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Successful change management: how banks become agile

Change management has become one of the most important topics in the financial industry. The market environment of banks and credit institutions has been undergoing drastic changes for years. The low interest rate phase, increasing regulatory requirements, ongoing digitisation, as well as the dynamic development of the fintech industry pose great challenges to companies in the financial sector.

In order to make employees and customers comprehend and follow these dynamic times, managers must address themselves to change management. With the right strategy, any transformation can succeed smoothly.

Increasing importance of change management for banks and savings banks

The banking market is in a state of upheaval. Low interest rates are reducing earnings, customer loyalty is steadily declining and rising administrative costs are gradually become notable even at established institutions. For this reason, credit institutions are revising their business models. Many banks are reacting to these developments with mergers in order to make the overall organisation leaner and realise synergy effects. This is reflected in the sharp decline in the number of banks in Germany. While there were 2,093 active credit institutions in 2010, the number had fallen to 1,717 in 2019. This means a decline of almost 18 percent.

In theory, mergers have many economic advantages. To realize them in practice, the management must be aware that not only two organisations but also two cultures with different employees collide. For the employees, a merger always means a major change, a good management should prepare them for. An effective change process steps in and helps you to overcome these hurdles.

Leadership management as an essential part of the change process

Particularly in the case of mergers, the complexity of the reorientation of the organisation increases, which makes the introduction of effective change management necessary. Executives have to adapt to changing conditions at an early stage. Experience has shown that employees’ fears and resistance can be expected. A professional approach in which all parties feel understood and supported is of utmost importance to maintain productivity and employee satisfaction.

The management’s responsibilities include proactive communication with employees to maintain the highest possible level of transparency and to ensure that employees are aware of the vision and goals behind the change.

But the top management of a bank cannot tackle this challenge alone. Including senior staff in managing and monitoring the change process is advantageous.

Risks and problems in change management

Change management in a company rarely runs completely smoothly. Change processes are not carried out from one day to the next.

Challenges must be overcome again and again. According to a study by the consulting company Capgemini, managers should hence not lose sight of the following risks:

  1. Change management is an unending process.
    Change is not a project that is implemented for a few months and then completed but rather a dynamic process that is constantly evolving.
  2. Change cannot be forced.
    Even though time pressure is often great, change processes cannot be implemented from one day to the next. In fact, it requires a well thought-out strategy, a lot of communication within management and with employees, as well as effective execution, which should be constantly monitored.
  3. Old structures and processes no longer fit.
    For changes it is often necessary to adapt former structures and processes to the new organisation. Don’t be afraid to flatten hierarchies to enable agile acting.

Six success factors for successful change management

These six success factors have proven to be particularly effective in the past in the context of change projects.

1. Create a concrete implementation plan
A clear goal and a well thought out strategy are elementary before starting the communication with the employees. They want regular updates on the current status of the changes in order to be able to discard uncertainties. Within the framework of an effective change process, all affected stakeholders should feel that they are in good hands and continue to trust in the decisions of management. This supports the success of the implementation.

2. Develop a common understanding of the change
When two banks merge, the encounter between two different management philosophies automatically follows. It is therefore all the more important to develop a basis for a common understanding of each other from the outset and to create transparency about their own strengths and weaknesses.

3. Involve all people concerned
Think at all times from the perspective of the person concerned. This may increase the effort but optimises the results of the change process. It is worthwhile to involve not only top managers, but above all employees, customers or shareholders as relevant groups. Remember: Each group has different interests and reacts differently to your plans.

4. Ensure transparency
The announcement of the planned changes is only the first step. Your stakeholders want a high level of transparency throughout the change process. Ensure a healthy communication culture in which you pass on new and relevant information specifically. Explain further decisions and obtain regular feedback on the views and concerns of those affected. If information is withheld, there is often a feeling that something is going wrong and management is trying to hide it. Open communication promotes trust and productivity among employees, which ultimately benefits you.

5. Support the announced changes
Successful change requires the unconditional conviction of managers. As soon as doubts arise in communication, it affects the mood of the employees. In case of doubt, this can cause the entire change process to fail. As a manager, you must show that you are fully behind the decision. Pay all the more attention to your formulations (whether verbal or electronic): Sentences such as: “I wish it were different… or: “I would do it fundamentally differently, but…”, should be avoided in any case.

6. Reduce the uncertainty
Fear, uncertainty and excessive demands are three major risks in the change process. One of the most common consequences is the so-called “change fatigue”. If you succeed in reducing these worries to a minimum, the chances for successful change management increase significantly. To achieve this, let employees participate in the decisions and remind them again and again of the vision. Above all, remember to communicate sub-goals and celebrate them when the opportunity arises in order to maintain overall motivation.

With fintus you benefit from a greater focus on your customers

The focus on your customers must not suffer from the complexity of a change process. Ideally, customers do not even notice the change within the bank. This is where process automation plays a decisive role. It can help to save valuable resources. In this dynamic environment, it is becoming increasingly important for banks to digitise manual and repetitive tasks in order to focus more on product development and customer centricity. For this reason, fintus provides you with solutions that can save you enormous effort in the following areas:

digital processing
customer management
customer onboarding

Customer needs are in a constant state of flux and missing out on this could have serious consequences for business success. With our solutions you can master the challenges of digital transformation.

Conclusion

Banks must rethink in order to prevail in the dynamic market environment. In most cases, the resulting mergers or restructurings serve to realise synergy effects, reduce costs and digitalise existing processes.

A successful change process requires effective change management. Managers must agree on a common strategy at an early stage in order to improve communication with employees and to integrate them into the new strategy.

If management succeeds in maintaining a high degree of transparency and in establishing an open communication and feedback culture, the change process can be accelerated and supported.

 

Carlos Link-Arad
August 2020