Blog Article

Why are things not what they seem in financial services?

Posted by Jean-Marc Laouchez

Jean-Marc Laouchez

The outward image of the sector is still one of a profitable, competitive industry with effective leaders – so why is it struggling?

This blog post is part of a six-part series looking at how leadership in financial services can boost performance, build focus on the customer and drive innovation. It all starts with leaders taking a realistic look at themselves in the mirror. Sign up for the full series here.

The real picture: underperformance
You have only to look at leading market indices to see the problem: the financial industry has underperformed the Dow Jones Index by up to 40 percent since 2011.

Performance is unlikely to return to what it was in the pre-crisis days. After crashing from 25 to minus 25 percent between 2006 and 2008, global banks’ return on equity has since been struggling in single figures. Institutions know they have to find new ways of operating and new business models.

Four opportunities
What’s holding firms back? This was the question behind our latest research: ‘Appearances can deceive.’ Over 70 years we’ve amassed a treasure trove of insight into financial services people and organizations. To build a clear picture of how ready the financial industry overall is to move in a new direction, we looked into this data and uncovered four areas which – if addressed by leaders – represent great opportunities for renewal.

1.      The future belongs to customers
Firms know they must move in order to rebuild trust and succeed in the new competitive landscape. It’s clear that a sustainable, competitive future lies in the creation of long-term value, customer-focused financial services innovation and effective risk management.

Acknowledging in a January 2013 staff memo that the industry had become “… too focused on the short term, too disconnected from the needs of our customers and clients”, Barclays CEO Antony Jenkins announced a shift to a “values-driven” model that assesses performance “not just on what we deliver but on how we deliver it”.

We see that financial services employees feel their firms are less customer-focused than best practice organizations, and relatively poor at innovation. Some 67 percent describe their organization as ‘customer-focused’, compared to 79 percent of the world’s best-performing companies. Similarly, fewer have faith in the quality of their firm’s customer support compared to top-performing companies (61 versus 75 percent.)

2.      Engage hearts as well as minds
In contrast to their peers in other sectors financial services executives felt enabled – i.e. equipped to ‘get the job done’ – but were less engaged than even the average. Their heart was not in it. Clearly, if employees are thinking and feeling this way, it will affect performance. But what’s behind this? We see financial services leadership as a big driver.

3.      “Just do it” leadership
There are in fact six leadership styles detailed in the ‘Appearances can deceive’ report. Hay Group found that significantly more financial leaders rely on ‘coercive’ leadership than leaders in other sectors: 43 percent versus 34 percent. The coercive style demands compliance without discussion. It does have its uses: but after too long, it creates precisely the impacts on engagement revealed by our data.

The question is: how ready are financial services leaders to transform themselves and their organizations?

4.      Time to look in the mirror
A pause for thought on the part of financial services leaders could be the trigger for wider renewal. Leaders – whatever the sector – tend to rate their abilities higher than those around them do. But self-confidence can be twice as high in financial services sectors, particularly when it comes to competencies such as achievement, positive outlook and empathy.

It’s clear that the sector attracts brilliant, high achievers. The risk is that they could be more focused on personal success than on the team-building and collaboration that is critical for driving performance.

In the coming blog series we’ll examine the leadership issue in more depth. We’ll look at how financial services leadership can boost performance, build customer focus and trust as well as drive innovation.
Sign up here to receive the series.

More blogs in the series:
2. In banking, no-one can hear the customer scream. By Graeme Yell
3. Innovate differently. By Jean-Marc Laouchez
4. Beyond dealmakers. By Madeline Dessing

* For more detail about our findings on customer service in financial services, download the Appearances can deceive white paper or visit our website to find out more about the research.

 

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