Bank leaders set the tone for cultural transformation
For banks to fully embrace their digital destiny, top executives and board members need to set the tone with a cultural transformation that underlies the increasing move to electronic channels.
Traditional banks are often seen as operating at a disadvantage to their digital-only or fintech rivals—not only due to the burden of their legacy systems, but also legacy culture and business models. Management icon Peter Drucker once said: “Culture eats strategy for breakfast,” so in developing a digital strategy, banks also need to consider how their internal culture must change.
“It is imperative that the CEO drives this change,” says Ryan James, CEO of Surety Bank, a $125-million asset bank headquartered in DeLand, Fla. “For us at Surety, it took a lot of patience and a lot of reinforcement of the message. It takes a new way of communicating throughout the whole organization. People are used to doing something the same way for years. It takes time and patience to change that.”
Joe Fazio, CEO and co-founder of Commerce State Bank of West Bend, Wis., believes that, “leaders cannot expect people to voluntarily want to do something differently. We are all creatures of habit. We do what we are comfortable doing. Change requires vision – where do we want this to take us? What does it mean for our bank? Our industry?”
Indeed, banks are often hampered by past successes and practices that lull them into a false sense of comfort, Fazio adds, and to overcome this inertia, leaders must create a culture of embracing change, of accepting mistakes and missteps.
“Look how pervasive mobile banking is today, yet only 12 years ago smart phones and banking apps did not exist,” he says. “Throughout the history of banking, maybe nearly all of civilization, once we discovered it was better to use something of common value to exchange goods and services versus constant bartering, everyone’s lives improved. Once banks arrived on the scene, they improved the use of money for everyone, from cash to checks to electronic to digital.”
And yet, conventional banks systems and protocols often make this digital development difficult. Maria Schuld, division executive for the core and banking division at FIS, points out that banks of all sizes are facing the challenge of how to adapt existing systems and processes, how to respond to change and the innovation challenge.
“This is where the C-suite plays a pivotal role in driving change,” she says, “both in terms of navigating how to innovate, but how to retain the bank’s core values that make it unique and relied on by customers.”
According to the FIS 2019 Performance Against Customer Expectations (PACE) report, nearly three-quarters (73%) of consumer banking interactions are now digital. However, as Schuld points out, “that doesn’t negate the importance of still delivering the highly personalized experiences to customers that banks have been giving for years.”
“Banks need to invest in digital tools that provide customers with a frictionless, on-demand experience across multiple channels,” she adds, “while ensuring the customer remains at the center of every process.”
‘Commitment, all the way to the top’
Alex Carriles, executive vice president and chief digital officer at Simmons Bank of Pine Bluff, Arkansas, also believes that digital transformation requires “a lot of commitment, all the way to the top… If it’s trying to happen in middle or lower executive management, but you don’t have buy-in from CEO and board of directors, that’s an uphill battle.”
Carriles, who moved to Simmons from digital transformation poster-child BBVA less than a year ago, reports directly to the bank’s CEO. Being told from the get-go that he would have a direct line to the bank’s chief executive, “ I knew that this is a position that would have the ability and influence to make things work.”
Victor Orlovski, founder and managing partner of Fort Ross Ventures and former executive with Russia’s Sberbank, says, “it is the role and responsibility of the CEO to be a visionary project owner for a transformation journey. Truth is, a natural selection of the C-level executive in banking is a risk-averse personality, not a risk taker.” Risk-takers usually don’t survive in the banking environment for long, Orlovski points out. A CEO who wants to transform his organization has to be a risk-taker and, he adds, “usually, this personality is not a banker.”
With that in mind, can a traditional bank executive lead their organization into a digital future? “It is possible for a legacy CEO to have this perspective, but it is harder. They have to be willing to evolve,” Surety Bank’s James says. “More than willing, they need to possess a drive to evolve and become a better organization.” The best case, he says, is for someone to have experience leading a bank but also be willing to take a bit of a risk because “you’ll get better buy-in from staff than an outsider would.”
Orlovski says cultural transformation should be viewed as an incremental process. “The worst thing a CEO can do is to start pushing slogans instead of acting. It takes time to transform people’s habits. You should be patient and consistent, but what is even more important is that you should put the right stimulus in place.”
Fazio agrees, saying it takes time for people to understand and to buy into the change.
“Some lead it, some follow it, and some they are dragged into it or they never come along,” Fazio says. The most important things about change is leaders communicating it, living it themselves, and “repeating, repeating, repeating,” he adds. “You cannot overcommunicate. People need to hear things several times before it clicks for them.”
Karen Epper Hoffman is a financial writer based in Olympia, Wash.