About the Episode

For banks and credit unions, change management is the key factor when switching to a digital lending platform.

If you install a lending software solution for your financial institution’s team and they don’t use it, your transformation project will fail.

Change management has to start from the top. As a leader, you need to put yourself in the shoes of the people whose processes will dramatically change once new loan origination tools are introduced into their work processes.

Once you’re armed with these insights on their day-to-day life, you can set goals and clearly communicate your vision—and help you get to where you’re going next.

Listen in as Baker Hill lending experts discuss their thoughts on best practices for change management during digital lending transformations.


Ashley Garrison: Hello, and welcome to Baker Hill’s Lending Made Easy.

On this episode, we’re going to be talking about change management for digital transformation. 

Why are some financial institutions successful when they adapt technology and why are others not? Let’s talk a little bit about change management, and what is truly needed to transform your institution.

So, Brian, you want to kick this one off and talk to the team a little bit about, change management? Big topic.

Bryan Peckinpaugh: Tell you what, David, buckle up. 

You and I could probably talk for hours on this. I think we’re going to be hard-pressed to keep this one short. I’m not sure which one of us is going to get the taller soap box out, but to me, change management is the maker and breaker of all projects.

In every good successful technology project that I’ve seen in my career, the underpinnings of it were solid change management strategies that were driven from the top down of the organization where the leaders came into it with a very clear vision, going back to some of our conversations about processes and perfect versus continuous improvement.

They came into it with a vision. They had a solid strategy. They understood the people aspect of it, and they managed it accordingly.

Conversely, the unsuccessful projects just didn’t take this into account. They either didn’t or wildly underestimated the impact of change for people to the adoption of the technology or process change they were looking to implement and did not factor in what happens if my lenders don’t adopt my commercial lending origination system. It’s hard.

It is the crux and doing this well is not easy. Having help from a lot of times external sources to lead you through the change management aspects again can make or break the success of your project.

David Catalano: I agree. I think this starts at the top from a leadership perspective in how well the leader has a vision and how well they explain that vision to employees.

MIT did a study and 93% of employees supported digital transformation after it was explained to them. However, only 36% of CEOs communicated their vision clearly and sufficiently to the employees.

The disconnect there was the lack of understanding. I’ve got change. It’s put upon me that I’m not the architect of that change. I kind of liked the way I was doing what I was doing and now I’ve got to change it. 

Why would I do that? When we think about I like to think about commercial lending in particular because we do this every day.

We look at the systems that banks have today. They’re old. Has there ever been a change there or at least wholesale change? When you bring a digital solution into your organization, you’re changing multiple departments. So you’ve got, the front, middle, and back offices that are all disparate, siloed organizations with their own solutions.

Now, all that comes together. There’s a really, really big change management process that has to take place. And has the leadership been through that? They think they’ve got a technology problem. They don’t—they’ve got a process problem. It starts with a process. We getting back to what we think about is policy process and technology.

What is our policy? Does it allow us to deliver wow experiences for our commercial customers? What is the process we have today—does that process conducive to change to a digital platform? If it’s not, how do we get ready for that? And that takes leadership and ownership transfer.

Ownership transfer is an employee buying into it.

And it’s really easy for employees, who enter information into a system all day long, and now they no longer have to enter that information because it’s automatically there because it was put in during a different process, from a different silo, and now the silos are gone and they’re sharing all the data.

They no longer have to do that. And they’re wondering is my job gonna go away? There are all these different undercurrents going on in this process of change is bringing, brought to bear on the organization. So there’s a lot going on in here. It takes some really strong management to lead through that.

A lot of ownership transfers. We got to get buy-in from the people. If you install it and they don’t use it, you got a failed project on your hands. 

Bryan Peckinpaugh: A big challenge here is we’re talking about skillsets that are rare. You don’t necessarily need these change management skillsets to be successful in business and in a career.

How many times do you lead an organization that is going to go through a monumental change project, right? How often am I going to deploy a new commercial loan origination system? How many times am I going to put in a new core? How many times am I going to swap out my online banking systems inside of a financial institution?

These size and scale projects are where change management is vital and just may not be a skillset that the leaders in place have. It’s a very empathetic skill set. It’s putting yourself in the shoes of the people whose day-to-day lives are going to be changed by bringing in technology like that.

How am I going to reposition my institution to best take advantage of these that might be changing my approach to business? Can be all kinds of things that I’ve made, never flexed those muscles before. That’s why I said, this is an area where. 

I have seen a lot of success in going to outside partners who specialize in this, who can come in and guide you through.

Just like organizations turned to us as part of a commercial lending project to lean on our advisory services organization. Because we have been there and done that through lots of these types of transformation projects, where we can guide you through best practices and approaches to commercial lending, we still don’t fully have that skillset of change management. 

That’s still something you probably want to look to other types of consultative companies for because those get beyond just the technology, which is obviously where our expertise lies, to the broader organizational impact.

David Catalano: We do see best practices.

If you think about it, we have software with a single code base across all institutions. So we can see the data from each client and we know who’s got really awesome statistics with respect to lending, and we can compare and contrast and benchmark that data.

We know who’s doing a really good job, and we know who could use some help. But when I think about change management, it has to start from the top. 

I think of a story. Matter of fact one of the guys in our office told me yesterday that in two separate instances the CEO of two separate banks yelled at him because we couldn’t get his credit memo correct. His printed credit memo. 

If you think about that printed a printed, he’s got a printed credit memo. I get credit memos are sacred, right? We want to see the credit score in one spot. We want to see the revenue in another spot. We want to see the EBITA, the cash flow, the debt coverage the collateral, and the loan.

We want to see them in certain spots and we can read them real fast. I get that. But if we’re unwilling to change the way in which we see and consume a credit memo. And we’re expecting our employees to abandon their manual processes and adopt digital processes. I think we’ve got a disconnect, right?

From a cultural standpoint, are you open to change? Changing to the world around you? Leading, it would be great if you could lead the change. And then, empowering people, your people to adopt change or to come up with new ideas and new ways to improve. 

Cause if we don’t continually change and get better and better as the world evolves around us, we’re going to have a problem as an organization. 

Bryan Peckinpaugh: Because we don’t keep up with the times, right?

I mean, you talk about that printed credit memo. I’m in our offices here in Carmel today. I’m working on a foreign setup to me, I’ve got, different types of monitors and things. I was going earlier to try to do something on one of these separate monitors, and I went to touch it and scroll on it.

Right? Cause you just, you become accustomed to these things. 

If change is done correctly. If I really lay out the reasons for change. If I show you the benefits that are gained by using new technology or using technology in a new way, or modifying your processes to give you a better experience.

One I’m going to adopt them two I’m just going to come to expect them in everything I do. I’m going to expect to be able to swipe and scroll on things because that’s just so intuitive now based on what Apple and other device manufacturers have pushed out to us and had us consume over the last 10, 15 years just building it into your DNA that way of how you talk about change. 

How you paint the picture for the future, how you rally around the why for the reasons for doing these things, right? The old analogy of you tell the bricklayer, not that they’re building a chapel, but you paint the picture of the Sistine chapel. 

You give them the vision of the end state, not just one brick on top of the other to make sure that he pays attention to how he’s doing it because he understands the grandiose scale of the final result. So it all goes into how you layer and communicate all of that from the start through the finish. 

Ashley Garrison: And I think we can’t talk about change management without really addressing the great resignation that’s going on.

If I’m a bank, how am I going to retain and attract the talent of tomorrow? If I’m not willing to change my processes, if I’m not willing to try to do things faster, more efficiently through the use of technology, I’m not going to get that new bench in that’s going to help me bring my bank or financial institution to the next level.

Can we talk a little bit about change management generationally? I know it’s a different topic, but why has change management important when looking at talent and retaining and growing talent?

David Catalano: Yeah, a bank is going to have a policy and they’re going to want to put a process together that allows him to fulfill that policy. Technology can be the vehicle to do that.

So the nice thing about technology is you can build all the steps into the technology. All the steps of your process can be built into the technology and then new people who don’t have 20 years of domain knowledge and who don’t know your customers inside and out can follow that process and adhere to it. 

They know they can’t close this loan because the system is telling them they need these three items first.

Your policy for a particular type of loan is built in. So when they select that loan, everything around it fills in with respect to that particular product, which adheres to your policy. 

As your employees age and retire and new ones come in or you can’t hire as many people. That’s where technology comes in and it protects you from the risks associated with turnover and protects you with the risk associated with workers who aren’t familiar with commercial lending.

We have customers that have lenders that have never borrowed money. They’ve never been through the process of borrowing money. They’re just young people that have never done that. But they work in a branch. And they secure apps at the local branch level and submit them through the system.

How are you going to get them to do that? The technology facilitates that, and it’s one of our long-term clients that has automation everywhere. And you can do that with the right systems.

You’re not going to do that with a manual process, and you’re not going to do that relying on the older generations because they just may leave and they’re going to take all their knowledge with them and that’s going to be a problem as the new people come in, they’re going to want a technology. They’ve been, they grew up with something in their hand. They grew up with technology. 

It’s part of their DNA. We have a solutions consultant. He’s a young guy. He is so good with our system. It’s like intuitive to him. He just creates an amazing experience for the people looking at our system. 

They’re like, oh my gosh, how does he do that? He’s so good. But his facility with the system is simply because he grew up with it. This is part of who he is. 

If you want to attract those people, you got to have a system that they’ll be excited to use. If you have a whole bunch of different disparate solutions that don’t talk to each other, that’s not very attractive to the generation of people that have grown up with Apple and with Google and with devices everywhere that are all connected.

Bryan Peckinpaugh: They’re the ones that are going to want to see the continuous change, right?

Because they have not only have they grown up with Apple, they’ve grown up with getting a new device, every 12, 18, maybe 24 months. They’re coming up in an age where we went from an iPod to an iPhone, to an iPad in a span of a few years not decades of change, but change every year.

That continuous focus on how do I adopt good change management policies into the DNA of my institution to take advantage of all these things is going to be critical. And it gets back to some of the things we’ve talked about on this podcast before.

How do I look at processes? How do I look at areas of improvement across the organization? This just becomes part of your fabric if you’re going to continue to be successful going forward.

Ashley Garrison: I heard Simon Sinek talking about the people that originally purchased the iPhone and they waited in line, not necessarily because the iPhone was the perfect product.

Right. But they waited in line because they believed in the iPhone’s power to change our tomorrow. And so I do think, having a mindset of looking at change from a lens of I’m never going to be done. Therefore, how do I think big and, ultimately get to a place where I am moving in a direction of change, I think that’s part of the journey and part of the fun. 

So thank you David and Brian for yet another interesting conversation on Baker Hill’s Lending Made Easy.