Dysfunctional behaviours in FS teams: Roots and resolutions

Competition, distrust, greed, narcissism, shame, power plays and exclusion. What is it about financial services (FS) environments that can provoke and exacerbate such feelings and behaviours? And what can executives and leaders do to address them and instead build highly effective, value-creating teams?

Drawing on interviews with board members, directors and senior leaders across banking, hedge funds, insurance, private equity and fintech, this report blends theory, research and real-world data. Exploring the seven dysfunctional team behaviours most cited by these interviewees, I use systemic and psychodynamic psychology to analyse their roots. These approaches consider unconscious behaviour and symbolism; hidden and unspoken norms; desires, assumptions and the multiple systems teams interact with and are impacted by. The report closes with ideas to address these challenges, promote value-creating behaviour and enhance team cohesion. Given that the culture on a trading floor is markedly different to an actuaries’ office, certain behaviours will resonate more depending on your sector.

Why are these team dynamics so important? Unfortunately, only 20% of people rate their current team as ‘highly effective’. Ineffective or sub-optimal teamwork results in actual and opportunity costs including lack of innovation, weak decision-making, poor capital usage, decreased profitability, lack of inclusion, attrition, stress and ESG failure. Given most FS businesses contain tens, if not hundreds, of teams, the need to maximise their effectiveness is paramount. Below each of the dysfunctional behaviours cited are explored, along with interviewee quotes:

1. Difficulties generating deep trust

“Most teams I’ve been in were just groups of individuals with weak trust”

Teams depend intensely upon mutual trust for cohesion; we need to believe others will be reliable and won’t hurt us. For over 10,000 years, humans worked in predominantly localised tribal and family groupings, building deep, long-term bonds of stability between members. However, the more distanced and changeable nature of 21st-century financial workplaces – communicating on virtual platforms, across borders with people we rarely meet, in often rapidly changing and restructured teams – often reduces and deconditions our experiences of bonding and trust. This diminishes our psychological safety, making it harder to engage our innate capacity for trust-building. In this space we often regress into defence mechanisms (eg. fighting, withdrawing or withholding our opinions), significantly inhibiting the quality of idea generation and innovation our teams can achieve.

“Displaying vulnerability or doubt is rare. There’s a protectionism: if I show weakness, I’ll get hurt”

Reading a ‘future investment stars’ report I am struck by how few participants smile in their profile photos: an air of seriousness prevails. I wonder what their industry and investors demand of them and the personal costs of maintaining such professional appearances; surely photos from their personal lives would tell a different and more joyous story. In environments where ‘strong’ behaviours (eg. strength, certainty) – are prized and other behaviours devalued (eg. not knowing, doubt, uncertainty) – we seek to conform and keep our personal vulnerabilities well hidden. With such high stakes involved in financial industries – mistakes can be incredibly costly – ‘strong’ behaviours can become culturally preferred and even rewarded by others. However, deep trust only forms through displays of reciprocal authenticity; teams that inhibit the expression of human doubts and uncertainties only ever achieve superficial cohesion, making them much less likely to engage in the constructive debate and healthy challenge essential for effective decision-making. 

2. Competition, control and perma-anxiety

“I gave 7 years of hard work to that place…and left with an email of thanks.”

Despite a generous severance package, both anger and sadness came through as the former director spoke – the termination of their belonging clearly lingering despite the financial ‘compensation’ offered for it. From being (often) cherished members of our families, friendship groups and communities, the impersonality of large organisations is a jarring challenge to our deep human need for belonging. Unlike social groups, many FS businesses require continual hard work and total commitment to maintain our place – being reachable at all hours, doing ‘what it takes’ for the business, absorbing psychologically complex reorganisations and restructures. In return, ‘the firm’ offers financial reward, a place to employ our talents and, for some, the borrowed grandeur of working for an admired business. In an increasingly global world, many companies have even come to act as a surrogate for the family and community, providing a place of belonging for those living and working away from their communities of origin.

Unfortunately, many organisations don’t return the psychological loyalty they demand. Frequent corporate restructures or, in the most competitive firms, annual ‘culls’, leave many with an underlying sense of ‘perma-anxiety’ about their position. Competing for limelight and profile are used to build the social capital that we hope will guard us against the emotional pain of being ejected from this social system.

“There’s a mad competition to be ‘king’; there can only be one top earner and everyone wants it”

The disparity between our individual influence and the size and power of our employing organisations is huge, particularly if they are large multinationals. To combat this, we seek to build status and influence, hoping to become senior enough to wield power, rather than have it wielded over us. This may also offset underlying (and often unconscious) fears of humiliation – that we will be found lacking in power or knowledge – by becoming powerful enough to be ‘bulletproof’. Promotion also offers a way to confirm our intrinsic personal value within a depersonalised (or at least less personal than our social group) setting; being promoted means someone has recognised and acknowledged us.

“We’d celebrate other teams f*ckups, even though they were our friends… it meant we had a chance to take the limelight, to promote ourselves [internally]”

The psychologist Wilfried Bion saw that groups operating under conditions of high anxiety often move into fighting each other, or externally created ‘enemies’, as a way to avoid confronting their anxiety. Given the volatility of financial markets, high stakes involved and threats from technology and competitors, it’s unsurprising that many teams derail into internal competition and explicit or covert fighting to deflect from, or find scapegoats for, the anxieties of their environment.

3. Greed, compensation and unmet needs

“People can be so tribal over their P&L and earnings…it’s a massive interference to team cohesion”

Rather than portraying greed in the typical way – as an individual failing – we see something different looking through a societal lens. Many societies are witnessing a decreased sense of community; increased singlehood; longer working hours impinging upon intimate relationships and reduced recreational time for sex. What appears as a lust for money may instead be a means of seeking ‘compensation’ for our unfulfilled emotional and psychological needs. A ‘compensatory dynamic’ trades off a diminished meeting of our needs in the present (eg. the emotional pain of working long hours with consequent exhaustion and work-life balance) for an imagined future created from our money pot (where we hope to gain abundant and compensatory leisure time).

Accumulation can also be an unconscious way to seek power over the painful experiences of death and loss. We live in an age of existential threats – the focus on death through Covid; war in Ukraine; heightened eco-anxiety for our planet. Our unaddressed grief and fear from these experiences inhibit our sense of permanence and can leave us feeling we have to grab as much as we can, right now, for fear it will be taken from us. By building a bigger pot of capital we hope it will somehow make us stronger and better protected against having to experience similar pain again.

“Most leaders don’t give enough positive feedback – your bonus is your praise – people are driven to continually strive for validation”

The ‘high standards’ of many financial organisations espouse an ethos of needing to continually ‘prove yourself’. Without adequate recognition of our efforts as human beings, we are left feeling shame and inadequacy. These are not stupid or irrational feelings; validation from others is a normal human need. To (unconsciously) try and repair our self-esteem, we may strive for externally validated objects (money, material possessions, etc) that will lend a sense of value to us, despite them only offering a temporary satiating of our inner self’s unmet needs.

4. Omnipotence and narcissism

“I have two pet hates in our industry: peacocking and narcissism”

FS institutions are subject to huge projections. Many investors idealise investment professionals, explicitly and secretly wishing they will produce exceptional returns to satisfy their personal fantasies of wealth generated. The media hype ‘whizzkids’ and ‘geniuses’: Fortune Magazine touted Sam Bankman-Fried as a ‘trading wunderkind’ and ‘the next Warren Buffett’ only months before his arrest for fraud. Subject to these projections, it is hard for such professionals (or any of us) to resist inflating our sense of self-importance, feeding the idea that we are somehow personally ‘special’.

Seeking to appear omnipotent and self-assured may also be a defence against the volatility of the global financial system. Facing volatility, humans seek stability, gravitating towards those who project certainty in the hope they can help them feel more ‘in control’. The more we come to be seen as a source of strength and reassurance, the more others are likely to feed it and come to depend upon it (eg. the idealising of Bernie Madoff and wilful blindness of his behavioural ‘red flags’ by investors and regulators).

Narcissism is also an increasingly reported social phenomenon. Much more of our lives are lived through screens and ‘on display’; what we lose in that is the forming of true relationships with real depth. As such, narcissistic behaviour is simply a misguided attempt to get our emotional needs for meaningful connection met. “We seek insatiably for admiration, of which we never get enough, because it is not the same as ‘connection’ but rather a ‘substitute gratification’” (Miller, 1986). To mask our unconscious sense of inner emptiness, people may develop a conscious outer arrogance as a way of keeping others from seeing their unresolved pain.

5. Genuine inclusion: Still a challenge

“After 30+ years in FS I am pretty used to sexist and derogatory comments. I would like to tell you things have got better in recent years but it’s fair to say they have actually increased.”

Aviva CEO Amanda Blanc, May 2022, following sexist comments made to her by shareholders at their AGM

Despite efforts to improve representation, inclusion is still a major challenge in certain parts of the FS world. The 2016 UK government’s Social Mobility Commission found most investment banks tended to recruit for “familiarity, similarity and perceived ‘fit’”. The 2021 Women in Banking & Finance Report identifies how women feel either ‘celebrated or ridiculed’; men are more likely to feel they can just fit and be part of the organisation. Covid had a noted impact in retracting diversity efforts; the percentage of women holding general and limited partner roles in European hedge funds fell from 17% in 2021 to just 8% in 2023. As Megan Tobias Neely, author of Hedged Out, notes: “During uncertain times, people do business more with people who look like them”.

Efforts to create equality can leave current incumbents feeling anxious; cultural changes may threaten their status and position. Taking female inclusion as an example: different networks, initiatives and forums have been set up to support and increase representation. However, male participation or proactive support for these initiatives, or equivalent forums for exploring men’s changing roles, are very limited. Our organisations and societies haven’t created sufficient positive, aspirational models for what the modern man can become and how they can adapt to include women fully and equally in work. Lacking a clear vision of what to move towards, some men remain inert, or silently resistant, regarding representation efforts. This lack of support, particularly in FS sectors with male-dominated senior management, is part of what keeps female inclusion from being a full reality.

It may be that progress comes from newer generations into the workforce; as an HR Director interviewed noted: “Our younger managers are much more interested in developing emotional intelligence and understanding how to build inclusion”. Credit Suisse found more diverse management teams delivered a 52% higher return on equity; there is a plethora of further research on how inclusion drives better profitability and innovation.

I would encourage management teams to ask themselves: What can we do better with a more diverse workforce? Which innovation challenges need us to create a more inclusive environment? Answering these will create a clearer vision of why inclusion matters not just morally but from a business perspective. With consumer and investor activism on the rise, FS teams that fail to address diversity or inclusion issues are putting themselves at substantial reputational risk.

6. Groupthink

There’s little genuine innovation [in my investment bank]…processes get reconfigured but truly disruptive thinking rarely happens”

The need in certain FS environments to ‘look strong’ and ‘in control’ reduces our permission to ask ‘why?’ or play ‘devil’s advocate’. This can create a cultural rigidity that inhibits genuine innovation. In addition, we are less likely to want to speak up and threaten the status quo when we work in more homogenous teams (eg all-male teams from similar cultural backgrounds). Groupthink is often strenuously denied by members, who claim to have an environment of diverse thought and high challenge, little aware of what an echo chamber their team really is. 

7. Resistance to regulation and control

“As Chief Risk Officer I encounter considerable hostility from other teams, resisting the idea there should be any checks and balances to their behaviour”

Global markets can leave us feeling overwhelmed and powerless in the face of their scale, complexity and volatility: how can we ever master our understanding with such flux and volatility? However, many fears are largely suppressed into our subconscious due to ‘shame-anxiety’; the fear of being labelled ‘weak’, ‘stupid’, ‘simple’ if we were to admit them to colleagues and clients. Making ‘winning’ investments or trades, especially if we become a serial winner over time, can lead us to feel we have ‘tamed’ the market, providing an illusory omnipotence to override our subconscious powerlessness. The deeper our suppressed powerlessness, the more ‘winning’ will inebriate our psyche, creating illusory though often pleasing feelings of power and acquisition. As such, attempts to regulate behaviour by internal functions (eg. risk officers) and external regulators may be strongly resisted. Such interference can be seen as personally inhibiting our capacity to win and ‘conquer’ our fears, with accusations like ‘they don’t get it’ levelled to delegitimise attempts at control.

How can leaders and teams address these challenges?

Many team development efforts fail or remain superficial because they operate solely at the level of personality, exploring what is similar or different about individual members. This is far too simplistic. Rather, team dynamics result from conscious and unconscious hopes and fears; pressures from stakeholders and investors; societal shifts; industry innovations; changing consumer needs. By understanding a much fuller range of influences, teams substantially increase their ability to maximise their collective intelligence and output.

This development is best accomplished by using an independent ‘team coach’ trained in the psychology of teams and groups. This approach works by enabling teams to better understand the assumptions, emotions and dynamics driving their collective behaviour. This may be done through a bespoke combination of team effectiveness reviews, observed meetings, development intensives and leadership coaching. In these, the team identify and experiment with new ways of working to create real transformation in how they work. Using an external coach allows the leader to focus on operational, rather than interpersonal, issues and hear fresh insights from an impartial observer.

What benefits does this bring?

Team coaching has helped FS client teams tackle operational, people and profitability challenges including:

  • Increasing cohesion and output in the executive team
  • Embedding new leadership and driving engagement in the wider firm
  • Increasing innovation to address margin squeeze, competitor challenge and tech innovation
  • Maximising collaboration in multi-cultural, multi-located teams
  • Attracting and retaining talent
  • Meeting the increased societal, ESG and regulatory focus on behaviour and inclusion

Next steps

Duncan Lewin is a team development coach with over 10 years’ experience of coaching FS teams and leaders, alongside his earlier career as a chartered accountant and finance director. If you want to enhance the efficiency and impact of your team, please contact us to arrange an introductory conversation.


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Duncan Lewin