The economic crisis caused by COVID-19 has brought about a number of acute challenges for personnel management in banks: It is important to protect employees and ensure liquidity. But that’s not all: At a time when the business model has already been shaken by digital competition and the lockdown has made the importance of digital communication unmistakably clear, measures are needed for efficiency-enhancing digitization. This is where HR comes into play. hkp/// group experts Petra Knab-Hägele and Holger Jungk explain how.
Ms. Knab-Hägele, Mr. Jungk, traditional banking institutions have been under pressure from both direct and online banks as well as fintechs for quite some time. What has the coronavirus pandemic changed in terms of digitalization?
Petra Knab-Hägele: The coronavirus crisis has reinforced existing trends. During the lockdown, employees discovered how easy it is to do much of their work digitally from home. Customers already prefer to carry out banking transactions directly via their smartphones. These developments are now facing increased cost pressure. Through the clever digitalization of internal processes and external services, banks can become more efficient, save costs and provide liquidity – this is currently a competitive advantage for many companies.
The digitalization of business processes, business models and the world of work therefore remains a decisive challenge for banks. What does it take?
Holger Jungk: This may sound trivial now, but first and foremost it requires digitally competent employees.
What are the specific skills that distinguish digitally competent employees?
Holger Jungk: The Duale Hochschule Baden-Württemberg – or DHBW for short – has compiled around 150 competencies from a number of studies. Change orientation was identified as one of the most important classical competences. The ability to grasp and select new methods and to adapt them to constantly changing circumstances is also required. A rather new competence is called “facilitation” – the ability to define a framework in which employees are enabled to act in a self-organized manner in the interest of the organization.
Petra Knab-Hägele: DHBW considers a total of ten competencies to be particularly relevant: Agility, method translation, ambiguity tolerance, product and business model design, process innovation, technology trend assessment, transformation competence, transdisciplinarity, facilitation and networking competence.
IT systems certainly contribute to a new prioritization of competencies – just think of keywords like artificial intelligence...
Holger Jungk: According to studies, 14 percent of wage hours that currently involve physical and manual work will be taken over by automated systems in the next few years. But even simpler cognitive skills are increasingly being covered by information technology. In our sector, 15 percent of wage hours, such as those of clerical workers, are at risk.
Petra Knab-Hägele: Higher cognitive skills such as creativity or social, emotional and technological skills are becoming increasingly important.
Which skills are needed in which form and where in the company and by whom they will be performed in the future is of course a central question of the HR function.
Petra Knab-Hägele: Exactly. Among other things, it is up to them to design the digital skills and abilities in such a way that employees and the company benefit equally from them.
Holger Jungk: But this requires a considerable degree of digital competence and maturity from the function itself.
What criteria can be used to assess the maturity of the HR function?
Holger Jungk: For this purpose, we conducted the “HR drives digital” study in cooperation with DHBW 2019. Based on a statistical factor analysis, we were able to identify nine drivers that determine the maturity levelof digitization in HR management: infrastructural framework conditions, digital knowledge, tool and technology use, social media use, future technologies, HR IT use, digital culture, Internet and mobile as well as the ability and willingness to change.
And where does the digital maturity of HR in banks stand?
Petra Knab-Hägele: Compared to other industries, the human resources management of banks is slightly better off in terms of digitization than, for example, industrial enterprises.
Holger Jungk: Across all sectors, we were able to divide the participants into three clusters. Twelve percent of the participants in the study were among the “laggards” and had a low level of maturity, 53 percent were “on track” with a moderate level of maturity, and 35 percent were the “progressives” – those with a high level of digital maturity.
Petra Knab-Hägele: In contrast, the majority of institutes were “on track” with 69 percent, while 31 percent were among the digitally progressive ones. It is striking that there were no “laggards” amongst banks. In fact, the digital infrastructure is better and HR IT usage in the industry is higher than, for example, in manufacturing companies. This is because in the latter, among other things, not every employee necessarily has access to digital infrastructure and technology.
...so you don’t have to worry about the digital fitness of HR in banks.
Holger Jungk: The overall view of the industry does indeed show that HR functions in banks are in the middle to upper cluster for almost all drivers. Nevertheless, it is worth taking a look at the details.
Petra Knab-Hägele: Especially in the field of future technologies, banks can be classified as “laggards” and thus as lagging behind. A result that must be seen as an opportunity: The use of future technologies, such as chatbots, digital assistants, etc., offers a prime opportunity for differentiation.
In your study, did you also identify any obstacles to digitization?
Holger Jungk: Yes, we have. In the case of banks, this is first and foremost a lack of digital competence, followed by generational differences in the workforce and a lack of digital competence, especially among managers – a similar picture to the overall sample. However, two limiting factors play a much more important role for banks than in the overall picture: the large number of internal guidelines and the lack of support from management.
Petra Knab-Hägele: Banks are much more heavily regulated than companies in other industries, and the digital spirit is not yet as widespread in the executive echelons.
What does it take to specifically drive digitalization in banks in general and in the HR function in particular?
Petra Knab-Hägele: We have identified three fields of action. First, we need initiatives in the area of transformation: We need to ensure that management pays attention and provides support. Here it helps to make the advantages of digital transformation transparent using a business case. A digital strategy has to be drawn up collectively, which records where you stand and where you want to go and why.
Holger Jungk: A second point arising from the digitization strategy is governance or the target vision for the HR IT system. Here, clarity in terms of HR strategic and technical guidelines, functional design and implementation are crucial. A close cooperation between HR and IT is critical for success.
Petra Knab-Hägele: And third, the digital transformation will only succeed if HR processes are optimized. To this end, an HR product portfolio should be defined that benefits the customer and offers the best possible user experience. Ultimately, all legal requirements must be taken into account – for example, the mapping of the status of risk carriers.
Why should financial institutions tackle all of this now?
Holger Jungk: Because it is precisely now that one should no longer close one's eyes to the fundamental upheavals in the industry, in the companies and in the HR function. Those who don't make efficiency gains now through conceptually well thought-out digitization measures will soon be at a disadvantage.
Petra Knab-Hägele: And this means that existing processes must be closely scrutinized right now. The coronavirus crisis has already made a difference here – for example, by sending bonus letters digitally or submitting sick leave reports online. However, in continuing along this path, the creativity of those involved and their ability to think “outside the box” are crucial. Because it is precisely this kind of thinking that makes up the digital spirit. We must see the crisis as a catalyst for change.
Ms. Knab-Hägele, Mr. Jungk, thank you very much for talking to us.