While banks have always faced regulatory changes, the volume and complexity of the new regulations being introduced can be daunting as bankers are being asked to fundamentally “change the way they do business.”

Change is constant, we all know that. But our ability to foresee the change proactively, comprehend its potential impact, and adapt to it with as little “indigestion” as possible…well, that’s a different story. Top executives would agree that while CEOs expect the amount of change in their organizations to continue to increase, nearly 50 percent of executives lack confidence in their organizations’ ability to manage the changes they will face.  The banking industry is no different.1

While banks have always faced regulatory changes, the volume and complexity of the new regulations being introduced can be daunting as bankers are being asked to fundamentally “change the way they do business.” We see this with Basel I and Basel II, as banks now must examine the capital implications for the products they trade and determine which products may not be economically viable and sustainable in the longer term. The Dodd-Frank Act and the European Market Infrastructure Regulations (EMIR) are examples of regulation designed to increase transparency and reduce the credit risks that came to light during the 2008 financial crisis. Now top of mind for senior leaders, these regulations will continue be an executive priority as they demand further changes from banks over the next five to seven years.2

With both aggressive timelines and a high degree of uncertainty around these regulations, the confidence to implement change successfully is at risk. While ideally one would prefer to lock down the scope of these regulations so they can plan and budget for the changes required, many of these regulations are still open to interpretation, driving additional and oftentimes short-notice changes by regulators.

Regulation is not the only factoring driving change. Heavily influenced by retail and other leading industries, banks now must manage the sudden convergence of digital, social, and mobile spheres, which push organizations to connect customers, employees, and partners in new ways. The term “customer experience” has taken on a new role in the financial services industry, evolving to include a “digitized human experience” across end-to-end channels. Banks are challenged to create seamless and effortless interactions between the in-branch and digital customer experiences, exceeding expectations while further building trust in mobile banking services.3

Turn on a dime
“This is now a continuous feedback kind of world and we need the organizational nimbleness to respond.” 4 
CEO, Financial Markets, United States

Given the constantly shifting banking landscape, CEOs must practice the “art of continuous change” in order to implement extensive changes quickly. This facilitates faster and more relevant responses to markets and individuals. With an expected increase in the level of change saturation, organizations need to improve their “depth of field” to best mitigate their risks and avoid change fatigue for their resources. As change practitioners, it is our responsibility to inform and advise our leaders on the importance of their role in leading change and how their level of engagement, or lack thereof, has a direct impact on the overall success of the transformation underway.

Prosci is a leader in change management research, providing industry standard processes and tools for managing the people side of change within organizations and government agencies. Participants in Prosci’s 2012 Best Practices in Change Management Report identified five main obstacles to the overall success of their change management programs.

Top five obstacles to successful change

  1. Ineffective change sponsorship
    Prosci's 2007, 2009, and 2011 benchmarking studies identified ineffective change management sponsorship from senior leaders as the number one change management obstacle. An absent, invisible, or unengaged sponsor sends just as strong of a message to employees about the importance of a change as having a project with extremely effective sponsorship. In the latter scenario, study participants reported that 80 percent of projects met or exceeded objectives.
  2. Lack of dedicated change management resources
    Without a dedicated change management resource and/or team, no one is focused on the people side of change. Securing change management resources for your project may be challenging, as change management often is not fully embraced by the organization—it can be seen as “too soft.”  Research, however, shows that when there are change management resources dedicated to a change initiative, the project is more successful.
  3. Employees’ resistance to change
    Resistance to change is inevitable; therefore, it is critical to be aware of the root cause of that resistance in order to manage it effectively. According to the Prosci 2012 Study, employees resist change most often because they lack awareness of the need for change and they fear the impacts of the change. When addressing these points of resistance, study participants recommended that change practitioners focus on two areas: 1) building awareness of why the change is needed, and 2) addressing how the change will directly impact employees.
  4. Middle-management resistance
    Managers who have not embraced a change themselves cannot effectively lead their direct reports through the change. The 2012 report indicates that more than half of resistance from managers could have been avoided. Steps to proactively avoid manager resistance include involving managers in all phases of the project, building awareness of the need for change and the impacts early in the change process, and ensuring executive support for the change.
  5. Poor communication
    When communicating with employees, successful change messages are honest and clear and seek to explain the business case for why the change is happening within the organization. The research also indicated that the message deliverer is just as important as the message content. Effective communications share the right message from the right sender (such as the project leader or communication specialist). Poor communications tend to share in-depth details about the project (such as status updates and development) rather than the “case for change” and are often delivered by someone other than the preferred senders.5

Prepared for change?
“Of course we need better information and insight, but what we need most is the capability to act on it.”
Unit Head, Government, Hong Kong SAR6

Change is not going away. That’s one of the few things in life you can bank on. Leading organizations now recognize the need to build internal change capabilities and identify change agents as part of a long term strategy for managing continuous change. Banks must do the same to support, react to, and adapt to the amount and complexity of the changes on their horizon.

Take a moment and ask yourself: How ready is your organization (or the clients you support) to tackle current or upcoming changes?

If you are unsure how to answer, we suggest changing that. The health and success of the organization depends on it.

West Monroe Partners has a well-established track record for helping banks navigate through complex change. For more information, please contact Kelly Hamski. 

1Global CEO Study (IBM)
2Smart implementation: Reining in the risk and cost of regulatory change in banking (PWC Banking)
3Banking Technology Trends You Can’t Ignore in 2013 (Bank Innovation)
4Leading through Connections – Highlights of the Global Chief Executive Officer Study (IBM)
5Prosci’s 2012 Best Practices in Change Management Report
6Leading through Connections – Highlights of the Global Chief Executive Officer Study (IBM)