Building the Agile bank

By Claudia Pellegrino, James Harvey

The faster the world changes, the faster organisations must change. Already shaken by ambitious digital start-ups, the world of banking is now faced with the challenges of not just helping customers survive the cost-of-living crisis, but also making sustainable and conscious investment choices. In addition, our latest banking research reveals that a third of UK leaders expect new entrants to dominate the banking industry by 2030.

The need to be fast, nimble, and make tough decisions, all while keeping a laser-like focus on customer satisfaction and the competitor landscape, has driven an urgent need for a new approach: organisational agility.

However, changing for agility is tough. Six out of ten leaders told us they knew they had to become more agile but embedding the change and scaling it was arduous. Banking is no exception. By the end of 2022, 90 percent of banks had started their digital and agile transformation journey, but only 5 percent believe the results have been very successful so far. Banking institutions have a specific set of characteristics (e.g., historically outsourced IT centres), which makes the journey to embedding organisation-wide agility difficult, and long-winded. But when the top financial performers are 30 percent more likely to display agile characteristics, banks have to act.

Successful agile transformations may feel challenging, but they are not impossible: We’ve explored the four necessities to make organisational agility a reality for banks.

1. Build unanimous leadership commitment

For organisational agility to succeed, it’s crucial that the senior leadership team shows unshakable, tangible commitment. Many organisations find this a challenge. However, for banks – where a silo mentality prevails – the challenge is even larger. The tendency for siloes stems from long-term accounting and reporting rules, and an antiquated view of financial services, where customers would shop for single products only. But times have changed, and customers now shop for – and expect – end-to-end experiences. With this change in customer behaviour comes an opportunity for banks to react accordingly, better communicate across siloes to meet customer expectations, and build outstanding experiences.

So, what can executives do? To build unanimous commitment, the first step is to align behind a single vision for agility. There should be a single message that clearly articulates the outcomes and goals which organisational agility can help achieve. For example, building better products to compete with FinTechs, or simplifying the reporting structure to be more cost effective. Leaders should sign-up to this messaging and believe in the power of agility to achieve such outcomes if they are to gain the buy-in of their teams.

In our experience, creating agile guidance committees with board level representatives from multiple business areas helps to align an organisation behind a single vision. Committees are crucial in setting the strategic direction to achieve organisational agility across all areas of a bank.

2. Create the conditions for success: invest in training and new skillsets

Contrary to traditional agile evangelists who believe it is better to ‘just start’, achieving and sustaining organisational agility means undertaking preparatory work. We’ve found that banks often underestimate the technology transformation needed to achieve agility and the preparation needed to build expertise in-house. Historically, banks have invested in building strong customer-facing teams, rather than digital and transformation teams. And this hasn’t changed – 75 percent of banking executives believe there’s still a considerable digital and agile skills gap in the financial services industry.

To solve the technical skills shortage, banks have, until now, invested in expensive bridge-gapping teams to help non-technical employees align with their technology counterparts. This strategy has proven ineffective and expensive, creating dependencies within the organisation.

A better solution might be to look towards their competition. FinTechs employ and upskill a digital-first workforce to support digitisation and agility across the organisation. We recently worked with a leading bank to pivot towards a similar model – helping them plan and understand the skills required to support transformation efforts. We deployed a team of learning experts and coaches to upskill the team in digital and agile proficiencies. The bank is now able to drive transformation independently, using their in-house teams.

3. Cut out the compromises

The biggest risk to an agile transformation is the temptation to water down the design at the first sign of difficulty. It’s understandable, given the amount of change the organisation will experience. But making organisational agility a success means avoiding slipping into old habits.

One of the most common mistakes banks make when embarking on an agile transformation is that despite best efforts to embrace agile working practices across the board, they end up mastering them in the innovation or front-end technology spaces only. It’s not uncommon to see mature ways of working in mobile banking apps teams, whilst regulatory programmes and updates to back-end technology are still made in traditional ways. This is especially the case when new regulation comes in. Banks tend to spin up separate multi-year programmes, rather than breaking down requirements which can be delivered incrementally by agile teams.

To avoid this compromise, it is important to involve the CFO. Funding should be allocated on a fixed capacity basis to long-lived agile teams. In other words, setting teams a fixed budget every year, and empowering them to prioritise work within the budget.

4. Accept that tomorrow’s leaders will be different to today’s

Inevitably, there will be tough decisions along your organisation’s agile journey. Some leaders might resist it; they will struggle to unlearn years of command-and-control working and leading. However, a new set of leaders will embody a new definition of leadership: one that liberates, empowers, and inspires others. It’s important to bear in mind the new leaders you will appoint might not be the most obvious candidates, but instead those who show a genuine commitment to the vision behind organisational agility.

Changing leadership in banking is hard. The banking industry has long-serving CEOs. In fact, five of the nine longest active CEOs in the S&P 500 are from the sector. Historically, there has also been a long tenure of middle management. Low employee turnover is likely to lead to a reluctance to change, due to the lack of new joiners challenging the status quo. Additionally, rigid hierarchies, driven by regulatory reporting, also make the promotion of new talent and thinking difficult.

Working alongside a global retail bank, we ran an extensive leadership agility programme to change the culture of the leadership team. The programme involved learning about other successful transformations within the industry, allowing team members to gain knowledge about the fundamentals of agile, and the behaviours needed to implement it. We also supported the team with a three-month coaching and online executive programme to ensure success. Throughout the programme, a new definition of leadership was agreed, leading to a significant increase of new people joining the leadership team. This new, blended leadership was vital in supporting the move towards enterprise-wide agility. It created the right mix between existing organisational know-how and new challenger thinkers and agility experts, which supported the organisation on their journey ahead.

The need for organisational agility has never been clearer, and many established financial institutions are already attempting to raise their game. Transforming an established, profitable organisation is a complex undertaking. Banking leaders must turn these four necessities into a reality to achieve success at scale.

Agile transformation

Agile transformation

Organisational agility is all about extending the principle of Agile across your entire organisation to drive better performance. This is agility as a culture, a mindset and an operating model – an entirely different way of running your business, to keep one step ahead.
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As banking models and consumer demands shift, we find ways to maintain trust, reduce complexity, and put customer benefits over company profits.

About the authors

Claudia Pellegrino PA business design expert
James Harvey PA agile expert

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