How Financial Institutions Can Make Transformation Stick
Institutions are under constant pressure to innovate, improve efficiency, and grow. In finance, in particular, this pressure is driven by competitive, economic, and regulatory pressures that are constantly shifting. To address these challenges, organizations often refer to their “transformation agenda,” staffed by “transformation managers” running “transformation projects.” But what are they really talking about?
Defining transformation
Let’s start by taking a step back to look at transformation generally. After years of overuse, applied to everything from massive, strategic restructurings to targeted process enhancements, the definition of the word has certainly broadened. Rather than dramatic changes that fundamentally alter a business, organizations more often focus on narrower improvements. For clarity, I’ll refer to the former as “Big T” transformation and the latter as “Little T” transformation.
“Big T” is strategic and organization-wide. It delivers material and irreversible change to the size, scope, and character of an organization. It involves major shifts in how the institution operates, how it competes, or whom it serves. “Big T” transformation is loud: mergers and acquisitions allowing smaller companies to compete with bigger players, footprint consolidations combined with new, technology-first client-facing solutions, and strategic market exits to focus on areas of strength and rationalize costs. It’s big, bold, and visible.
“Little T” is much narrower, so the disruption is more focused. That said, it can still upend the status quo. Changes to improve the competitiveness, productivity, and profitability of products, processes, or teams often cause friction. More nimble organizations embrace a culture of continuous improvement, building institutional comfort and discipline around change. While smaller in scope, these “Little T” transformations add up, and their cumulative impact can be significant.
“Big T” and “Little T” transformation reflect different paths to deliver necessary change. The path chosen should be informed by the pervasiveness of the issue, the complexity of the solution, and the time sensitivity of the resolution. Both can work, and they can work well together. Success, however, is ultimately determined by how well the organization accepts the transformation and sustains the benefits.
How to make transformation stick
Constant change can take a toll on an organization. This is prominent in the finance industry, where Catalant’s recent study found consultants see more change fatigue than in other industries. After years of responding to regulatory scrutiny, market disruptions, and competitive challenges, people in financial services are tired. And that fatigue tends to reinforce the very things that make transformation difficult in the first place. Breaking through that exhaustion is a real challenge, but I’ve seen it work when organizations have key principles in place.
Strong leadership
According to Catalant’s consultant survey, strong, engaged executive sponsors are the top success factor for transformation in financial services. To get a transformation off the ground—especially “Big T” transformation—you need a sponsor to establish the vision, get things moving, and clear roadblocks. But executive involvement can’t end there. For transformation to affect the broader organization, leaders across different commercial and functional areas also need to be invested in the process. An aligned leadership team can make sure that transformation not only happens but that it is sustained and incorporated into how the company does business.
From the field
I witnessed a striking example of leadership alignment and engagement during a large banking institution’s response to a series of compliance failures. The CEO recognized that it was not enough to enhance governance, procedures, and controls. Instead, a fundamental cultural reset was required to ensure the entire organization would operate differently. While individual initiatives were executed by project teams, the executive team and every senior-level manager across the bank were actively involved in enterprise-wide communication, training, and regular recognition of ‘culture heroes.’ Most importantly, the transformation stuck: five years later, after many of those leaders had left, the organization continued to adhere to that culture of heightened accountability and compliance.
Internal communication and stakeholder management
Transformations can succeed or fail based on how engaged the workforce is. People won’t automatically know how to think about a transformation program or what it may mean for them. They need transparency, reinforcement, and guidance at every step for “Big T” and “Little T” transformation alike. Feedback mechanisms that give people a voice promote participation and surface valuable insights as plans progress. Celebrating wins, promoting success stories, and recognizing contributors inspire engagement and adoption. Leaders make this happen, and it’s critical for them to stay involved and communicate a consistent message—from launch, through change, to adoption:
- Start with ‘the why’: what’s driving the change, and what will it do for the organization?
- Explain the ‘how’: what changes are coming, and how will they be delivered?
- Articulate ‘the what’: what does this mean for them, and what role will they play?
- Define the goals and milestones: how do we measure success, and what does ‘good’ look like?
That same discipline extends to your broader group of stakeholders. Clients, investors, and regulators also need to understand what’s changing, with messaging tailored to what matters most to them. Clients want to know how their experience will be impacted. Investors need insight into implications for profitability and competitiveness. Regulators require a view of potential risks and the controls in place to manage them. Like internal communication, stakeholder management needs to be proactive and sustained throughout a transformation.
From the field
I led a “Big T” transformation where a branch-heavy retail bank transitioned to a more digitally enabled, wealth-focused model. At its core, it was a strategic repositioning to focus on competitive strengths and deliver material cost and profit improvements. It made sense on paper, but it ultimately worked because we carefully managed internal and external stakeholder communication at every step. No matter how well you conceive, plan, and execute a transformation, your stakeholders get a vote, and they need to be fully aware of how the change will impact them. If they aren’t prepared to embrace a change in services, a different experience, or a new business model, the transformation won’t succeed.
Defined outcomes
Before starting a transformation, big or small, you need a clear idea of what would make it worth the investment in resources, time, and disruption. That means having concrete, measurable outcomes in mind and a good roadmap to get there. I often start with the profitability equation: how will this transformation impact revenue, cost, or both? From there, you can more easily identify the discrete drivers tied to fundamental business outcomes. This approach validates the commercial rationale for change and helps uncover key metrics to monitor before, during, and after the transformation.
From the field
I worked with an organization to transform a loan approval process that lagged industry benchmarks. The target outcome was simple: grow profitable lending revenue by making better credit decisions faster. The process was riddled with bottlenecks, requiring work—and often rework—from staff across many different areas. Identifying and addressing the underlying productivity issues was only part of the effort. The real trick was pairing operational improvements with client-facing initiatives that capitalized on the streamlined process. Faster loan approval cycle times worked alongside higher sales targets to deliver top-line financial results.
AI reality check
When we talk about transformation today, we have to address AI. AI is in every annual report and is an expected topic of discussion for every board. That said, applications vary widely, with most organizations taking tentative steps to enhance existing workflows. The introduction of AI into an organization is not inherently transformational, nor does AI improve revenues or reduce costs on its own. The transformative power of AI comes from reimagining time and resource-intensive activities and replacing them with new processes delivered by people harnessing AI, often via “Little T” transformation. This can certainly be disruptive and carry risk, like any transformation, but it can also provide the means to address previously entrenched problems and accelerate financial results.
The commercial potential of AI is all about enabling people to do more, faster and more accurately. Think of back-end functions, like compliance or risk, where the time-intensive portfolio reviews and credit analysis can be done in real time. Imagine frontline staff achieving meaningful improvements in client conversion and relationships, putting the right solution in front of the right client at the right time by drawing on analysis from dozens of data sources.
From the field
During COVID, I witnessed a bank adapt an AI solution to meet the sudden demand for thousands of loan applications for the newly launched Paycheck Protection Program (PPP). By reimagining the process, they met the market need with existing staff in a matter of weeks, while competitors had to redeploy hundreds of staff as PPP loan officers. AI is an enabler, but the real transformation is in how people within the business operate. That’s what drives more productive client engagements, more efficient staff deployment, and better first-time decisions.
The best transformations never stop
The pressure on financial services isn’t going to let up. Organizations with the discipline to execute transformations effectively are best positioned to succeed. Leaders who support continuous improvement, shepherd change, and invest in new capabilities build the institutional muscle necessary to stay ahead. Engaging and empowering staff to use this muscle drives the organization forward faster. The best way to build transformation muscle is to exercise it—even small-scale efforts add up over time. Challenge your teams: Are we doing the same thing we did a year ago? Two years ago? More? If we changed one thing, how could that improve business results?
You do not have to wait for a “Big T” effort to get going. And you do not have to do it alone. The most effective leaders know when to bring in outside perspectives. Experienced consultants who have led transformation inside financial institutions think differently from those who haven’t. That kind of hands-on, senior-level guidance, whether for a single workstream or an end-to-end engagement, can be the difference between a program that stalls and one that compounds.
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We can help you get thereMeet the Author
Jeff Barden is Managing Director, Financial Services at Catalant, where he partners with clients across the finance sector to deliver growth and improve profitability. As a former JP Morgan Chase and HSBC executive, experienced consultant, and U.S. Army veteran, Jeff brings deep expertise in strategy, operations, and innovation. Throughout his 25+ year career, he has launched new businesses, led turnarounds, and guided organizations through market disruptions. He holds a Master of Business Administration from the Boston University School of Management and a Bachelor of Arts in Politics from Wake Forest University.
