Leadership Lessons from the Banking Upheaval

Guest post from Jean-Marc Laouchez, Hay Group:

 

“Banking is no longer
somewhere that you go, it’s something that you do.” – Brett King, Banking 3.0

When
was the last time you visited a bank branch? My kids have never seen the inside
of one. Chances are they never will. Brett King’s quote sums up the total
revolution sweeping through financial services. With their industry
transforming before their very eyes, what are the lessons for leaders?
 

“Just do it” doesn’t
do it any more
One
thing’s for sure: the old ways won’t work.
New research from my company Hay
Group reveals that compared with peers, financial leaders have up to now been
more likely to rely on a coercive, “just do it!” leadership style. We found
that nearly half (43%) used this as their dominant approach, compared to only
one third (34%) across all sectors.

Being
authoritarian like this has its uses. But it’s the opposite of what’s needed to
drive the things the financial industry needs right now – in particular,
innovation. Indeed our findings confirm that financial companies lag in this
area. While they may be good at dreaming up new financial products, they are
not so hot when it comes to taking a completely fresh look at their business. Only
53% of financial employees rate their firm’s ability to innovate: at
top-performing companies, this figure is 70%. And our research shows that compared
with other industries, they also lack customer focus and pay much less
attention to competitors.

Upstart competitors
on the rampage
This
is a dangerous combination, because now that banking is no longer ‘somewhere
you go’, a host of new competitors have been appearing from left field to eat
the sector’s lunch. In Africa, some telecoms providers have bypassed
traditional banks completely. The M-Pesa service lets anyone with a cellphone
and some form of ID deposit, withdraw and transfer money easily: no strings
attached. In mature markets, banks are rushing to play catch up with this kind
of mobile service before smart new competitors outwit them. In the US, new online
firm Betterment has made it remarkably easy for ordinary customers to set up
and manage investment portfolios. Claiming 37,000 customers to date, Betterment
is proof that customers will happily move their money to the easier, cheaper
place even if it lacks the kudos of an established brand.

How
can banks respond to challenges like these? Leaders have a critical role to play
in creating the conditions for successful innovation.

1. Openness.
If
one thing stifles innovation, it’s closed minds. When leaders major on a
‘coercive’ style, employees can be afraid to come forward with new ideas, for
fear of criticism or even being fired. By making it clear that the business is
open to new ideas, leaders can help create a culture that stimulates them. Even
if it’s within the confines of their existing business model, being open-minded
can open the door to useful innovation for banks. Chase Bank, for example, is
opening “all-in-one” branches in California. Featuring touchpad screens, meeting
rooms and bank staff standing by, they’re designed to ‘upgrade’ the experience
of visiting a branch. In this organization, someone has been prepared to
rethink the one of the industry’s fundamentals: the very purpose of a bank
branch.

But
is it really possible to fight off upstart competitors from within the confines
of an existing business model? Leaders at some institutions have decided not.
Their openness has included being willing to set up totally new, separate units
where disruptive ideas have space to grow. Early in the online banking era, leaders
at venerable European bank Societe Generale decided that this was the approach
it needed to take. Today, its separate and highly successful online banking and
broking operation Boursorama has attracted nearly half a million customers.

2. Vision.
In
any industry it’s hard to innovate and change from within. In financial
services, focused on immediate gains and with a business model that has changed
little in decades, it’s harder still. To overcome this, leaders need to be
visionaries, with a clear view of the destination and how to get there. The
CEOs of both Citi and Barclays have taken care to articulate this: Barclays’
staff are asked to rally behind the idea of “
Helping people achieve their ambitions – in the right way.” New
CEO Antony Jenkins has set out an ethical vision for the bank, assessing
performance “not just on what we deliver but on how we deliver
it.” His
letter to
staff
also makes it
clear there is no place at the bank for people who do not share this vision.


3. Willingness to fail.

Finance should by definition be a
risk-averse business. But innovation depends on leaders who are prepared to let
people make mistakes. Leaders who will make space, as
Apple’s current ad campaign says, so there can be “a thousand “no’s” for every “yes”. Because
if failure is always seen as a sign of weakness rather than a by-product of
striving hard for success, people will be less likely to develop the kind of
breakthrough new ideas that could provide much-needed competitive advantage. 
 
Leaders hold the key
The
new world of money demands a new approach from established players. Their
steady, reliable business model of the past is no more. Leaders hold the key.
With a clear vision, an open attitude and a willingness to get it wrong before
they get it right, they will be able to steer their firms to success in a less
predictable and more competitive world.

Jean-Marc Laouchez is
the global managing director for the Financial Services sector at
Hay Group.
He can be reached
Jean-Marc.Laouchez@haygroup.com
.