Anxiety, threat and fear are derailing transformation in the financial services (FS) industry. Where is that fear coming from? Accenture’s research offers some insight—and points to some solutions.

FS organizations recognize they must master change and make it a core capability to succeed in a landscape that is changing at high speed. Yet many are struggling to scale innovation and achieve transformational change outcomes. Accenture’s research indicates that high levels of fear and anxiety are derailing change in this sector. Where does that fear come from?

It comes from concerns about an uncertain future and job insecurity. This fear is driven by:

  • A decade of cost cutting and job losses since the financial crisis.
  • Digital programs that have focused on cutting costs and reducing existing work rather than seeking to deliver genuine transformation, new value streams and new business models.
  • An industry sector struggling mid-change to move forward due to lack of resources, suitable processes and clear focus.

 “Every single individual on my team and every team I’ve come across is anxious or uneasy about these changes.” Accenture surveys, industry responses

Accenture’s Transformation GPS (TGPS) analytics tool measures the change state of organizations based on 10 dimensions of change and locates industries, companies and teams on a change map according to their performance.  Our research puts FS firms in a ‘Yes, But’ change state.

YES, leadership is supportive, people understand and agree with the vision, change benefits are being realized, and business performance is improving… BUT people feel they lack needed resources, systems and processes get in the way, conflicting priorities jeopardize business benefits, the legacy environment is complex and, most of all, fear and anxiety are pervasive.

Accenture’s Transformation GPS analytics tool puts financial services is in a ‘Yes, But’ change state.

For firms in a ‘Yes, But’ state, early progress in change initiatives is undermined by levels of fear about change among the workforce. For FS, levels of fear and anxiety are higher than in other industries. They are the most significant negative drivers for FS teams and employees, and have a material impact on business performance and the realization of the benefits of change.

What does fear in the workforce look like?

The anatomy of fear

Fear is a basic human reaction—an unpleasant emotion that surfaces when we perceive a physical or social threat in our environment. It triggers freeze, fight or flight responses. Humans also experience anxiety—where the threat is not present but anticipated or recalled. In these states, the instinctive brain takes more control and the rational, analytical mind struggles to assert itself in the same way as it does when the person feels safe.

Fear and anxiety do not generally bring out the best in human beings. In these states, many make hasty, biased decisions and take uncalculated risks. Others become overly risk-averse. Some become autocratic or go on the attack, lashing out at those closest to them.

How does this play out in the workplace?

These symptoms can, for example, be observed among teams in FS organizations where change has become associated with rationalization of the workforce.

Job insecurity means people are worried about loss of status or their ability to provide for themselves and their families, tapping into some of their most primal drives and fears. In addition to impacting self-confidence, studies indicate that people trapped in these states find it difficult to learn new skills and patterns of behavior. Because people believe failure will not be tolerated, they do not experiment. Fear and threat create a narrowing field of view and those with expertise may hoard information to protect their position. Collectively, these behaviors spell trouble for any organization, but especially for FS firms.

As people are subjected to physiological or mental arousal their performance increases. But, once the level of stress becomes too high, performance decreases. Yerkes–Dodson law.

Why addressing fear matters for financial services

Fear and anxiety can damp innovation, initiative, team work and the acquisition of new skills.

Historically, many FS firms have been managed using a traditional hierarchy, position authority, functional specialization and centralized decision making. Leadership styles were command-and-control or paternalistic. These approaches worked for FS firms while the environment was stable. In today’s disrupted environment, increased agility, innovation and collaboration are required.

Employees need to be able to work well in teams, across team boundaries and with external ecosystems. These new ways of working will not be possible in organizations where fear prevails. Similarly, as new waves of technology are applied to financial services, new work is emerging and workforces need to be able to acquire new skills. Yet sustained learning will not happen in workforces that are fearful.

According to the Yerkes–Dodson law, as people are subjected to physiological or mental arousal their performance increases up to a point. Once the level of stress becomes too high, performance decreases. Too much fear can distort communications, make people bitter and resentful, create negative psychological effects that can linger, and result in people wanting to leave the organization. Under such conditions, the benefits of transformational change quickly collapse. In short, fear tactics are short-term tactics when it comes to change.

Join me next week as I look at how FS firms can turn this around, reducing fear by cultivating trust and psychological safety, and putting in place the right leadership structures.

Meantime, for more on managing change and building trust, click through to:

Fearless. How safety and trust can help FS thrive even during disruption and transformational change.

Enterprise Agility in Financial Services. The new strategic Imperative.

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