Banking is in flux and it is impossible to avoid the constant change this creates. The financial institutions that will succeed in this environment are the ones that embrace change from within.
To achieve this, banking leaders must change the way they think about change.
Many scholars have made a vital observation from their research on successful changes in social, political, and organizational areas: Change comes from motivating a movement.
Examples of rapid change due to the power of movement-making are abundant in business. What do Facebook, Uber, and the broader sharing economy have in common? They’re all business models that used movement-making to drive change and become more successful.
Leading systematic change in the banking industry — for example, changing consumer behavior significantly, reacting to disruptions appropriately, or modifying employee behavior — requires leaders to have devotion to and concentration on motivating a movement.
What is a movement?
At Korn Ferry, we define movements as “sustained campaigns led by groups of people with shared purpose who create change together.”
We can only imagine the movements just gaining momentum in banking today. We do know the five methods that successful movements use to bring about lasting changes, whether large or small. These methods, as detailed below, also can be used to orchestrate an effective change management strategy in the banking industry.
They are key for any financial institution seeking the faster transformation that the current environment demands.
1. Tap Into Customer and Employee Discontent — This is the Fuel for Change
Change doesn’t occur because people demand it; change starts way before that point, when they start to feel as if something isn’t right. The most successful change leaders know that and allow people to come to this conclusion first — then use it to fuel their call to action.
This helps minimize initial resistance to a change management initiative.
Bank of America, for example, has been investing billions in digital capabilities going back to at least 2007. However, the banking giant still struggled to gain traction with Millennial and Gen Z consumers initially.
Then BofA learned that many young people were dissatisfied with the lack of peer-to-peer mobile payment options, like Venmo. The bank acted on this insight, in effect using the dissatisfaction as fuel to improve its digital banking strategy.
From Pain to Gain:
Bank of America gained 2 million active digital users in 2021, a one-year record that can be attributed in part to its effort to understand and remedy sources of dissatisfaction.
Ultimately, BofA’s efforts to create internal alignment and re-invigorate its digital offerings was driven by discontent. By setting out to understand and remedy sources of dissatisfaction, the bank supercharged its progress, as evidenced by the growing popularity of its digital offerings. BofA gained a record 2 million active digital users in 2021, pushing its total up to 54 million. That has continued to climb since, with BofA reporting 56 million digital users as of early 2023.
So how can you identify a source of discontent that is meaningful and channel it?
- Do your research. Assemble a case for why the current state doesn’t work.
- Make it a conversation. Invite others in and show how far the dissatisfaction extends.
- Engage others in envisioning the possible. Sometimes people can’t see that the present is broken until they contemplate an unbroken future.
2. Articulate a Vision That Motivates Others
The most successful changemakers are those who have the ability to outline the future they desire in a way that conjures a clear picture for others, inspires an emotional reaction in them and sets up circumstances that rouse them to action.
Consider the many initiatives around diversity, equality and inclusion, or DEI, in the banking industry. Despite all the talk about the desire to attract diverse employees in greater numbers, banks and credit unions have been slow to show meaningful results.
But there are some pockets of progress. KeyCorp, for example, has set concrete goals and demonstrated headway toward those goals.
Key committed in 2021 to increasing the representation of people of color in its senior leadership ranks by 25% by 2025, and 50% by 2030. Chris Gorman, the company’s chairman and chief executive officer, said in a report on its environmental, social and governance, or ESG, initiatives that as of yearend 2022, “we successfully increased representation by 36%.”
Leaders must change the way they think about change.
Key also promised to increase its lending and other investments in diverse communities across the country to $40 billion. This gives the company a clear “purpose” of helping people, providing an edge in today’s competitive talent market where many job-seekers give weight to the values of the company where they are considering working.
“Purpose” and “meaning” are powerful tools in the effort to build support for a change management initiative.
Change can be daunting and exhausting, often with setbacks along the way, and requires followers who believe in the mission. People need to not only understand it, but have genuine enthusiasm for it and be willing to actively pursue it as they go about their everyday tasks.
How can you inspire this kind of meaning?
- Link your movement to your company’s vision, mission and values. Make it clear that the work you’re setting out to do aligns with what the company stands for.
- Frame change efforts around the pursuit of greatness but don’t lose sight of the everyday. What will make the average employees’ work more meaningful?
- Remember that the magic is not only in the message but in the delivery. Practice communicating with the intent to inspire.
3. Call Attention to Early Wins to Feed Enthusiasm for Change
Visible victories create a sense of forward momentum that is essential to any cause. The most successful movements highlight each early victory, no matter how insignificant it may seem, to generate excitement and strengthen support. This creates “aha” moments that show people a better way is achievable, and even within reach.
This lesson is especially easy to apply to a change management initiative, and Zelle is an example of how it can fuel success.
When Venmo was launched in 2009, it quickly took market share away from traditional banks. Eventually, Bank of America, JPMorgan Chase, and Wells Fargo launched ClearXchange to introduce a competing platform. The early successes of ClearXchange quickly led to support from Capital One, U.S. Bank, and other banks and credit unions.
The platform was later sold to the bank-owned consortium Early Warning Services, which then launched Zelle. In 2021, Zelle processed $490 billion in transactions (compared to Venmo’s $230 billion). This increased 28% in 2022, to $629 billion (which is quadruple Venmo’s growth).
Had ClearXchange not emphasized its wins early on, Zelle would not be here today.
How can you create “aha” moments?
- Name and brand your movement so that “aha” moments are accretive to the same effort.
- Understand the audiences you need to convert and their underlying needs and motivations.
- Create recurring experiences that disrupt people’s assumptions and paradigms.
4. Build Momentum with Help from Influential Agents of Change
A movement is, in some ways, like a brushfire. A fire starts with a single spark but quickly catches, amassing into an inferno. In the same way, successful movements start with a solitary convert but quickly build momentum as they innovate, increase awareness of the brand, and grow a community of believers and influencers.
Consider how the ESG movement has grown in financial services. A decade ago, ESG efforts at banks and credit unions often focused merely on corporate social responsibility — for example, volunteer work in the community. In many cases this work would be unconnected to a company’s overall business strategy.
Now ESG is a factor influencing many components of the banking business — lending, hiring, branch locations and more. The ESG activities a bank or credit union pursues, on the business side or in its philanthropy, also tend to tie into a larger vision, as in the case of KeyCorp’s diversity and minority lending initiatives discussed above.
A movement can grow as quickly as a brushfire; it might start with a single spark, but if it catches, it can amass into an inferno.
For a sense of how interest in the ESG niche has exploded, consider that annual flows into sustainable funds in 2009 and 2010 were less than $10 billion.
Over time, the data showed that ESG investing seemed to be outperforming, and the movement amassed believers across the industry. The tipping point happened in 2018 when BlackRock Chairman and CEO Larry Fink said that focusing on ESG should be a given. As of today, almost every financial services organization has something to say about ESG and typically has an ESG strategy.
So what’s the best way to achieve unstoppable momentum?
- Work to attract others and utilize both formal and informal networks. By identifying and empowering agents of change within your ecosystem, you’ll be able to effect transformation on a much larger scale.
5. Transform a Desire for Change into a Mainstream Movement
When a movement starts picking up speed, it enters a crucial stage in which a small group of dedicated followers helps generate mainstream attention. This is called a tipping point. Contrary to popular belief, successful movements don’t turn everyone into believers; they only need to convert 10% of their target audience into believers to reach the tipping point into mainstream culture. This broader awareness increases the potential for buy-in among the other 90%.
For example, the killing of George Floyd initially outraged a small group of people in Minneapolis who witnessed the tragedy. But as a video of a police officer kneeling on Floyd’s neck went viral, it elicited an emotional reaction from people across the city, the country and the world. It sparked massive protests and launched a national discussion about racial injustice.
In response, many large U.S. employers have committed to institutionalizing actions to address racial disparity, both internally and externally. Of the 100 largest employers in America, 91 introduced new programs to educate and train their employees about qualities like empathy and other DEI hallmarks, while 98 began collecting data related to race so that they could further improve diversity within their organization.
Winning Hearts and Minds:
Movements need to convert just 10% of their target audience to be successful.
When a movement passes the tipping point, leaders must make sure that the values of the change are upheld in the long term. To do so, it is important to put systems in place. In social or political movements, these might be new bills or laws. For companies in the banking industry, leaders must be purposeful in how they communicate, align workforce incentive programs with new changes, and consider the ways different departments should interact to make better decisions. That’s how leaders ensure changes stick.
After Floyd’s killing, several large banks created new “chief diversity officer” roles that report directly to the CEO. This was intended as a signal to employees, communities and investors that they were elevating the importance of racial justice issues and committed to effecting lasting change.
So how can you hardwire your change management initiative so it sticks?
- Make incremental calls to action that advance change without asking too much of the system too quickly.
- Codify new norms in the form of codes, policies, or processes, so that everyone in your ecosystem knows what is expected.
- Align your practices in support of the new norms, ensuring that you’re hiring, promoting, developing, and exiting people in line with your future-state aspirations.
Adopt a Leadership Approach Equal to the Changing Times
Disruption has become the status quo in business. Changes occur faster than we can keep up, sometimes leaving businesses floundering. Economic uncertainty is just one example. This is a strategic challenge for banks and credit unions, and consumers are rightfully becoming more frugal. In 2022, the U.S. stock market cost companies and families $9 trillion, in terms of investment losses.
Inflation appears to be more permanent than transitory, and the Federal Reserve, in an attempt to counter it, increased interest rates 10 times in just over a year, stoking fears of a recession in the process. Mortgage rates have hit a 20-year high, home equity lines of credit are at a 14-year peak, and interest rates on car loans haven’t been this high in 11 years.
Furthermore, longtime banking business models are being disrupted. As competition from innovative fintechs pressures banks and credit unions to invest heavily in digital improvements, many see M&A as a way to advance their digital acumen quickly. Challenges like the need to find talent and to understand sectors like crypto contribute to the interest in M&A as well, though activity may be muted until the economic and regulatory outlook become clearer.
Gone are the days of embarking on a change management initiative by creating spreadsheets and relying on a top-down call to action to inspire a transformation. That traditional style of change leadership is often ineffective when change is so rapid and a speedy response is so vital.
It ends up lacking flexibility as circumstances change yet again. This approach can frustrate employees, who feel like they have no choice but to comply with whatever edict has been articulated.
The disruption banks and credit unions face today requires a different process, one that is equal to the times and is able to sustain the energy needed for transformation. This is where creating movements comes in.
To get started as a movement-maker, think about this: What changes are you or your organization uniquely qualified to make and what is needed to get you there?
Sherzod Odilo is an associate partner at Korn Ferry.