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Today’s banks implementing software: Make change management a priority

By Mary Ellen Biery, Sageworks

The term “change management” is a popular one these days, though it may sound like consulting jargon.

It is an important concept for any financial institution considering implementing financial software – whether it’s software to book the right loans at the right prices more quickly,manage lending relationships and the portfolio or implement the new current expected credit loss standard (CECL). There’s a solution for everything, and more institutions across the board on entering into new relationships with various vendors, integrating with multiple technologies at once, and facing the challenges of effective implementation and successfully promoting adoption among employees.

Change management is an approach that incorporates strategies, people and tools in order to ensure that the changes being implemented achieve what they are intended to do.  So when it comes to implementing financial software, change management can make sure that the implementation accomplishes what your bank or credit union expects it to. Without change management, there’s no guarantee your bank will derive the value it paid for from a given technology – with change management, there’s a far better chance your project will produce or even exceed the outcomes your institution sought from the project.

Financial institutions are understandably wary about changing their systems and practices. After all, banks and credit unions are incredibly complex and heavily regulated, and they may face potential legal, regulatory and reputational risk if an alteration in a system or process results in a major problem. While banks have a history of being adverse to change, today’s banking environment and the pace of innovation in product and service offerings has demanded the industry to move toward flexibility and quick progress.

Mary Ellen Biery
Mary Ellen Biery

Despite the tendency to stick with legacy systems and processes in the industry, change is inevitable in all business, noted Chance Castellucio, a senior credit risk consultant at Sageworks. It seems to be increasing as technology advances and, in financial services, as competition heats up to create better borrower experiences and better manage risk and expenses.

“Since change is always happening, we will be better off if we are able to handle it more smoothly, and that’s where change management comes in,” he said.

Castellucio commented on the role of change management and how it affects a financial institution that is implementing financial software.

He said change management:

  • Reduces the risks associated with change, giving more confidence that the change will be successful
  • Helps the institution proactively plan for potential obstacles and develop mechanisms for overcoming them
  • Encourages the institution to develop a plan for increasing user adoption.

The first role or benefit of effective change management is that it will reduce the risks connected to the change, Castellucio said. This may be especially important for smaller institutions with less cushion to absorb any negative impact, such as a delay in service or a lost record.

A second benefit is that change management provides the institution with additional information that will help it identify in advance any potential hurdles to executing change. Examples of potential hurdles could include problems related to miscommunication or to employees who are resistant to changing from one process to a new one. “A good part of being able to reduce those risks is to proactively think about what obstacles can be faced,” Castellucio said. “A lot of that’s going to come from you at your institution. You know your culture, the potential issues or roadblocks you have run into in the past.” By looking at those issues and considering them from employees’ and users’ perspectives, you might be able to communicate more effectively to overcome those obstacles, he said.

A third role of change management is that it fosters development of plans to increase user adoption. Those plans could include communicating why the change is being made, Castellucio said. Or they could include training people to do an entirely new job process. In any case, part of the user adoption aspect of change management is getting people engaged. This often means having a structured rollout, being able to convince influential parties to increase adoption and other methods of engaging users. Above all, Castellucio said, it’s essential to provide high-quality communication about the importance of the change throughout the transition.

“People will better do something if they better understand the why,” he said.

Change management often occurs both inside and outside banks and other financial institutions. For example, a major influence on successful software implementation within a financial institution is the role of the software partner.Best-in-class partners help limit the change-management issues that can occur before, during and after implementation. Vendor partners’ background and experience, their approach to implementation and their approach to ongoing support are critical factors to consider. As banks realize the essential nature of training and implementation support to effectively overcome change, it will become commonplace for these institutions to pay as much attention to vetting their providers for consulting, integration and general support as they do to the technologies themselves.

Change isn’t easy, but with the right change management protocols in place, your employees and institution will be able to move through the process seamlessly and start seeing the returns you’re seeking quickly.

Mary Ellen Biery is a Research Specialist at Sageworks, a financial information company, where she produces content for the web. She is a veteran financial reporter whose work has appeared in the Wall Street Journal, Dow Jones Newswires, CNBC.com, Marketwatch.com, Forbes.com and others.