everything that that meant.

So it just was something that attracted me, something I fell into, and then it just continued to pique my interest and I kept going with that path.

JULIA KENNEDY: Are you a huge fan of Stephen Covey?

KEN KRAFT: I think Stephen Covey has wonderful principles and concepts. He has based those concepts off of really good principles that have been in the business world for a long time—things like the ladder of inference. That is where, when you get into a conversation, even if it is a difficult conversation, where do you start that conversation? That conversation should start with the other person's story so that you understand the facts, you understand who they are and where they are coming from. Stephen R. Covey did embrace that. So I appreciated that.

He touches on something that is extremely important within the business world, and that is emotional intelligence and what do we do with emotional intelligence. He breaks it out into some other things, such as spiritual intelligence, intellect itself, but deals with this whole concept of emotional intelligence.

That is proving to be an extremely important concept for leaders themselves. It's not only to be able to deal with their own emotions and reactions that they may have in a given situation, but then also being able to handle or deal with emotions of employees or direct reports as they are receiving information and getting communication and how do we deal with those.

So that whole emotional intelligence component I think is extremely valuable and important. So Stephen R. Covey, yes, I think he has done some great work. His books are best-sellers, so they catch on out there. But the concepts are solid.

JULIA KENNEDY: So one concept of a great leader is to have emotional intelligence. What are some other attributes of leadership that you have tried to inculcate in the executives you have worked with?

KEN KRAFT: Developing a team. If you can do that well, and if you can do it with what I have now come across as probably the two most important characteristics of a leader, which are empathy and humility, then you can begin to progress and grow. It will help in those situations that come up that are conflicting.

There are also really important components on how do we deal with our clients: What's the best way that we deal with those clients? What's the most appropriate way to deal with our clients and to make sure that our ethics are at a high standard with our clients? That's extremely important.

Global acumen, just being able to deal with different cultures and the complexity of cultures, is extremely important for a leader. We are now embarking, and we have been for a long time, into multiple cultures, into a global environment, and if we cannot really embrace that global acumen and how do we work effectively across cultures, then that is going to be difficult for a leader. They've got to learn how to do that.

And what are the nuances: How do I adjust from being U.S.-centric to being able to look at what is going on in Europe or in Asia, and being able to deal with colleagues and clients across the globe?

JULIA KENNEDY: You do this internal leadership consulting work at BNY Mellon.


JULIA KENNEDY: When you are working with locations outside the U.S., for example, are there different challenges or questions that are posed in those sessions than the ones that are posed in the U.S.?

KEN KRAFT: Well, there are a number of nuances that occur. It just really simply comes down to how they work within their particular work environment. So they may have a completely different understanding of status than what we may find in the United States, for instance.

JULIA KENNEDY: You mean related to your job position?

KEN KRAFT: Exactly.

So somebody may be very egalitarianist here, but their status may be an extremely important concept—you know, hierarchy, if you will. How do we deal with that, how do we deal with the leadership, and how do we even protect that leadership? I think those things become very important in different cultures. So we have to adjust.

We have to be able to take a look at that, understand ourselves well enough, what is our own cultural makeup—those attitudes, those beliefs, those values—that are beneath the surface of our behaviors, and then being able to adjust those so that we can work better with others.

One of the ways that we do that is understand ourselves, then we can understand others and their culture, and then we can adapt and be flexible.

JULIA KENNEDY: Can you give me an example of one time when there maybe was an adjustment that had to be made based on hierarchy, for example?

KEN KRAFT: Yes. We see it all the time actually with particular leaders, ones that may be U.S.-centric in nature, and they are working with an individual or a group that is in Asia, whether it's in India or in Singapore or Hong Kong, where status is a really important concept. Then, in that case, oftentimes those employees begin to protect their leader. So they will take the hit, if you will, for problems or issues that might reflect adversely onto their manager.

If you look at that, if you are U.S.-centric and you look at that from a U.S.-centric point of view, then you will continue to blame the individual that may not have even been involved. They may have actually been protecting a manager.

And it's really not all about blame anyway at this point. It's actually mapping contribution. So being able to get past the status component to be able to map contributions to issues that might arise is much more powerful, both for that manager that may be on the U.S. side working with a group and managers that are in another part of the world, such as Asia. So it truly is being able to adapt.

JULIA KENNEDY: How do you deal with that? Do you give that U.S. leader information about the culture into which they are entering, or do you suggest certain ways to approach the employee who may be protecting the manager, or what's the next step?

KEN KRAFT: With about 10,000 managers, you can't just hit them all.

JULIA KENNEDY: Of course not.

KEN KRAFT: So what we do is we provide tools and opportunity for them to learn these particular nuances between different regional cultures.

So we subscribe to a particular vendor that has a website called GlobeSmart—you may have heard of that—where they can get a lot of information. They can learn about themselves, take a self-assessment, compare that to other regions in other parts of the world, and begin to learn what are some of the things that I need to be considering when I'm working with somebody, say, for instance, in Hong Kong or Singapore, or someone in London or in Dublin, or whatever it might be.

So they are able to get that kind of information, and even to compare what their propensity is in different indicators in cultural awareness compared to other countries. That's one of the tools.

Another tool is their taking advantage of at least courses that we may offer. There is one in particular that talks about the complexity of cultures—not just regional cultures, but also our own personal cultures—and being able to deal with not only teams across the globe, but even their own individual team that might be there within the location that they are at, and how do we embrace diversity and how do we embrace multiple cultures to make sure that we are aware of the nuances within those particular cultures.

So we can't be so ignorant as to think that culture ends at regions, just regional or location; but that also there is this layer of complexity of personal cultures, how they develop their behaviors, what were their attitudes and values and their beliefs that led up to the behaviors that they now have.

We are all different, so we have to deal with that and we have to figure out a way to make sense of it. That's what that class really hones in on.

JULIA KENNEDY: Interesting.

You also mentioned ethics and how important they are. Bank of New York Mellon has an internal as well as access to an external ethics hotline. Why is that important to have for employees to call?

KEN KRAFT: The reason why external is also important is that some of our clients may do things that we can't do ethically, whether it's the way that they do business, to even gifts, to whatever it might be. Those standards have to be set.

So for both the client and the employee to be able to gain more information, they've got a wealth of information they can get on the Internet as well as through the hotline if they do need to call in to talk to somebody about something that may have occurred that they may have a question about on whether it was ethical or not.

Ethics is incredibly important. We think about companies that have had major downfalls and have completely even lost their business due to ethics itself—large corporations, such as Enron and others. So ethics becomes something we have to focus on.

JULIA KENNEDY: I'm curious, after the global financial crisis of 2008—you were at Bank of America at the time, I think.


JULIA KENNEDY: It was before you came to BNY Mellon, but still in the same industry. The echoes, the ripple effects, continue today.

How have you seen the way that your students from inside these organizations approach these ethics trainings and leadership trainings? Are you finding more soul-searching, different questions of any sort, after that?

KEN KRAFT: You know, that's a great question. Actually, it's a wonderful outside observation as to what is taking place within these particular courses.

I believe since then that there has been an increase of interest in being able to take particular courses, and there has also been more of an emphasis within the corporations themselves to be able to provide training that really helps them to develop important behaviors, whether it is behavior as a follower or an employee in a particular team, which we all are; or as a leader, and what are some of those leadership-type behaviors that we need to learn in order to be able to work effectively.

So that is becoming enhanced. From my observation, being at Wachovia through Bank of America, even back when I was at American Arbitration, even to now, there seems to be more interest, and individuals seem to be really having a desire to take certain classes to develop their own careers as well as developing their own behaviors as either a follower or a leader. So yes, I do see that taking more hold.

I do believe, too, that if you make courses mandatory, there is a stigma around that, that "We have to take that, and if we have to take it, then that's taking time out of my busy day." If you allow them the opportunity to make the choice to take it, then they have a greater desire to learn the content that's in it.

You can see the physical difference in the body language, in the attitude in which they come to the class itself from those who took it because they wanted to compared to those who felt it was mandatory.

That is because, honestly, it needs to be a personal choice. We cannot make changes that are forced on us oftentimes, at least internal ones. We can go through the steps, we can modify behavior because we are forced to modify behavior, in order to, say, for instance, keep a job or whatever it might be. But in order to truly modify something that is within somebody, they've got to desire it.

JULIA KENNEDY: Is there a way within managerial technique and institutional structure to change incentives so that people are incentivized in a different way, maybe not to take a class that they have to be preached at or engage in, but have certain benefits for acting responsibly, or certain other carrots and sticks for behavior that might be a different way?

KEN KRAFT: You've hit on a really important topic actually, and that is how do we evaluate our talent, and do we merely evaluate talent based on their performance and the results that they may have within results-based goals that they may set for themselves at the beginning of the year.

If we only evaluate on performance alone, we can foster some really poor behavior. The reason is that if an individual takes a very competitive approach and they leave behind them just a trail of—I would call it almost a bloodbath behind them, of individuals that were left in their wake—on their pursuit to actually performing and having high performance so that they can gain incentive, then we are missing the boat.

The important concept here is not only to rate an individual based on their performance, but how they go about doing that performance. We call it "the what and the how." It comes down to what are their performance goals, what they set for them as far as those results-based goals, are they achieving those goals, and then how are they going about doing it; are they exhibiting good competencies and behaviors in the pursuit of performing well? They are rated on both of those indicators.

Then, of course, their pay-for-performance would be absolutely tied to that, looking at both those indicators, not just the one but both, the behaviors and competencies and how they mesh up with the performance.

JULIA KENNEDY: So I guess a lot of the critique that people have been giving the banking industry is that "how" piece, right?


JULIA KENNEDY: So do you think there is response to that within the industry?

KEN KRAFT: Yes. I know with BNY Mellon, which I have been just so pleased with as I've come onboard with this particular financial institution, they had done the legwork to develop a set of competencies that are truly driven by behaviors within those competencies that each employee is now accountable for. I think that was a tremendous step in the right direction.

Seeing industries do that and companies do that really, for me, helps me to realize that they are making the effort, they are promoting and they are pushing for this concept that it's not only the performance anymore, it's behavior as well, and that we have to exhibit the right, the appropriate, the ethical behavior in order to make a difference, not only in our industry but with our employees that are within the organization, and within our clients as well.

JULIA KENNEDY: So empathy and humility for someone at a very, very high level I would imagine are hard to remember sometimes.

KEN KRAFT: Absolutely.

It just has become so apparent to me, as I have been doing this for years and I have gone into those classrooms or I have had those one-on-one coaching sessions with the executive or a leader, that humility and empathy are some of the most important characteristics that a leader needs to embrace.

The reason is simply that that leader needs to learn how to put themselves into somebody else's shoes for a moment, to experience what they are experiencing, or at least even conceptually doing that, and really understanding what they are facing so that they can deal with that and address that appropriately.

The humility aspect—if you don't have the humility to be able to be challenged, both on task, on process, then you won't progress. If you are stuck in your particular ways and you can't get past that pride of what you have within processes that you may have developed or tasks that you might have set forth and those challenges that might face you, then you won't progress.

That is one of the things that to me has become very apparent. If you have the humility to be able to accept those challenges, then you will progress and you will be able to progress in a way that is going to build the performance of your team, you individually, and then it will cascade up as well as down within the organization.

And the empathy, it's just understanding what people are going through—not making judgments, not making assumptions, and really exploring from their particular story what they are experiencing before reacting and jumping to some kind of judgment, or even a blame if you will, for something that has taken place.

JULIA KENNEDY: When you're dealing with people who are managing large amounts of money, I would imagine quickly you start to lose sight of especially the humility piece. I can't even imagine being at a company that holds $26.3 trillion. I can't even picture how much $26.3 trillion is.

KEN KRAFT: Me neither. I just hear those figures.

JULIA KENNEDY: What's a sort of practical, down-to-earth way that you can remind someone who is managing those large sums of money the value of humility?

KEN KRAFT: Well, hopefully, it is a value that will be fostered within the company. And it is. We do foster that within the courses that people can take.

But just on a day-to-day basis it is listening to the team. It really is all about listening, accepting challenges, making adjustments that are going to improve. If a leader grabs on to that, they are going to be effective. If they don't and they close themselves up, then it will be difficult for them. There's no doubt about it.

How do we remind ourselves every day? It really comes down to a personal thing that happens within an individual. They will either think that way or they won't. They will either have made that adjustment at some point in their career or they will down the road, because what they will find out is by not doing this that they're not going to be effective.

So you will see that those who embrace that will just be very successful in the way that they manage a group, particularly large groups of individuals, as well as even down to just the team level as well, that they will be effective if they have embraced that.

But it's hard. It's not like we can send out an email or something at the same time, which is like an instant message or something, every day saying "Remember humility, remember empathy." It's something they have to learn, grab, embrace, and make it part of them.

JULIA KENNEDY: These are principles that really go cross-sector, right?


JULIA KENNEDY: This would be true if you were a banker, a nonprofit manager, a lawyer—anything. So I'm curious, in the application, would you say that's also constant cross-sector, or is it different for a banker than it might be for a lawyer?

KEN KRAFT: I think that's why individuals like Stephen R. Covey are so popular, because they hit on these principles that are transferable and they hit on these concepts that are transferable.

Even the concept of sitting down with a direct report where there was an issue that occurred and being able to ask them, saying, "Here, this issue occurred, tell me what happened," is transferable. And just listening to them for a moment, focusing on what they are saying, gathering the data that they have around what the issue is, then you can go to a better spot.

That takes empathy and it takes some humility, of being able to not go in there and just blame, blame, blame.

JULIA KENNEDY: And say, "I'm on a mission, I know what happened based on the outcome."

KEN KRAFT: That's exactly right. But it's being able to ask that question, asking them, "Tell me what happened, what occurred here, what took place," so that they can come with a position of understanding.

That was one of the principles that Stephen R. Covey brought up, which is seek first to understand, which is part of the ladder of inference, which has been around for a long time. Where do you start from in the conversation, from their story or your story? From their story.

JULIA KENNEDY: These are really interesting insights.

Ken Kraft, thanks so much for joining me on Just Business.

KEN KRAFT: You're welcome. I enjoyed this.

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