By Mark Reeves, Partner

Faced with a continually sluggish economy, banks continue to look for ways to improve their cost base. Many financial institutions have chipped away at run-the-bank costs but still remain unable to invest in strategic change initiatives that can provide a sustained cost differentiation over time.

Addressing this core cost challenge is a key priority for executives. Up until five or six years ago, executives needed to save 10 to 20 percent on their institution’s annual cost base. Today, that figure has risen to 50 percent, requiring banks to drive much more fundamental change within the institution to lower the cost base. Most banks want to move ahead with transformative business and technology change initiatives, but are currently unable to do so. Many don’t have the flexibility within their workforce to drive and champion those kinds of big change efforts.

The challenge banks face is how to mobilize their talent to focus on a more strategic change agenda rather than just keeping the bank running. Most institutions have professionals who are able to make small, incremental changes, but they need to create opportunities for these people to work on larger, more strategic change projects. Banks also need to provide a platform for their talented change individuals to genuinely succeed and work in a place where they can realize their potential.

A new concept, known as changeSourcing, can help banks take this step toward strategic business and technology change. changeSourcing allows financial institutions to work side by side with an external service provider that is purely focused on change and managing change talent. Banks are partnering with a third party to pursue strategic change initiatives for three reasons:

• Greater cost efficiency. Improving cost efficiency within the bank is key from a change perspective because it frees up money for more strategic investments.

• Staff loyalty. Banks can transfer some of their change professionals to the service provider but still retain the loyalty of those employees, who can now work at an entity that can more readily provide support and training.

• Flexibility. Working with a third party allows banks to create a fungible staffing pool, giving them options as to where to deploy their change professionals, what projects to assign them to, and whether to move them to the external service provider.

Professionals in a bank’s change group are often called the “crown jewels” of the financial institution. changeSourcing offers banks an opportunity to focus on their crown jewels and invest in change initiatives that can provide sustainable cost differentiation at the same time.

What is your bank doing to drive toward strategic change? Join the discussion.

Mark Reeves is a Partner at Capco