Financial services: All change, except the culture

By Alison Huntington

It seems a month barely passes without a new financial services scandal making headlines across the globe. Whether it’s bankers in London quaffing Bollinger after a day of rate rigging, international banks laundering money for cartels and unpleasant regimes, or technical glitches which mean customers can’t access their money, examples of bad behaviour and failed processes just keep crawling out of the woodwork, with no obvious changes made to ensure it doesn’t happen again.

And yet, as our new financial services sector report shows, this is the sector spending the most on changing itself. Over a quarter of global consulting spend is by financial services companies, most of which is related to regulation. And while change is undeniably being forced upon financial institutions by regulators, many clients are seeing it as an opportunity to launch wide-ranging transformation programmes, looking at the fundamental parts of their business models to work out where profit will come from in a more risk-averse era.

It’s great news for consultants, who have seen client interest in nearly all services either rising or remaining strong. Whether it’s thinking strategically about operating models, stripping out costs or the nitty gritty of implementation, there’s plenty of work about keeping consultants off the bench for long periods of time.

There is one exception though, and that’s HR and change management – 28% of the financial services clients we interviewed for our Client Perception Study planned to cut back on this consulting service. Indeed, we think this will be the slowest growing service over the next 12 months, lagging behind the others at just 2% growth. Looking at clients’ lists of priorities over 2014, culture change was near the bottom of the list.

Rather than being uninterested in cultural change (a substantial number of clients are interested in it, they’re just more interested in other things), we think traditional HR and change management services are being wrapped up in wider transformation programmes, where it’s not the focus of the project, but expected as a by-product. There is a sense, perhaps, that implementing regulatory change in itself should lead to different behaviours. As a result, clients end up not giving culture change the attention it needs, perhaps finding and expert or two from the larger consultancy firm already running the overall transformation programme.

This presents a challenge to niche HR consulting firms – how to convince clients of the need for their services, over and above what already feels like a vast amount of change, without getting drowned out by more tangible priorities? Perhaps they need to argue harder that a transformation programme can’t be a true departure from the ways of old if there is no significant investment in changing the culture that allowed these behaviours to go unchallenged. If not, it will become increasingly difficult for HR firms to remain relevant.