Authoritarian vs Participative Leadership

Cultural Differences in Banking vs Tech

I started my software career in investment banking at Goldman Sachs in Chicago, a few years after the first internet bust at the turn of the century. At the time, investment banking was, for knowledge workers, generally thought to be where many of the “best & brightest” pursued corporate careers; that famously (¹, ²) came with an authoritarian, high-pressure, cutthroat, and long-hours work culture. Here, I’ll write about how fundamental leadership culture differences manifested in investment banks and tech companies.

Before we dive in, here’s a diagram of management systems as developed by Rensis Likert³; we’ll use some of the terms described here in this post. N.B. I use “authoritarian” and “authoritative” interchangeably.

Rensis Likert Management Systems

Investment Banking: Exploitative Authoritative (System 1)

One of the most salient characteristics of investment banking leadership culture was its authoritarian, top-down management style. Given the highly-regulated nature of banking, the non-trivial consequences of mistakes, the value of stability over innovation, risk minimization over agility, scale over specialization, it’s not too hard to understand why such a culture took hold in these companies; unlike tech companies, errors could cause massive monetary and reputational loss. That’s a topic for another time.

At the core of it, authoritarian leaders “tend to keep all the decision-making authority to themselves and make the decisions about policies, procedures, tasks, structures, rewards and punishment themselves. The intention behind most authoritarian leaders is to retain control and they usually require unquestioning obedience and compliance.”⁴

It was not uncommon to observe and hear engineers being subjected to withering berating by their managers for mistakes, big or small. The volume and visibility of these exchanges meant they were impossible to ignore—they’d be overheard by their colleagues outside their managers’ offices, reinforcing fear-based compliance with other teammates. As you can infer, employee well-being and professional development was non-existent beyond mandatory compliance training, i.e. SOX, KYC, money laundering, ethics, etc. Meetings with managers, if they occurred at all, were almost always in the form of infrequent, prescribed corporate rituals: annual reviews, comp discussions, or status updates; there was no such thing as 1-1s as we understand them today.

Leaders were often distant and had little to no interaction with subordinates, much less skip-levels; they were the high priests and employees the mindless followers. There was no individual autonomy to make decisions as those were made top-down and employees were simply expected to keep their heads down and follow orders.

Fortunately, I did have some great, empathetic managers who modeled more positive behaviors as I advanced in my career at Deutsche Bank, so when I transitioned into management, I’d like to believe I was a humane and respectful manager. However, I still followed the models that had been set before me and maintained the overall, authoritarian status quo. My only justification is that I wasn’t aware, at the time, of management as a practice that required specific skills that could be learned, developed, and hopefully mastered.

Technology: Consultative (System 3) ⇨ Participative (System 4)

[I]t is more difficult to move from an authoritarian style to a democratic style than vice versa⁵

After 10 years in banking I started at Etsy where I was first exposed to the notion of 1-1s and everything it connoted: authentic care/empathy for employees, participative/collaborative decision-making, active career development, and shared accountability (among many others). It was an entirely foreign mindset and, in hindsight, easily the most important change required to effectively lead teams at technology companies.

Learning about 1-1s for the first time

Old habits die hard, and as I acclimated to Etsy’s (and broader Tech) culture, I made several seemingly, I thought, innocuous decisions to help with team productivity. Literally within five minutes of sending an email outlining a new process, my manager approached me and asked to speak in private. Sitting in one of Etsy’s many dedicated 1-1 rooms (!), he asked if I’d run my ideas past the team before sending out the email (though he knew that I hadn’t). He understood my background and was empathetic to it, but told me in no uncertain terms that my approach wouldn’t fly. At first I was taken aback and a little offended, but then I was embarrassed.

I had read Dr. Carol Dweck’s Mindset⁶ around time time I joined Etsy, and the concept of the "Growth Mindset" had deeply resonated with me. We are not captives to our history or perceived intellectual/behavioral limitations;, they're not limitations at all, but merely data points. If not for the book and my desire to personally internalize the growth mindset, I'm not sure I'd have been able to set aside my indignation and take the feedback to heart. I'm glad I did, though, because I'm a better leader, human, and colleague because of it.

After 10 years of being steeped in an authoritarian culture, it’d never crossed my mind to involve engineers in team-wide decisions before. However, the more I exercised this muscle at Etsy and thereafter, it became unequivocal that a participative model was dramatically more effective not only in terms of employee engagement and work quality, but in terms of achieving vastly better outcomes for the business.

Genuinely caring about and meaningfully involving engineers at all levels of decision-making was one of the greatest lessons I learned as I transitioned from banking to tech. It seems all too painfully obvious in hindsight, but you don’t know what you don’t know if you see no other counterexamples around you.

1. https://www.npr.org/2021/05/07/993938573/absolute-meltdown-wall-streets-work-till-you-drop-culture-under-attack

2. https://www.thegentlemansjournal.com/article/goldman-sucks-sachs-investment-banking-toxic-culture-employee-report

3. https://en.wikipedia.org/wiki/Likert%27s_management_systems

4. https://oxford-review.com/oxford-review-encyclopaedia-terms/authoritarian-leadership/

5. https://en.wikipedia.org/wiki/Authoritarian_leadership_style

6. Dweck, Carol. Mindset: The New Psychology of Success. New York: Ballantine Books, 2016.