Fortune Bank is a big institution that has been serving the needs of a large number of customers for more than 50 years. It has a highly traditional customer base and a number of branches across Australia.
In the past 12 months, however, Fortune Bank has seen an alarming dip in its market share. The bank’s failure to match growth in alternative banking channels has allowed competitors to get ahead, minimising their costs by directing existing customers toward telephone and internet banking.
In January 2000, Fortune Bank begins investing large sums of money to revamp its existing alternative banking channels to increase their appeal to customers used to more traditional modes of banking. The bank hopes to start closing within a matter of months branches that are not cost effective.
This revamping of existing technology is to be accompanied by a marketing drive created around a Customer Relationship Management system, the strategy being to deepen relationships with existing customers before striving for new business.
Given the implications for staff of a restructuring, Fortune Bank has been careful to maintain union involvement throughout the development process. The relationship, however, has been tempestuous and the union has remained sceptical. Union leader David Cheam has kept a close eye on developments.
In the first phase, a large number of employees are to apply for newly created positions that will replace their existing roles. Changes affect tellers and personal business managers, through branch and area managers and up to general manager level.
At the beginning of April, the executive directors meet to decide on selection criteria for the new roles. Executive directors Hilary Aitken, Mark Harman and Anne Wilkes are keen to move forward. The feeling is that the process must be as efficient as possible and have minimal effect on customers and staff.
Aitken suggests that selection decisions be based purely on data from recent performance appraisals. Harman disagrees, insisting that informal interviews would add depth to the performance-based approach. He adds that the union would be likely to object were staff not given the chance to add value to the performance data. Wilkes agrees and draws their attention to the importance of balancing the need for a swift and efficient selection process with the need to maintain staff morale.
They decide on a selection strategy that incorporates a performance appraisal and a short, informal interview to be conducted by HR staff and managers. At this point, Harman suggests the use of psychometric tests, which he believes would provide a further differentiator between applicants. He has basic knowledge of these tools and recommends a number of measures of numeric and verbal abilities.
Wilkes and Aitken are sceptical, but Harman explains that staff are likely to be more accepting of the application process if there is some formal ability assessment involved.
On May 5, along with several hundred other Fortune Bank employees, Amber Kay is invited to apply for the newly created role of customer-service representative. Before the restructuring, Amber was a bank clerk for seven years. During that time, she worked at three suburban branches and won a number of customer-service awards. She has little knowledge of the internet but has a full understanding of telephone banking. Eight months ago, her performance dipped as she tried to adjust to changing targets and trouble at home. More recently, though, she has got back on track. She is distressed that she will have to reapply for a job she already has and does not see the need for restructuring.
Her friend Clare Simper works at a branch in the centre of a big city and has also applied for one of the new customer-service representative roles. She has been with Fortune Bank for 18 months, her first job since school. When she joined, Clare was highly enthusiastic, but became disheartened as the bank fell behind its competitors. Although she does not enjoy dealing with customers, Clare has extensive knowledge of the internet and is keen to see Fortune Bank’s e-banking develop in line with industry trends. Her performance has suffered considerably since her last appraisal four months ago.
On May 12, Amber and Clare are informally interviewed at their respective branches. Amber’s interview is with her branch manager, a woman she has worked with for the past three years. The interview questions are largely concerned with Amber’s home life, how she is balancing family and career, and her relationships with other staff. After the interview, her manager asks her to complete two psychometric tests, one to assess her numeric ability, the other her verbal reasoning skills. She feels reasonably confident about her performance on the numeric measure, but found the verbal reasoning tasks difficult and confusing.
Clare’s interview is with an HR manager from head office. He questions her over her interest in the internet and asks her where she sees herself in five years time. He then asks her to do the psychometric tests. She finds both reasonably easy, but is not sure how “verbal reasoning” relates to the target role.
On May 26 Amber receives notification that she has been unsuccessful in her application. The letter explains that, under the new structure, there are bound to be more applicants than there are positions available. It also suggests that she apply for other positions at the bank.
On the same day, Clare is told that she has been successful. She meets Amber that night and they discuss their different experiences of the selection process. Neither can understand why Clare’s application was successful and Amber’s was not.
A week later, Amber approaches the union. She puts forward her case and David Cheam recommends taking the matter to a tribunal. Over the next week, he collects anecdotal evidence for a class-action suit against Fortune Bank. There have been a number of cases similar to Amber’s.
The union presents this evidence to Fortune Bank’s executive committee. The committee stands by its selection decisions, insisting that the process was fair and offering to share performance data, notes from interviews and the results of the psychometric tests with union representatives. The union accepts the offer to review the material and concludes that the combined assessment methods gave an unfair and inaccurate guide to candidates suitability for roles.
During the discussion, information is leaked to the media. Fortune Bank’s share price falls dramatically over the following week.
The union heads present their conclusions to their members on June 12.
An immediate consequence is that a large number of tellers go on strike. The bank’s executive stalls the restructuring process in an attempt to restore staff morale and relations with the union. The planned marketing drive for alternative banking channels is put on hold, increasing the gap between Fortune Bank and its competitors. The share price drops again.
By the end of June, class-action suits for unfair dismissal are under way. Media attention is at its peak and competitors are making the most of Fortune Bank’s adverse publicity.
Disgruntled staff are openly seeking jobs elsewhere and the bank now finds itself faced with an expensive external recruiting process.
The executive is being forced to consider closing a number of less-profitable branches across the country, irrespective of the failure to shift existing customers to alternative banking channels.
How could Fortune Bank have avoided litigation for unfair dismissals? How might the executive have managed the restructuring program to minimise the effects on staff morale?
Proposed solution #1
Richard Boston is an assessment consultant and Therese Malone a business development manager for MXL Ltd, a provider of professional employment-related services specialising in solutions in recruitment, assessment, organisational development and related training, as well as internet-delivered products
There are five stakeholders to consider here: staff, the union, managers, customers and shareholders. Essentially, the reactions of all these can be managed effectively by adhering to one basic premise: that the selection process fairly and objectively identifies the applicants best suited to the new roles.
Staff morale always depends on a perception of the selection process as being fair. Lack of trust in the objectivity of decisions regarding who is the best person for the job is likely to result in fewer applications, greater unwanted turnover and a high risk of unfair-dismissal suits.
The key to fairness and selecting the right person for the job is to offer candidates a “level playing field”. This does not mean ignoring data relating to past performance; rather it aims at fostering an environment in which candidates can demonstrate their abilities with regard to the role in question.
If all candidates jump the same hurdle and that hurdle is directly relevant to the target role, Fortune Bank not only stands a greater chance of allocating the most suitable staff, but it has protected itself against litigation.
The notion of “best fit” requires some expansion. What exactly do the new roles require? What is the key behavior that differentiates high from low performers in those roles? Which of these are deemed essential, and which are merely desirable?
The next step is to decide how candidates will be measured against these capabilities. During the meeting at Fortune Bank, Aitken suggests performance appraisals be used as the sole predictor of on-the-job success. Quite rightly, Harman disagrees with her. Performance appraisals, though invaluable when used for their prescribed purpose, can offer a distorted view of a candidate’s potential. In Amber’s case, for instance, appraisals over the past 12 months would have painted a negative picture of her performance. Where Clare is concerned, her January appraisal would have missed her recent decline in performance.
As a way of filling out information gathered from performance appraisals, Mark suggested informal interviews. The rationale here is clear, but the process still suffers from a lack of standardisation and objectivity. Different interviewers are bound to ask different questions of different candidates, adapting to the dynamics of the conversation and their experience of the candidate. This is exactly what happened during Amber and Clare’s interviews.
Mark also suggested the use of psychometric tests. These tools, provided they are carefully selected according to the requirements of the role, do offer insight into candidates abilities. Nevertheless, they often suffer from a lack of relevance to the activities of the target roles. This not only has implications for the accuracy of the selection process; it is likely to undermine the applicants confidence in the process and attract negative attention from the union.
The answer here is to complement psychometrics with job simulations designed to emulate the tasks of the target roles. After all, you would not entrust a 747 to a pilot who had been unable to land during a flight simulation.
The relative weight afforded job simulations, structured interviews, information on past performance and experience, aptitude measures, and personality or work-style evaluations is a matter that requires some expertise. Fortune Bank would do well to use an experienced, independent selection committee.
Such a committee would integrate all relevant information and make decisions based on a balance between technical experience and potential. This would be particularly valuable in the event of external applications.
The selection process, besides identifying the “right” staff for the new roles, should provide management with insights into the candidates abilities whether they meet the criteria or not. For those who do, work-style and motivational data can facilitate productive management of the employee. For those that are unsuccessful, the information can be used to identify other areas in the organisation in which the candidate would be more comfortable.
Whether candidates are successful or not, they will inevitably have some areas for development. They should be made aware of them and given suggestions as to how to improve their performance. Indeed, the information gathered from the selection process should form the basis of a structured development program, which is sure to be necessary given the bank’s attempt to align itself with market trends.
Moreover, a clear explanation of why candidates were unsuccessful, how they might improve their performance, and to which areas of the bank they might be better suited will positively affect staff morale. It should also satisfy the union that all reasonable steps were taken to ensure that the restructuring was as fair as possible.
Proposed solution #2
Adrian Ohlsen is principal at TSR Consultants, a specialist in change management, corporate mentoring and coaching
During times of change, all aspects of business become far more sensitive. Seemingly simple problems can be blown out of all proportion. So, in times of change, expect an extreme response from the people involved. As a rule you will never satisfy all people in all things, so you have to protect those things that protect you. Define the important parts of your business systems and give them the care they need. Above all: communicate, communicate, communicate again.
In time of restructuring and change, one of the greatest fears all staff have is of losing of their jobs. A siege mentality develops and fighting for the status quo is the result.
We can never entirely remove the fear, but we can explain the reasons behind the changes and provide opportunities for staff to acknowledge the need for them to become part of it.
“Unfair dismissals” are a characteristic of change. It is better to expect the worst and build it in to your thinking than to be surprised and worried when it occurs.
Trust and credibility are elements of all relationships and are what good businesses are built on. Strong relationships do not just happen; they are nurtured. Nurturing requires time. In short, at times of change, we reduce anxiety through an overabundance of communication and active listening.
Opportunities for staff to ask questions and seek explanations on all issues must be provided. We have to manage the anxiety by allowing it to rise to the surface and acknowledge it.
So, with this in mind, Fortune Bank could have:
- Conducted discussions in January and February with its staff and the union explaining the changing market and the need for restructuring.
- Involved staff and union in the consideration of new technology in the business and how it could be introduced with a minimum of fuss.
- Ensured that the “key movers were a representative group from the overall network (a strong guiding coalition).
- Ensured that discussions on the changes were conducted by everyone’s first-line manager. Staff are more likely to trust them than anyone else.
- Ensured that everyone had available to them their entitlements in clear, unambiguous language. People need to base the decision to stay or leave on correct information.
- Ensured union involvement was real. The union needs to be convinced that the new world is the best one for staff that choose to stay.
At times of change, we not only have to manage the transition, we also have to continue running the business. And we have to keep all our people happy.
A clear and communicated strategy for each of these three aspects must be developed. Resources to suit the importance of each have to be allocated. You might, for the duration of the change, appoint a champion for each aspect over and above the normal management structure.
Communication is imperative. It is not unusual to establish a regular change newsletter to build confidence and minimise the insecurity change can bring.
Acknowledge the insecurity people may feel at all levels of the organisation. Senior management’s insecurities are just as real as anyone else’s. Remember, their influence is broader, so the effect of their fears is more far-reaching. You also may need them to help manage the change; so, any losses here can make the job a lot harder.
This can be done through practical change workshops with an emphasis on listening and solution. People need time to come to grips with the moves and to be able to choose how they participate.
So, with these ideas in mind, Fortune Bank:
- Could have appointed Aitken, Harman and and Wilkes as champions for three aims of the bank: the continuing business, the new business, the people.
- Could have invited interested parties to be the investigative reporters for the newsletter and encouraged them to pursue stories to their satisfaction.
- Could have invited and trained staff to conduct the change workshops. Staff would then see the changes as an opportunity to grow.
- Should have ensured that early planning for change and the ongoing reviewing process were transparent. Decisions made behind closed doors automatically suggest a hidden agenda.