Change management in a dynamic marketplace is one of the most essential features of a viable company. The need to manage change, in general, is usually conditioned by environmental, competitive, and policy pressures on the company. In this case, the company has two outcomes: either to effectively implement new operational practices and adapt its operations or to isolate itself from the market and significantly lose profits and customer loyalty. In this presentation, we will talk about ABCD Bank’s case in ABANG country and how to ensure its continued development along the first path in the current stagnant environment.
ABCD Bank is one of the most important mortgage banks in ABANG, providing affordable housing to the public. When housing turns out to be too expensive, and residents do not have enough available money, mortgages can solve the problem of affordability of that housing (Can lending controls, 2021). However, there are some serious drawbacks to mortgages, which include decades of debt burden, high overpayments due to the mortgage rate, and unscrupulous customers who do not pay their mortgage payments. In ABANG, a small country of 10 million people, there is a shortage of affordable housing, resulting in a worsening social and economic agenda for the region. A growing number of people cannot afford mortgages and do not have a reliable income to pay interest. The impoverished population is thus an important national issue for ABANG. As a result, local mortgage banks (BATAVA) are losing their operational efficiency and are not profitable.
The President of ABANG, unequivocally interested in improving the social and economic agenda of his country, creates conditions to improve the availability of mortgage lending to the public. Thus, the president’s key vision, which sets the vector for development in this environment, is defined as increasing the affordability of mortgages by creating conditions more favorable to both parties and creating an environment in which ABCD Bank to increase its profitability. In other words, the ABANG national president has set out to reorganize the current operational efficiency of the mortgage sector.
The First Step
Understanding the fundamentals of the current agenda in-depth and determining the root causes of the problem at ABANG is a priority action to implement any change. In this case, change is not just implemented in a specific bank but scaled to the entire ABANG population, which means change management literacy is of federal importance in this case. At this step, it is desirable to create a reference point and fix the current key metrics so that in the future, it will be possible to go back to them and evaluate the progress of activities. A good strategy would be to forecast the further development of the mortgage market in the absence of any transformation to assess the dynamics and possibilities of deterioration of the situation; this will give more significance to the changes and allow for the involvement of influential stakeholders.
In a bank that has decided to implement transformation, effective information sharing is a critical necessity to ensure the speed and coherence of change. ABCD is not an ordinal enterprise but instead represents a collection of multiple departments responsible for individual tasks. Thus, the changes implemented in one of the sectors must be known to all the others to maintain the overall culture of transformation. The plans and mechanisms of information exchange developed by leaders include the development of a unified communication platform, regular meetings at the level of not only managers but also rank-and-file employees, and the distribution of the latest corporate news. As a consequence of the intensification of such policies, the bank’s working environment will experience a peak of thirst for change, in which employees are willing to work for the sake of transformation.
It is impossible to organize a bank’s transformation without technological transformation. This relates to increasing the computer awareness of employees, developing new software for mortgage lending, and implementing innovative intelligent management systems. Several significant changes must be made in this strategic decision. First, the need for technological transformation of the company must be unconditionally embraced by all employees. Second, bank leaders must conduct a market analysis to identify current digitalization opportunities. This could be not only the use of cloud-based data storage to increase accessibility but also the potential use of AI to manage mortgages more sensitively. Third, any change management must be mediated by measuring progress and performance, which is what KPIs are for. Finally, reorganizing individual ABCD bank departments can be confusing and lead to chaos if all decisions and problems are not outlined in a single software that key employees have access to.
Opportunity for Innovation
By now, the innovativeness of any enterprise is a crucial feature to achieving commercial success and increasing customer loyalty. As such, the change allows not only to optimize of the bank’s operations but also to position it as a modern, viable enterprise properly. In this sense, as a strategy, we can consider the idea of personalizing mortgage lending with software systems. The mortgage rate is not rigidly fixed, and although it depends on the Central Bank key rate, ABCD can sell contracts at a higher or slightly lower rate, which affects profits. Implementing AI systems into customer management programs can allow the mortgage rate, monthly payment, and schedule to be personalized for the customer based on their needs and capabilities. Mortgage rates can also depend on several demographic and economic characteristics of an area so that in more disadvantaged areas of the country, the mortgage rate will be somewhat lower. Such a solution is expected to meaningfully increase the availability of credit and create customer loyalty to the ABCD brand.
In attempting to reorganize a large enterprise, leaders must carefully monitor employee motivation because the expected results may not be achieved if employees do not understand what they are trying for. Leadership in ABCD can be charged with the responsibility of taking care to inform all employees of the significance of the change: the forecast of failure built in the early stages, as well as model statistics on downsizing, come in handy for this purpose. On the other hand, the ABCD leader can show employees the benefits of transformation, which include increasing the company’s profitability, expanding the staff, and creating positive career opportunities. Thus, the proper motivation of employees determines the reliability of implementing any change and answers the question of why employees should try for change in the first place.
In operations, performance measurement, including the use of KPIs, is critical. KPIs are applied not only to employees to assess their corporate dynamics and make decisions on their promotions and compensation but also to workgroup progress: adherence to schedules, budgets, and realized goals. Automating KPIs will help ABCD Bank optimize performance monitoring and track the development of any problems that could lead to failure promptly. For example, inconsistency in the activities of an AI software development workgroup is a problem and can be resolved by replacing the project manager or employees involved as early as the initial stages.
Any changes are audited not only with KPIs, as this does not preclude bias but also with a third-party audit. The ABCD bank leader can bring in third-party audit firms to independently verify the success of the practices being implemented and to look for weaknesses. This applies not only to accounting but also to the workability of innovative products, marketing offerings, and leadership qualities of management at ABCD. Based on the results of the audit, it becomes clear to what extent the transformation at the bank meets the initial expectations and what can be corrected to improve the agenda.
The Four-Year Strategic Plan
Thus, the bank has had a four-year strategic plan prepared now that aims to transform ABCD completely. The ultimate goal of such a plan is to improve the accessibility of mortgage lending to the public and the positioning of the ABCD brand, which will result in increased profitability for the company. The following steps are being implemented within the designated four years:
- The precise problem statement, analysis of current weaknesses.
- Statistical modeling aimed at creating a reference point.
- Initial development of a vision of the transformation, differentiating the problem into components.
- Building a unified corporate communication system and fostering a technology culture.
- Investing in innovativeness, developing a unique product based on AI.
- Implementing a system of KPIs at every step to measure momentum and detect weaknesses.
- Inviting audits to review and edit activities independently.
- Market launch of the offering, new marketing campaigns, and work on positioning.
With proper management and adherence to the proposed strategy, ABCD Bank, like any other mortgage bank in the country, will be able to meet the president’s vision and meaningfully improve its profitability.
Can lending controls solve the problem of unaffordable housing?. (2021). The Economist. Web.