By Onno Bloemers
Follow: @onnobloemers 

An often overlooked critical competency of an organisation is its adaptability – the capacity of an organisation to effectively respond to new demands and circumstances, whether it’s customer-, regulator- or technology-driven.

 While stability used to be everything in financial services and insurance, agility is nowadays an increasingly important quality. A broad range of research initiatives indicate that between 60 and 80% of all change initiatives fail. Despite everything that has changed in the past 40 years, there has not been any visible improvement in this number since the 1970’s. In order to increase this poor success rate and implicitly improve the chances for long-term viability of incumbents, organisational adaptability needs to be measured and improved. However, despite the obvious importance and massive amount of resources invested in projects, digital transformation and innovation programmes, we often see that this adaptability is overlooked.

 Could it be that adaptability is hard to measure? Possibly, but this is no longer a valid excuse. You can quickly analyse and measure this adaptability and even express it in a single score: the Net Change Factor®. The Net Change Factor® consists of the percentage of employees that show confidence in their organisational adaptability minus the percentage of employees that doesn’t have faith in this. NCF is like NPS, instead of promotors and detractors we’re now working with ‘supporters’  and ‘resistors’. Five drivers of change jointly make up the Net Change Factor®: the Need for Change, the Direction, the Engagement of employees, the Room for Change and the perceived Barriers. These five change drivers jointly define and explain the overall adaptability of an organisation expressed in the Net Change Factor.

 Recently, Delta Capita and Business Fitscan, who created this methodology, initiated their first Benchmark on organisational change in Financial Services in The Netherlands. The conclusions are disturbing: the overall level of adaptability in Financial Services is -20, comparable to the average across all sectors in NL, but indicating that the overall perception on organisational adaptability is negative. Zooming in on the financial services sector, banks score in line with this overall performance (-21) but insurers, including pension funds and providers, end up at -38! More than one third of all insurance respondents indicate to have little or no confidence in their organisation’s adaptability.

 Drilling down into the drivers of change, the most important driver is Direction. Among insures, 45% of respondents doesn’t have a clear picture of the course their leadership is taking. The Room for Change is also an important factor, where a majority of 54% of insurance respondents only feel limited Room for Change. On a positive note, Engagement scores reasonably OK around 70%, but 60% of insurance respondents experience Barriers.

 Management overrate their organisation’s level of adaptability

 Another finding from our benchmark study shows that management and staff have a different view on organisational adaptability. Management seem to overrate this, while staff have a bias that’s exactly the opposite – they show a tendency to underestimate the adaptability. Looking at senior management and executives – the management of the managers – this effect becomes even more significant. A discrepancy like this has a negative effect on the outcome of organisational change initiatives.

 Are millennials disappointed in their own organisations?

 Different age groups have different opinions. Respondents aging 55 or above are significantly more optimistic about organisational adaptability than their young colleagues in the 25-34 age bracket. Possibly, the millennials are disappointed from their experiences with organisational change, but this would be something that requires additional research.

 Summary: banks and insurers need to actively work on their adaptability

 The high percentage of failed projects and transformations is clear and undisputed proof that organisational change is difficult and risky. The key reason for this is a lack of organisational adaptability. In the long run, this is a threat for an organisation’s continuity. Across the financial sector in The Netherlands, we see a lot of potential for improvement. Particularly we notice a lack of understanding of and support for the Direction among insurance respondents. The discrepancies between hierarchies and age groups are also a concern.

 These risks are clear and present, and we all recognize the consequences: when investments in strategic change programs don’t pay off, organisations lose their edge and staff their trust. Demonstrating that organisational adaptability is not just an all-purpose concept but something you can accurately measure is in fact a first step towards improvement. With this first benchmark, we intend to provide a baseline on current sector status. Knowing which drivers of change to actively address will help organisations to become futureproof. It’s not whether you need to change – it’s how well you actually can change.