Financial institutions are upping their investments in changeprograms, and experts say credit unions that ignore this trendcould be left in the competitive dust.

According to a recent study from professional services companyAccenture, more than half of financial institutions (53%) expect toinvest more in change programs over the next 12 months. The bigpriorities: Efficiency and cost control, customer service,compliance and technology.

So-called change leaders — financial institutions thatespecially embrace change and get good at it — are at a particularadvantage, according to the data.

“The most important finding is that there is a small group ofbanks that are more committed than their peers to change, arebetter at it, and are achieving significantly better changeoutcomes and commercial performance,” Accenture reported.

“Like in a long-distance cycle race, as the race speeds up thedisruption initiated by these front-runners will eventually causethe chasing peloton to break up. Those not able to adapt and keeppace will slip off the back and out of contention,” the reportstated.

Financial institutions that become change leaders are oftensignificantly more successful than their peers when it comes toachieving desired results from their change programs, according tothe survey, which included 787 senior financial services executivesfrom large banking groups, insurers and wealth and assetmanagers.

“Thirty-three percent of leaders achieved 76% to 100% ofbenefits and the remainder achieved 51% to 75%. This compares to14% and 35%, respectively, of their peers, 41% of whom said theyhad achieved 50% or less of the targeted benefits,” it said.

The Changing World of Change Programs

Mark Woollen, who is the founder and director of managementconsulting for Hayden Technology in Charlotte, N.C., said changeprograms are really an evolution of enterprise programs and projectmanagement office functions that large organizations have used invarying degrees for years.

“I believe that the emphasis has been expedited recently due tofintech evolution and capital investments in fintech creatingnumerous disruptions and challenges for financial institutions. Notto mention the rapid evolution of technology, digital services andindividuals' general acceptance and comfort with alternativefinancial solutions, and continuous regulatory changes,” henoted.

Financial institutions are also expediting their ROIexpectations for their change programs, according to Accenture'ssurvey.

“One of the most striking findings regarding banks' changeinvestments is the demand for more rapid payback: 79% ofrespondents said their shareholders expect change programs todeliver the targeted benefits within 18 months or less. Clearly,the days of elongated multi-year programs with back-loaded benefitsare long gone, a fact which change leaders appreciate more thanother players,” it said.

Many change programs revolve around shifting to digital methodsof cost reduction, regulatory management, and customer- and growth-focused strategies.

“The upshot of all this is that most banks are exploring – orshifting toward – new business and operating models that are morefragmented and have more of the features of an ecosystem than thetraditional vertically integrated bank that seeks to capture thefull value chain and be all things to all customers,” it said.

Change Programs at CreditUnions

Change programs can be expensive and time-consuming, especiallywhen technology is involved, but credit unions don't get a passjust because they may be smaller, said Jay Fitzhugh, an executiveconsultant and partner at financial institution consulting firmCMPG. In fact, they may have one up on banks — especially bigpublic banks.

“Some of the credit unions have the advantage because they maynot need to look at such a near-term payback period with membersand board members if, in fact, it's an investment that improves theexperience for their members,” he said. “It's not what you invest,it's that you invest intelligently. And that's the hard part.”

That members-versus-investors difference is a big reason creditunions should be wary of blindly making exact copies of bank changeprograms, according to Dennis Dollar, who is a credit unionindustry consultant in Birmingham, Ala.

“The uniqueness of the not-for-profit credit union structure,plus the required regulatory standardization of credit union bylawsthat somewhat mandate organizational and governance structureconsistency, makes many of the 'change programs' being modeled inthe for-profit world less of a fit for credit unions,” he said.

“No doubt that credit unions still benefit from greaterefficiencies, more accountability and a willingness to revisittheir internal and external delivery model from both a managementand board perspective,” he added. “But the goal at credit unions,being member-owned institutions, is more toward how anyorganizational change impacts the quality of what is provided to the member-owner.”

Moving Targets

Having a well-defined change strategy and a leadership teamcommitted to change are common characteristics of financialinstitutions that are regarded as change leaders, Accenturesaid.

Change leaders are more likely to identify a “challenger” bank —67% of them do this versus 43% of their peers, according to thestudy. Almost all (92%) of change leaders have been especiallysuccessful in spreading their digital capabilities throughout theorganization, compared to just 54% of their peers.

One obstacle many credit unions face is that member expectationsare fueling cost pressures and regulatory pressures to add newservice-delivery mechanisms, but old, analog mechanisms still needto stay up and running, Fitzhugh noted. Still, financialinstitutions that are change leaders aren't experimental, “digitalon the side” types — they're “digital at the core,” according toAccenture.

Change leaders are also more likely to foster cultures thatembrace change. Accenture found that 84% of change leaders'employees were optimistic or engaged and motivated about changeversus 62% for their peers.

“These banks handle more change and achieve better results – 75%of change leaders say their organization thrives on fast-pacedchange (vs. 48% for peers),” the survey said.

Almost all change leaders in the survey had a dedicated changefunction and were developing professional change capabilities anddisciplines. The vast majority (86%) also had a wide range of“professional change skills and capabilities,” compared to 60% oftheir peers. Most (81%) had consistent change-management methodsand tools; just 61% of their peers said the same. Strong governanceand transparency existed among 83% of change leaders versus 62% oftheir peers.

Ultimately, who or what financial institutions are changing maybe less relevant than whether they're doing it at all.

“There are some banks that are now accelerating away from thepack. Their ability to manage change effectively is a keydifferentiator, allowing them to put space between themselves andtheir rivals,” the Accenture survey said.