Can risk practices improve when “servant leadership” is a bank’s prevailing personnel management style?
This approach urges supervisors, including department or division managers, to largely set aside rigid, top-down control. Priority pivots to team-generated needs and ideas. In fact, the strongest managers are those that “serve first” and “lead second,” argues at least one disciple of the practice. This includes when managing customer-facing and loan-decisioning teams. These leadership attributes also find a home in highly structured risk, compliance, and governance departments.
Christy Foster, a commercial banking professional with 27 years of experience, has long adopted this management framework, but she concedes it’s not automatically an easy sell in regulated, high-stakes, and potentially fast-shifting financial services. The time commitment and flexibility required of a servant leader’s “good listener” and “the door is always open” credos can feel at odds with industry expectations.
Servant leadership calls for managing proactively yet never avoiding hard conversations, stressed Foster, who is executive director of loan operations at United Community Bank, operating in Georgia, North Carolina, Tennessee, South Carolina, Florida, and Alabama. In that way, it mimics risk practices as a whole — by recognizing, assessing, and preparing for potential problems or opportunities before they emerge. “Servant leadership is not weakness. In fact, you must be strong to lead from this position,” Foster said.
Foster offered inside-the-bank examples and practical considerations in her presentation, “Servant Leadership as a Risk Management Strategy,” at a recent meeting of ProSight’s RMA Gulf Coast Chapter. She told participants the approach isn’t about simply making staff happier and reducing turnover but improving operations and revenue potential.
Impact Across Operational, Reputational, and Credit Risk
How do the effects of servant leadership show up throughout the ranks? In large part by defining clearer roles among staff that reduce handoff failures or misinterpretation of policy. And Foster finds that team members are more likely to escalate appropriate issues up the chain of authority when they trust a system and the leaders holding that system together.
What’s more, empowered employees tend to avoid a groupthink trap when it matters most yet challenge out-of-bounds exceptions that could invite undue risk to the institution.
Of course, servant leadership has purer workplace health benefits, too, such as lifting team morale and promoting cooperation. Satisfied employees generally make fewer mistakes or omissions, which pay off especially when new training is behind schedule or teams are understaffed.
When it comes to risk management processes in particular, Foster called out some benefits. Servant leadership, for instance, reduces:
- Credit risk exposure from overlooked analysis and delayed escalation.
- Operational risk by limiting shortcuts, errors, and undocumented workarounds.
- Compliance risk linked to policy drift and cultural misunderstandings.
- Reputational risk from delayed actions and customer impact.
- Leadership-based risk that can mushroom when employees don’t feel safe raising issues.
Foster said if risk-focused professionals still aren’t convinced, she reassures them that refining a management style is never a replacement for formal policies and procedures. Instead, servant leadership supplements governance sturdiness and risk frameworks by building confidence in early and consistent checks. It smooths a glide path for approved actions and encourages reliable communication across teams.
Scope for Creating Safe Space
For Foster, there are benefits to loosening the structure for debriefings, however, especially if organizations can leverage the accumulated trust from embedding servant leadership in the culture. This approach often generates invaluable information to improve formalized policies and procedures, she said.
“I hold twice-a-year listening sessions with my teams and meet more often with my direct reports, and I do not provide an agenda,” Foster detailed. “I listen to what’s going well and what’s not: what ideas do they have? Frustrations? Are there specific teammates or internal partners with whom we need to work on a relationship?”
Foster said servant managers are successful listeners when they’ve made sure meetings are safe environments for sharing and when staff feel that concerns find traction, even if all requests cannot be addressed right away or in full. Servant leadership is more effective when clearly on display from department or divisional leaders to the managers they oversee. “You’re going to throw your energy into your managers and build them up so that they take the same approach with their frontline employees,” Foster said.
Notably, servant leadership sometimes calls for modifications that Foster stressed do not undermine the logic.
In one example, Foster detailed how a customer-focused, empowered decision placed a bank at risk of noncompliance. In the retelling, the customer was going to be out of town for the business days surrounding the July 4 holiday. The loan department worked to get the approved loan closed and the funds dispersed before the client left on vacation, but the process bumped up against holiday closures. “They made an everyday decision to fund the loan and make for a better experience for this customer, but it resulted in a right of rescission violation for the bank,” said Foster. “Well-intentioned and well-informed people sometimes put their own spin on what a policy means, but the added risk is they might train other individuals using their interpretation.”
Servant leadership allowed this loan team to make and act on decisions that ostensibly help customers. And servant leadership is also in play for corrective feedback and positive reinforcement in this example. According to Foster, the situation called for steady, effective reminders that the regulatory environment is not an obstacle to the bank but a guardrail to help ensure an organization is managing its compliance risk effectively, even if a requirement feels like customer inconvenience.
Foster, who also teaches credit risk management, commercial banking, and financial literacy courses at the University of North Carolina at Charlotte, said managing becomes more like coaching under servant leadership, which means that mistakes aren’t about embarrassment or retribution but learning opportunities. That leads to better long-term results for the bank.
The approach requires leaders to consider staff behavior over time, making a distinction between one-off incidents and patterns. In another example, a misguided and bristly response from a team member was out of character and initially stirred Foster toward a reprimand; she pivoted after learning the employee faced a personal, if passing, hardship.
“Don’t just jump to conclusions that they didn’t know what they were doing, that they were maliciously making an error, or being lazy,” Foster said. “Make sure you get their perspective and use that in your coaching.”
Foster said some managers may feel too overwhelmed to adopt servant leadership wholesale. Applying the principles in moderation can be effective as a start. She offered steps to implement over 30 days, especially if not already part of a managerial playbook:
- Schedule regular one-on-one meetings with each team member.
- Normalize everyday risk conversations.
- Reward employees for early escalation of issues.
- Close the loop on an event or issue so that employees know their flags, even their questions, were seen and acted upon.
- Perhaps most importantly, build trusting relationships intentionally — not accidentally.
