Other parts of this series:
In my last post, I started sharing my analysis of the results of our Financial Services Change Survey 2017, published in June. We looked at how financial services (FS) firms were prioritising investments in change towards cost reduction, digital, customer, product/services and regulatory change.
While change is not new to banks and insurers, the kind of change they face now is more demanding and fast-paced than ever, and there are blocks to progress along the way. Knowing that all change has barriers, we utilised our survey to identify the most common ones in FS.
In our survey, we asked 787 senior executives from 10 countries to rank a dozen different barriers to change. There were a range of perceived barriers. Our ‘change leader’ group perceived these barriers just as much (in some cases even more) than the follower group.
The results cluster around themes of leadership and prioritisation; legacy complexity; and people.
What is most fascinating is the surveyed executives saw the greatest barriers to change being topics that surround change leadership and how the leadership prioritise resources and investment. The number one barrier was conflicting priorities (49 percent saw this as a serious/significant obstacle to change initiatives) – this echoes the breadth of investment priorities we explored last week. Other factors related to leadership include availability of, poor accountability (42%), unclear roles and responsibilities (42%), lack of strategic vision (39%), undisciplined execution (39%), lack of investment (39%), failure to build a strong business case (38%) and lack of management support (35%). As we see the industry deal with ‘today’ problems like regulation and high fixed costs, while trying to generate growth and move towards digital it is not unsurprising these factors came out top. We know from ChangeTracking® that change leadership is the number one factor influencing business performance through transformational periods.
The complexity of the current state/legacy environment came in second seen as a significant barrier by 47 per cent of FS firms. Most incumbents face very real barriers in their legacy operations, technology and data, which are well documented. Typically new entrants do not face the same barriers, as they are ‘greenfield’ businesses carrying less complexity and fixed cost (but lack the scale of the incumbents).
Part of the answer to speeding up change is ‘people’, but we have to be honest and recognise this is a major barrier too. This is especially true in transformations that challenge ‘how we do things around here’ and often lead to radical changes in business model, re-skilling and job insecurity. A lack of resources and appropriate skill sets (47%), employees inability to adapt to change (45%) and fear of change (41%). This is unsurprising, given the fact that the FS workforce has witnessed years of cost cutting and is facing future threats of digital changing the skill sets needed and the very definition of jobs.
Each FS firm committed to transformation will encounter many of the obstacles we identified in our survey. With so many roadblocks in the way of progress, the question then becomes, “How do we not get stuck in the mud?” Understanding these barriers to change is the first step and making some courageous decisions about vision, prioritisation and capital allocation. In incumbent firms, a sensible first step is to isolate some of the barriers and allow other change to run faster – for instance when addressing legacy technology many firms are establishing API layers over legacy technology, or building new core technology and then migrating volume across from their legacy technology. However, at some point these barriers cannot be ignored and need to be addressed. There is a lot of heavy lifting to be done to address legacy complexity (e.g. core banking replacement, legacy decommissioning); but the hardest barriers to address will be leadership and workforce mindsets, skills and behaviours. To address ‘how we work around here’ there is a need to activate leadership (e.g. getting them involved in digital programmes), nudge new behaviours in the workforce (e.g. developing digital customer support skills in branch staff) and rewire the organisation (e.g. changing metrics and decision making).