A Lesson in Banking Change Management

Man Pushing Against Falling Dominoes

If you spend much time reading about banking, it’s easy to get the impression that banks are behaving like Blockbuster Video -- ignoring an existential threat from emerging competitors.  

The media implies that the banks are sitting idly by, confident that they can ignore the scrappy fintechs and social changes swirling all around them.

But that’s not the reality. Not even close.

Around the world, banks of all shapes and sizes are transforming themselves for the digital age. They are no longer bolting prettier front ends onto clunky old legacy systems. Instead, they are embracing entire new digital ecosystems aimed at rebuilding the customer experience.

It’s hard work. In fact, the problem in many banks isn’t that they are standing still. It’s that they have too many projects piling up. Resources are stretched, budgets are strained, and leaders are struggling with prioritization.

The secret to successful transformation

In short, bankers have a bigger issue with tech indigestion than a lack of tech appetite.

Deciding to enter the digital age is no longer a differentiator. Instead, execution is the differentiator. Those banks that execute well finish big projects on time and reap the benefits. Those that can’t drown and get left behind.

 

Related Reading: Innovate Or Die: Your 7-Step Guide to Bank Transformation

If execution is the answer, then what is the key to executing well?  How do some organizations manage to deliver what others can’t?

There are dozens of reasons, but one stands out above the rest: empathy.

I’ve got a story from a recent rollout of PrecisionLender that helps illustrate why empathy is so important. I’ll start with a little context.

When change is celebrated

Like many technology companies, our team at PrecisionLender faces a difficult balancing act. On one side is managing our own business. We doubled in size again last year, which means giant leaps in complexity. There are more clients, more employees, and more offices. More everything. 

Consequently, change has become a familiar friend. Every day we deal with changes to the product, org chart, and processes. Change is not simply tolerated but celebrated. Watching someone do a gut rehab of a process you built last year means that it was successful, and the company has now outgrown it.

When change brings skepticism

On the other side, our teams must lead implementations for large banks with all the complexity that comes with these institutions. Banks have a very different view of change.

As a heavily regulated, slow growth, low-margin business, change is usually viewed with some well-earned skepticism. The banking business is built on proven approaches, and making changes should require some evidence that it is worth both the effort and the risk to the status quo.

If someone is doing a gut rehab of a process you built last year, you are probably in big trouble.

But let’s get back to the story about the client who exhibited empathy. We’re used to change. Our client was not. From our two very different experiences, we set out together to rebuild the client’s commercial loan origination process. 

Reverse engineering LGDs

Like most large banks, this client was using facility grades to determine the loss-given-default (LGD) on loans. To simplify the process for their Relationship Managers (RMs), I suggested we reverse engineer those facility grades. Instead of having to use a separate model to determine a letter grade, why not use the collateral and guarantees that would translate to the same LGD behind the scenes?

The RMs could negotiate collateral and guarantees directly with their customers to make deals work, and wouldn’t have to translate arcane letter grades. The project team at the bank agreed, and I excitedly demoed it to the RMs.

They hated it.

When a good idea doesn’t fly

I couldn’t understand it. I could see why the credit team might not like it, or why the treasury team might be leery of capital allocations not matching up. But the RMs?

It seemed like such a no-brainer.

Our champion at the bank helped me see the light. It wasn’t really about taking away the facility grades. It was about all of the other changes we had already made. We had turned their daily process upside down, replacing spreadsheets that had been exactly the same for years with a whole suite of dynamic, cloud-based systems that were fully integrated. 

Impressive? Definitely. Intimidating to do all at once? Yeah, a little bit.

The bank went back to the facility grades. It wasn’t the perfect project I had in mind, but the RMs got to draw the line at the one change that was too much for them. They felt like they had been heard.

Understanding the role of an internal champion

Our internal champion had empathy for his end users. He could see how much change we were bringing to  them, and how uncomfortable it was going to be. He understood that relenting on the facility grades would let the other, more important changes take hold. We can always return to tweak the system  after the initial overhaul has been properly digested.

This same bank, by the way, takes a similar approach throughout its business. They constantly evaluate the impact of changes, policies, and decisions on the end users, whether they be coworkers or customers. 

I meet a lot of hard-charging bank executives that would be well served to learn the same lesson I did; sometimes you need to stop trying to run over your constituents to get projects done, and instead truly listen to what impact those projects will have on their day-to-day work. 

About the Author

Dallas Wells

Dallas is a writer, speaker and former consultant who has held executive roles at two banks with experience in capital planning, liquidity forecasting, investments, budgeting, financial reporting and mergers and acquisitions.

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