Management Issues: Tremendous Transformations

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Successfully anticipating and implementing transformational organizational change

By Marcia Lerner

Truly successful companies, in any industry, are those that successfully anticipate and adapt to change. So what’s the message for community bankers juggling continual, increasingly complex industry change coming from various directions and dimensions?

You can make your community bank better at it.

And while it’s the responsibility of a company’s top leaders to keep an eye on change, the effort can and should be shared with others within the organization. According to organizational change management experts, it turns out that anticipating change is a lot like implementing it—it’s an organization-wide effort. The more the responsibility is shared, the easier it can be for an entire workforce to respond, and possibly for your community bank to become more flexible and agile in adapting to inevitable change.

Many community bank leaders need more hands-on players in the change game, and the single most powerful action your institution can take to bring others in on the process is to create a sense of urgency around the task, says John Kotter, director of research for Kotter International, a consulting company in Cambridge, Mass., and professor of leadership emeritus at the Harvard Business School. “Urgency is when lots of people have clarity about what the opportunities are, and intellectual and emotional commitments to exploiting those opportunities or avoiding those threats,” he says.

“People convince themselves constantly that ‘no, that’s not our problem’ when in fact it is.”
—John Kotter, Change Management Consultant

When employees have a sense of urgency and a clear understanding of the challenges they face, they have a personal investment in anticipating those changes and taking responsibility for them, Kotter adds. The involvement of more people will also help down the road, because they’ll be more open to responding to changes they themselves have seen coming.

Some larger organizations even create a staff position such as a change management officer, a person who owns the responsibility for anticipating and prompting change across an entire organization. But this may or may not be unsuited to community banks, change management experts say. You don’t want to send a message that it’s someone else’s job to think about and adapt to change—because the whole organization should be considering change, says Tim Baldwin, a professor of business leadership for the Kelley School of Business at Indiana University.

Step-by-Step Toward Change

Each change is different, and requires a different response. But Brian Emerson, Ph.D., principal of Riverstone Endeavors, a change-management consulting firm in Upper Marlboro, Md., offers a high-level view of the series of phases an organization might pass through in its quest for change.

Define the change. Identifying a specific change will give everyone who participates in the process a sense of how things are going to alter and why. The change should have defined goals to measure your success, Emerson advises.

Identify and include stakeholders. Find out who will be affected by the change and include them in the discussion. This doesn’t mean that everyone needs to have an active part in deciding what to change and how to change, but everyone should be given a chance to contribute their thoughts and ideas.

Communicate a plan. Once the people involved in the change are identified, communicate clearly and often to them. Explain what the change will be, why it’s happening and what won’t be changing, Emerson recommends. Also ask for input. A change that is coming, in part, from the people affected has a better chance of succeeding.

Look at long-term effects. Consider how the intended change will affect other parts of your work system, and how your community bank or its workers might resist change.

Follow up. Monitor the initial goals of the change project: Have you fulfilled them? If not, what can you to do get closer to them? Be sure that those in charge of discreet portions of the process are rewarded for success, Emerson says.

Celebrate. This is a phase that many people don’t do, even though it’s incredibly rewarding. Take the time to recognize that this was a big change for people. Doing so can make your next change easier, Emerson adds.

Keeping an outward focus

To see what’s coming, every organization needs to look up from what it’s doing, change management experts say. It’s essential that organizational leaders and others in community banks be aware of not just what’s happening inside their institution but also what’s happening outside it—what’s going on in the larger industry and the broader business world. A community bank that looks both inward and outward for change is more likely to see it coming, and can better able to adapt to it.

“Organizations tend to have an internal or an external focus,” observes Brian Emerson, Ph.D., principal of Riverstone Endeavors, a leadership development consultancy in Upper Marlboro, Md., “and you really need to have both.”

Keeping up on new industry events and developments should include reading trade publications and social media outlets. Time should be set aside for staff to attend industry conferences, and to share afterward what’s been learned throughout the organization. There’s a lot to learn from talking to other people in your industry or situation—both how they’re responding to changes and what they see coming down the road, change management experts say.

The key with all this outside input is in how you approach it, Kotter says. Be open to its message. When you’re taking in industry news, whether it’s bad or good, recognize that it could apply to you and your community bank. “People convince themselves constantly that ‘no, that’s not our problem’ when in fact it is,” he says, adding that a known problem is more easily prepared for.

Also, remember useful information can come from anywhere. Be sure to get out of your office and see what’s happening, says Rick Maurer, principal of Maurer and Associates, a change management consulting firm in Arlington, Va. Talk to, learn from and listen to others, especially your customers. You never know where your next great insight is going to come from.


Successfully Adapting to Change

Community bankers have been grappling with the rapid transformation of their industry for at least 20 years. Regulatory changes, a constantly fluctuating economic climate and ever-evolving technology have combined to create a shifting landscape. For community banks, whose close connections to their customers and local communities is part of their most powerful hallmarks, meeting changing or evolving needs is crucial.

“The mantra of the organism—that you change or die—is applicable,” says Tim Baldwin, a professor of business leadership for the Kelley School of Business at Indiana University. “This has always been true, but now it’s at a little faster pace.”

While recognizing change is essential, so too is the ability to respond and adapt to change effectively. For example, it’s all very well for a bank to institute new training rules or acquire a new technology, but there’s a difference between deciding something should happen and making it happen, change management experts say.

Moreover, implementing change is harder than it looks. A study done by the consulting firm McKinsey and Co., found that a full 58 percent of organizational change projects were unsuccessful. Other studies have put the failure rate for implementing change even higher—at 70 percent. These are daunting numbers. But that doesn’t mean that an organization’s attempt to change is doomed to fail—far from it, says Brian Emerson, Ph.D., principal of Riverstone Endeavors, a leadership development consulting firm in Upper Marlboro, Md.

However, change, when managed well, can save a business or organization. While 58 percent of the businesses in the McKinsey study weren’t able to put their intended project changes into effect, the ones that were able to change, and to do so within the budgets and time frames they set, found that the changes they made were beneficial. For example, they gained the returns they’d been aiming for—in some cases exceeding them by 200 percent or even 300 percent.

So what can you do to put your community bank into the group that’s able to reap with benefits of change? Pursue the proven steps involved with effective change management, say experts who are backed by the results of the McKinsey study.

The process

What, exactly, is change management? As Emerson, who has a doctorate degree in human and organizational systems, explains, “Change management is what you do to speed the adoption of a change so you can realize the benefits of the change more quickly, with less money and less frustration.”

Sounds good, doesn’t it? But, like change itself, simply understanding the concept on its own isn’t enough to avoid falling gravely behind the change curve. To make change management work at your community bank, it needs to take active steps. You need to understand what change management really is: a way to help a workforce effectively climb the mountain to achieve organizational change.

Journeying to another mountain is one of Emerson’s favorite metaphors for the change management process. The way he sees it, a successful organization is on top of a mountain. From there, leaders can see their goal—the next mountain—pretty clearly, even if it’s far off. They are looking at and defining the change that needs to happen in their own minds. The challenge for an organization’s leaders? Getting to the next objective—the next mountaintop—and bringing their employees and organization along with them.

However, problems and delays inevitably occur when organizational leaders­—because they clearly understand where they want the organization to go—get in a metaphorical corporate jet to fly directly to that final mountaintop destination, leaving most of their employees behind to walk the slower path to the final objective, Emerson says. In effectively leading an organization toward change, as in so much else, leaders need to return to walk alongside their workers to teach, encourage and lead them through the mountain journey of change that leads to the final goal and destination.

It’s important for leaders to paint a clear vision for their employees of what the path toward the final destination looks like and what other mountains may stand in between, Emerson says. When the organization or group reaches the top of a mountain, along with the final mountaintop goal, the whole process starts again.
Along the way, change becomes a series of continual steps toward a final goal that is led by a leader who fully understands the destination in mind, Emerson says.

“Change management is what you do to speed the adoption of a change so you can realize the benefits of the change more quickly, with less money and less frustration.”
—Brian Emerson, Change Management Consultant

Targeting change

As a leader of your community bank, you’re keeping an eye on the larger industry landscape, so you have a clearer idea of what changes might become necessary, and your employees should be, too. However, it’s your job as leader to identify areas and ways in which your community bank needs to adapt. Try to keep specific change projects narrowly focused. Baldwin says, “It just doesn’t work to radically transform an organization. The trick is to talk about iterative changes, small wins.”

The effort toward specific change should also have clear goals and measurable results, he adds. Seeing a successful result at the end of the process will make the next change easier—and there’s always a next change to be made.

Bringing everyone in

Once you have a focus, identify which employees will be affected by the changes envisioned. Be inclusive here, because those workers are the ones who will make the change happen—or not. What you’re doing is making a case for change for others to follow.

Upper management may have a great idea—and access to the data and reasoning—for instituting change. But just because management decides something, that doesn’t mean employees are willing and ready to make the change happen, points out Rick Maurer, principal of Maurer and Associates, a change management consulting firm in Arlington, Va. Maurer says organizational change fails primarily due to a natural human resistance to change. “A small technological change seems simple on the surface, but right underneath it are the people,” he says. “They say, ‘Wait, it was working fine for me before.’”

“A small technological change seems simple on the surface, but right underneath it are the people. They say, ‘Wait, it was working fine for me before.’”
—Rick Maurer, Change Advisor

Maurer says the best way to get people onboard an effort to implement change is to include them in the whole conversation. With greater understanding behind the need for the change they will be more responsive and even creative in working toward change—for themselves and the organization.

It’s not just people who resist change. John Kotter, director of research for Kotter International, a consulting company in Cambridge, Mass., and professor of leadership emeritus at Harvard Business School, says the potential barriers to change are wide-ranging, and notes that an awareness of these barriers is crucial to achieving change.

“To some degree, people forget how many forces are in place that keep things stable,” Kotter says. “It’s so easy to say, ‘It’s these stupid people who’ve been around here too long with their bad habits,’ but it’s bigger than that.” He notes that often the barriers to change may be so large that they’re almost invisible—things like the compensation structure, the management chain, even the appraisal process can all be used to reinforce the status quo.

But just because barriers exist, doesn’t mean they’re insurmountable, Kotter continues, who suggests that workforces be viewed not as barriers but as sources for solutions that can create a successful dynamic toward change. “So many times when leaders are faced with a change, they don’t take the time to think through the human aspect—whether because they think it’s too soft or doesn’t matter, or that humans should just get it—and in the end that’s why the change doesn’t happen,” Emerson explains. “So even though you may be tempted to skip that process because you think it’s going to take longer, paying attention to the human aspect is an investment.

“It’s investing a little bit of time up front that’s going to save you time, money and headaches down the road.”

Communicating openness

A key feature of including workers on the reasoning behind the change is frequent communication. All aspects of the change need to be communicated to those implementing it. This includes the urgency behind why the change is happening, the possible effects of not making the change, and what is going to change as well as—and this is very important—what will be staying the same, says Emerson.

“The mantra of the organism—that you change or die—is applicable. This has always been true, but now it’s at a little faster pace.”
—Tim Baldwin, Change Management Consultant

Communication on this level is difficult. According to Emerson, the first time people hear about a change, they don’t really listen because they often primarily want to know how it will affect them directly and personally. That means communication from leaders has to come multiple times, and must address both employees’ most pressing question—how will this affect me?

As Maurer notes, “People need to see that there’s a compelling reason to make this change. If people think they’re just making it for the sake of newness, there will be a lot of resistance.” Baldwin concurs, noting, “It’s about getting urgency, motivation for change.”

A great way to do this is to ask employees for their input. As Maurer sees it, while you don’t want to be giving wide-open change options or incorporate every suggestion offered, you do want to communicate that you are open for suggestions on how the change proposed will come about. Your openness to ideas from your workforce will help make them open to ideas from you.

As Maurer says, “What independent bankers have going for them is that people who work there are part of that community they are serving, so there is more opportunity for people to take pride in what they’re doing, in the way they’re serving their own community. This engagement is a great way to get people motivated about change.”

Rolling out change

Once you’ve made a case for change and gotten input and participation from the people involved, begin moving ahead to implementing the change, experts say. But note that implementing involves an active, intentional process, with much consideration for how it’s going to play out within the work atmosphere. That means leaders must stay involved, modeling the change and supporting the change. It also means holding workers accountable to the change.

According to Emerson, the main reasons that people adhere to change is that they are rewarded for doing so on one hand and are held accountable for not doing so on the other. It’s up to the leaders of an organization to make sure this happens in whatever way makes sense to their business, he adds.

Following up

Once a change is in effect, it requires recognition and a focus on returns, change experts say. With clear goals set at the beginning of the process, now is the time to assess whether those goals have been met. It’s also an opportunity to reward and acknowledge the ownership employees have taken for the process.

“You want wins,” Kotter explains. “That can pull people on your side, reduce resistance and gain momentum.” See what’s gone right, and continue to monitor adoption of the change to ensure that processes don’t slip back to their previous familiar groove, he says.

But the most important factor in ensuring that a change really sticks is employing the change management tactics all along. “If you’ve done it right, it will stay in place,” Kotter explains. “And if you haven’t done it right, it has a higher probability of undoing itself.

“If you’re doing it the right way, people see their successes. It’s not a battle. They’re doing it because they want to, and it’s a collaboration about helping the organization succeed.”


Marcia Lerner is a writer in New York.

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