Let’s face it… The financial industry isn’t known for embracing change; it is, after all, a risk-averse industry at its very core. You can find hundreds of articles imploring banks and credit unions to be more innovative (many of them published here on The Financial Brand) — “Innovate or die!” is the choral refrain. But historically, the leadership teams at financial institutions have not had the highest levels of confidence in their ability and capacity to embrace change.
That’s just too bad, says Accenture. Faced with unprecedented levels of change that seem to balloon in complexity and scale every year, Accenture says financial institutions need to make big cultural changes, and do so rapidly. Given the diversity, volume and force of the drivers involved, it is not hard to see why change is so pervasive and has become one of the biggest challenges facing those in the retail banking industry.
Constant change is the new reality, which is why Accenture says its crucial leadership teams focus on change management as a core competency. Banks and credit unions simply must cultivate a sense of institutional agility.
One of the biggest hurdles is — predictably — the regulatory environment. Most banks gripe that they waste 60% to 80% of the energy they spend managing change just trying to wade through a roily pile of new regulations. Some require financial institutions to significantly retool their IT systems, processes and culture, impacting nearly every aspect of the organization. This consumes resources they could be applying in more interesting and productive areas. But these changes are mandatory; there are deadlines and painful consequences for not managing regulatory change.
Compounding the problem, many banks still wrestle with a stubborn disparity between a high fixed-cost structure and sluggish revenues. They are also facing increased pressure from neobanks, fintech startups and other challengers that are attacking lucrative parts of the value chain. To retain (much less grow) revenues, financial institutions must train themselves to pivot, to be responsive, and react much more quickly that they ever have. If they don’t figure out how to transform the customer experience, roll out fresh value propositions and master digital channels, someone will be in a position to steal their business. All this requires changes so massive, it’s can make any financial exec squirm in their seats.
Banks have always faced change — “nothing is constant but change,” as the expression goes. And many financial institutions have successfully worked through smaller projects and technology changes for many years. But the pace of change is accelerating at a blistering rate. The new digital landscape redefines the “clock speed” for change; it’s exponential, with new challenges popping up at a faster and faster rate, with response times getting shorter and shorter. This requires leadership teams to be more nimble than they ever have been before. However, the track record with the level of transformational change financial institutions now require doesn’t suggest that the status quo is going to cut it.
Meanwhile, Accenture says change management has become so critical that it’s now an issue that concerns those sitting at the highest levels of institutional governance. Both boards and regulators are taking a much more active interest in the oversight of systemic risks relating to the complexity of change facing banks and credit unions today. What every chairman wants to know is, “How is this going to impact our bottom line?” They want to know the C-suite has a strategy that’s going to keep the organization on top of the change curve… and in the black.
The ROI of Change Management
According to Accenture, three issues have converged that have led many financial industry execs to focus building plans to institutionalize change and “change agility.” First, there is more transformational change than ever before. This sort of change alters the fabric of the business, changing the culture, the business model and how the institution serves its base. Transformational change is inherently multi-disciplinary and complex, so it demands new ways of managing change. New operating models that result from transformation are highly disruptive and complex to implement.
Second, as strategic planning cycles have shortened, timescales for transformation have been compressed dramatically. Large, complex programs can’t be allowed to run for many years before delivering tangible results.
And finally, the available funding for change is constrained and dominated by mandatory programs. So banks need to ‘do more with less’, delivering change at lower cost and with greater success rates.
But what is the business case for professionalizing change? Quite simply, what’s the ROI (as your chairman might ask). There are three key value areas:
1. Change outcomes. – Does the bank maximize ROI and strategic outcomes from discretionary change investments? Do mandatory programs achieve sustainable compliance outcomes by the regulatory deadline? Is disruption minimized? What is the opportunity cost and negative impact of failed or miscalculated change?
2. Change effectiveness. Do programs consistently deliver on change goals on time and on budget? Does change ‘stick’ in the bank after implementation? Is the risk profile of the change portfolio understood and managed?
3. Change efficiency. What impact would productivity gains of 30-50% in change delivery have? What proportion of change is provided from offshore teams or via industrialized capabilities? Can the change team flex capacity and cost around fluctuating demand?
Developing Organizational-Wide Change Leadership
So what change capability do you need? Accenture says you must start by asking, “What are the change priorities that our institution must execute over the next 3-5 years?” This allows clear prioritization, which in turn, defines the capacity and capabilities required to address this demand. In particular, it informs decisions regarding how internal leaders of change needs to be ingrained in the bank and the number of change professionals, the specialist skills they require, and the best location for them.
But a professional level of capability to tackle change goes way beyond project management. And just having a great team of change professionals is never enough. Financial institutions must prepare the entire organization for faster paced and more intense change, building up organizational agility and change leadership at all levels of the business.
It is a vital competence of all business executives and a much deeper set of behaviors, attitudes and skills. Exemplary change leaders raise the ambitions, horizons and beliefs of their bank. They create a constructive environment that can bring out the most innovative and creative thinking from their people. Their integrity and the trust they create with the team creates the commitment needed to drive difficult changes. They take ownership for big and challenging decisions.
Embedding change activity as a small part of all managers’ and employees’ roles and training them to successfully master change, can help turn “change” from the exception into the norm.
Particular focus should be given to executives get ready to be more effective change leaders. Effective sponsorship of change is a factor behind all successful programs. Sponsors of change need to set a clear vision, align the wider leadership team, clear a path for delivery and secure resources to pull it off.
In the past, change leadership roles were a side-ways career step or a secondary role. Today, Accenture says they are among the most important roles in the organization, and need to be populated with the best leadership talent available. Change leadership roles are a proving ground for key talent stretching them beyond their comfort zone. Today’s effective manager of change could be tomorrow’s CEO.
Accenture says accelerating and optimizing benefits from just a few programs can create a strong case for investing in change capability. The ultimate goal is to develop repeatable and scalable change capabilities — sustainable change.