Successful Change: Managing Human Capital Risk During Implementation


risk-3-26-18.pngMany financial services companies are in the process of implementing significant change initiatives or poised on the brink of doing so. As discussed in our previous article, many such efforts fail to meet expectations because leadership has underestimated the human capital risks that threaten strategy execution. But effective implementations can mitigate critical people-related risks while building employee understanding, commitment and resiliency.

The Typical Transition From the Past to the Future
Regardless of the type of change—for example, a consolidation, acquisition or new business model—employees must go through a process of transition. A transition that is smooth reduces the depth and duration of lost productivity, as well as unwanted turnover, and expands the organization’s capacity for future changes.

Employees often initially focus on change as an ending to what they know as familiar, which can foster uncertainty and negative attitudes, such as assuming the change won’t work. Leadership must help employees move first to a mindset that is more neutral and accepting, so employees are willing to give the change a try. From there, management can help employees begin to see the change as a new beginning and understand that the new organization can do better or more.

With most change initiatives, almost every employee is affected to some degree. Employees might need to adapt to a new technology system or move to a different facility. They could find themselves in a much larger department or with a different level of authority. Some of the changes in employees’ individual experiences will play a greater role in the potential for project success than others and therefore warrant greater change management attention. For example, leadership could expend more energy dealing with how managers react to having their authority altered than on employees who merely need to learn new procedures for approvals.

Note that it is not only reductions in authority that require leadership attention. Managers in a smaller bank where the president made all of the salary and promotion decisions might find it difficult to adjust after being acquired by a larger institution where they are expected to be more actively involved in such matters.

Transition Monitoring and Management
Financial services companies should create a change effectiveness scorecard to evaluate the impact, readiness, adoption and benefits realization of each change initiative. Metrics might include the percentage of business results achieved, individual or department change readiness (at project launch and quarterly intervals going forward), training completion rate, key employee retention, client satisfaction, quality of production and employee engagement.

Employee engagement can be measured through responses to pulse surveys conducted on a regular basis to track and improve employee understanding of and buy-in on the change project. These short surveys ask respondents to rank from 1 to 5 the accuracy of statements such as:

  • I understand how this transformation can benefit our employees, customers and community.
  • I believe the communications I receive from the transformation team.
  • I feel that I have enough opportunities to learn about the transformation.
  • I know where to go when I have questions about the transformation process.

When it comes to change projects, individual leaders or employees typically fall into one of four categories based on their level of engagement, performance and impact on project success. Each category calls for different management strategies during project implementation:

  • Advocate (high impact, high engagement): Leadership should recognize and reward high-impact employees who are actively and vocally on board and performing well, and consider increasing their project responsibilities.
  • Supporter (low impact, high engagement): These employees demonstrate their high level of commitment to the project by effectively providing assistance or resources, even though they are not critical to satisfying high-impact project objectives. Leadership should consider increasing their project-related roles and responsibilities.
  • Laggard (high impact, low engagement): These individuals have a low level of commitment to the project—even if they are performing well—but are essential to meeting the project objectives. Leadership should address their low engagement in hopes of moving them to advocate status. For example, the management team could consider demonstrating what’s in it for the employee if the project succeeds. If that effort fails, leadership should consider reassigning these employees from high-impact areas where they could negatively influence others and project success.
  • Bystander (low impact, low engagement): These individuals demonstrate a low commitment level, and their impact is not vital to meeting project objectives. Leadership might consider their potential for greater project impact and address reasons for low engagement.

The human capital risks associated with change initiatives could prove the difference between ultimate success or failure. Particularly when change affects customers, the employee experience has a direct effect on customer experience. By properly managing employees throughout the transition, bank leadership can help employees see change not as a negative ending, but as a positive beginning.

Talent Evolution: Banks Are Looking Outside the Industry for Diverse Skills


7-22-13_Emily.pngBanks are going through enormous changes in terms of the skills and talent they need at the executive level. Arguably, banks nowadays need more expertise in regulatory compliance, risk management, information technology (IT) security and social media than in the past. Peter Crist, chairman of Chicago-based executive recruitment firm Crist/Kolder Associates, and chairman of $17-billion asset Wintrust Financial Corp., foresees a need for someone at the executive level “distinctly different [from] the chief marketing officer’s historical role” who understands social media and digital products. Rising concerns surrounding cyber security risk will also see the role of the IT executive gain prominence, a role that promises to be “tougher, more complicated, more sophisticated” over the next decade, says Crist.

Banks are already familiar with shifting needs in human capital, lately driven by regulatory concerns on compliance and risk. As the financial crisis hit, many banks did not have in-house talent qualified for the chief risk officer position, and Crist noted a spike in searches to fill the role. As more of the Dodd-Frank Act is finalized, banks “have to respond to that with talent,” he says.

Where can banks find these specialized executives? Crist says that many of the biggest banks are recruiting from outside the banking world.

Citigroup’s head of human resources, Paul McKinnon, came to the financial services giant in 2008 from Dell. State Street Corporation’s Chief Risk Officer Andrew Kuritzkes came to the banking world from management consulting firm Oliver Wyman, where he was a partner. Teresa Tanner worked in human resources at fast food chain McDonald’s for a decade before joining Fifth Third Bancorp as chief human resources officer in 2003. Anil Cheriyan joined Atlanta-based SunTrust Banks as chief information officer in 2012 from IBM Global Business Services, where he was a senior partner serving clients in the financial industry. Crist says that diverse experiences aid any company, but can be of particular benefit within the banking industry, which, he says, suffers from a lack of new thinking and innovation. “The best organizations show a proclivity to attract and retain people with diverse experiences who can think differently,” he says. Institutions “that don’t think about introducing new [and] different DNA into their culture will go the way of all extinct species.”

In addition to looking from without, banks can still benefit from finding talent the old- fashioned way: Grooming from within, and taking advantage of the talent pool generated through industry consolidation. Crist wonders how industry consolidation will impact hiring for the surviving banks. “Will [bank] consolidation mean that there will be a surplus of talent floating around?” he asks. He also adds that some skills might prove unnecessary as banks provide more and more services online. “I don’t think that I would want to be a 55-year-old mid-market lending officer ten years from now,” he says. “I have a feeling that world is going to be changed dramatically.”

Bank boards need to look ahead. “How will the banking landscape look ten years from now?” says Crist, and in turn, where will future bank leaders come from? He stresses that bank boards and management should have a “top-down attitude” when it comes to human capital strategy, adding that the best companies spend considerable time on talent needs. He cites JPMorgan Chase & Co. (JPM) as a good example. “Look [at] how many JPM alums are running companies,” he says. “Jamie [Dimon, CEO of JPM] does a marvelous job [of] focusing on people.”