The Secret to a Smooth Transition? Better Change Management.

Have you ever tried adopting a new habit or routine? Or breaking an old habit? Changing something that feels like muscle memory is difficult for almost everyone. Studies suggest it can take anywhere from 18 to 254 days to form a new habit and make it stick. And this is when there’s a desire for change.

What about situations where change may not be so eagerly embraced? You’ve probably heard the saying: “if it ain’t broke, don’t fix it?” This often happens in banking – whether it’s change associated with a new regulatory requirement or adopting a new technology.

Effective change management strategies are vital for financial institutions navigating the complex landscape of technological advancements and evolving customer expectations, as well as market shifts, like a drop in interest rates.

Change management is not just a concept for financial institution growth. It’s now one of regulation, as a Wipfli blog post points out: “With the publication of the FFIEC’s Cybersecurity Assessment Tool (CAT) and the NCUA’s equivalent Automated Cybersecurity Examination Tool (ACET), it is now a baseline requirement for all institutions to have a formal change management process. This means that every financial institution, regardless of size, must have a program that explains how the institution defines and manages changes to its technology environment.”

Managing change when it comes to lending operations is especially important, as it can pose major implications for an institution’s risk exposure and balance sheet performance. This blog will delve into what a robust change management strategy looks like when implementing new lending technologies and the most common pitfalls to avoid.

3 Most Common Pitfalls

Even well-planned changes can face obstacles. While it’s normal to face hurdles along the way when tackling a major initiative, understanding the most common challenges that may arise can help bank leaders resolve these issues more proactively so that a small hiccup doesn’t derail the project.

1. Lack of Buy In:

Modernizing loan origination or risk management processes involves more than just upgrading technology. Success hinges on aligning people, business processes, and technology within the bank. The last thing bank leaders want is to implement major tech changes only to see team members struggle with long-term adoption of new processes.

2. Scope Creep:

When starting a digital transformation project, leaders typically focus on the KPIs and goals they aim to achieve. However, even with the best intentions, these goals can sometimes be too broad or generic. When expectations are not communicated clearly, there may be misunderstandings about the goals, timelines, or how success will be measured, which can hinder progress.

3. Insufficient Communication:

A lack of communication is a major issue when adopting new processes or technology because it leads to confusion, resistance, and misalignment across teams. Clear communication is essential to help employees understand the reasons for the change, how it will impact their roles, and what the expected outcomes are. When communication is lacking, it can create uncertainty and fear, making employees feel unprepared and unsupported. This increases the likelihood of resistance, reduces engagement, and makes it harder for teams to adopt new processes effectively.

A Framework for Successful Change Management

Leadership needs to be actively involved and visibly supportive of the change to set the tone for the rest of the organization. With a few actionable steps, bank leaders can establish the framework to ensure a smooth transition across the organization.

1. Develop a comprehensive change management plan.

Identify short- and long-term goals by determining the pain points employees or customers experience, gaps in consistency and opportunities for better alignment between teams, KMPG recommends. Consider establishing a change management team that will define goals and roadmaps to help everyone understand what is going on behind the curtain and focus discussions on the ideal processes or workflows that would work best. This will pinpoint which improvements or changes should be prioritized.

2. Invest in robust training programs.

Change, particularly in terms of using new technologies or processes can be overwhelming for employees, Simon Puckering, head of digital and innovation, wealth and personal banking for HSBC, notes in a LinkedIn blog post. “The essence is to allow them to participate in the change. This will require a fair bit of hand holding by skill development and training programs. It is also essential to help employees understand what the transformation means for effective participation.” Involving all affected parties in the process is critical so that feel a sense of ownership in the changes.

3. Establish clear communication channels.

The most effective change makers are those who can vividly articulate their vision for the future, creating a clear mental image for others that evokes an emotional response, and fosters an environment that motivates others to act. That’s why it’s crucial to clearly communicate the benefits of the changes to team members and to do so early on.

4. Create a culture of adaptability.

Change management at many financial institutions requires a culture shift. Develop a culture that prioritizes adaptability and continuous improvement. Engage the team to understand what the “ideal state” should look like. By taking time to gather feedback and insights from all stakeholders, leaders can better understand inconsistencies, gaps and opportunities for improvement that can be addressed with the new technology.

5. Measure and celebrate success.

With large-scale change, it’s best to focus on the incremental victories and foster a culture of continuous improvement. Doing so reinforces positive behavior and builds confidence among team members in the future of the initiative. 

In today's dynamic lending and banking environment, effective change management is not optional—it's essential. By focusing on clear communication, strong team engagement, robust training and building a culture of continuous improvement, banks can successfully modernize their lending operations and thrive.

Author Bio

Baker Hill empowers progressive financial institutions to increase revenue, reduce risk, and drive more profitable relationships.

Streamline business, consumer direct and indirect lending with our common origination platform. Understand profitability and risk at every level with our sophisticated business intelligence and analytics. Monitor and maintain a healthy financial portfolio with our statement analysis, exception, and risk management solutions.

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