The banking industry is in the throes of structural changes that call for each bank to reinvent itself in terms of strategy focus, organizational form, product offerings, and delivery systems.

Yet many senior managers shy away from making the major changes that are critical for success, especially if they involve taking some calculated risks that banks historically would have avoided.

Rather, these executives are inclined to follow the fads of the moment, like mergers, or play it safe by clinging to the familiar.

They need to recognize that in a break from banking history, there is no single path for success. The critical question is: How can banks mobilize for change to cope with the upheaval that is and has been taking place in the financial marketplace, compounded with a more cynical employee group that has less and less institutional loyalty and commitment?

In order to execute major changes, I recommend a five-step action program that begins with a cultural assessment and factors in the organization's goals, competencies, and technologies.

First and foremost, we must evaluated those enduring rules, values, and principles that guided the organizational behavior to date - "the way we have always done business around here." We must challenge the core assumptions on which the bank's business philosophy has been built, the sacred cows of the organization's customer focus, products, markets served, business practices, organizational form, distribution methods, and so on.

Consideration should be given to tearing down all routines-except the most essential, such as annual customer satisfaction surveys-that get us into ruts, that dull our senses and thinking, that stifle creativity and otherwise destroy our ability to compete.

We must encourage the flow of new ideas and information to help identify opportunities to change, grow, and innovate, and therefore to make easier the introduction of new products and practices (such as sharing of strategic and financial strategies with all key personnel).

When in doubt, experiment with new ideas through pilot testing: for example, a bank with no branches, credit scoring for small-business loans, or new methods of integrating the delivery of existing products to targeted customer segments.

And if an experiment fails, we must learn to learn from those mistakes.

Second, we must develop a shared, compelling vision for the bank's future, not based solely on profits.

One example of a "new model" might be a bank that focuses on financing the needs of customers that buy mobile homes and RVs. But articulating a clear vision alone is not enough to make the change happen.

Third, we must communicate the shared need for the new agenda effectively, to inspire people to act in ways that make the new vision a reality. That means sharing both good and bad news on such matters as financial performance and customer satisfaction indices.

A partnership style of management and leadership can help align, motivate, and manage the employees.

A team-spirited climate encourages them to do their best while feeling in charge of their own lives.

Otherwise, the best-laid plans are doomed to fail by creating anger and resentment, which in turn lead to poor execution and mediocre results.

Goals should likewise be linked to corporate strategy. Newsletters, kickoff meetings, individualized letters to employees, customers, and the like are a must.

Management, in short, must constantly "walk the talk" as champions, role models, and agents of change. Objectives and milestones must be measured and plans must change when they do not pan out as projected.

Fourth, we must foster collaboration by continually promoting and reinforcing the shared goals to build trust, strengthening people by assigning them real responsibility and the training to carry it out. Above all, we must reinforce this with incentives, like sharing a third of all earnings beyond the targeted goals.

The best approach to accomplishing this is by investing in the bank's biggest asset-human capital-by providing new skills, using technology in innovative ways to develop new products, new ways of marketing, and product delivery.

Staff training and development, again, are crucial, since the heart of the new evolving banking business is knowledge and information, much needed to fully satisfy the needs of the new customers.

Banks will therefore need employees who are competent in offering a holistic package of services and support that includes a balanced mix of products, information, advice, and personal attention.

Research has repeatedly shown that a well-trained employee is 30% percent more productive than one who is not. Well-trained employees will be more creative and innovative, and more prone to generating new ideas and alternatives that will translate into useful products. Employees who are not motivated will tend to concentrate inward on their own careers.

Motivated employees with superior knowledge will, on the other hand, focus on value to the customer. And long-term customer loyalty and retention are key ingredients of a bank's prosperity.

Fifth, team spirit and commitment should be encouraged by recognizing individual and team contributions to the success of each project.

We must celebrate both the successful ideas and those that are not. Those well-intentioned efforts that did not come to fruition are equally important to keep innovation going. Risk takers should not be punished; they must continue challenging the status quo.

Even after taking these actions for managing change, let us remember that the process over the long term is, at best, hard work. To the extent it is also great fun, it will be a labor of love that brings forth our creative juices.

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