Pwc Equipped to Compete

8/12/2019 Pwc Equipped to Compete

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Equipped for the future: Re-inventing your organisation

Most nancial services businesses are organised and run for a marketplacethat is fast disappearing. How can you make sure your business is equippedto compete?

www.pwc.com/fsfutureorg


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5 Foreword

6 Executive summary

8 Forces driving change

12 New organisational blueprint

20 Laying the foundations for organisational renewal

22 Contacts

PwC Equipped for the future: Re-inventing your organisation 3

Contents


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The key question is no longer whether or even how the nancial services (FS) sector is beingtransformed, but how to undertake the urgent organisational overhaul (capabilities, structure,decision making, processes, technology and talent) needed to meet changing customerexpectations and deliver a decent rate of return in this new environment.

In this paper we outline the organisational implications of the forces reshaping FS (Section one)and then set out our blueprint for the successful organisation of the future (Section two), beforeconcluding with the immediate priorities for action. The paper draws on the insights of PwCssector experts from around the world and our experience of working with the businesses thatare spearheading the development of a new organisational paradigm.

We hope that you nd the paper useful and interesting. If you have any queries or would like todiscuss any of the issues in more detail, please speak to us, any of the contacts listed on page 22or your usual PwC contact.

Bhushan SethiPartner, PwC USTel: +1 646 471 2377Email: [email protected]

Andrew JurczynskiGlobal leader, Project Blue, PwC NetherlandsTel: +31 (0)622461820

Email: [email protected]

PwC Equipped for the future: Re-inventing your organisation 5

Foreword

Were pleased to introduce Equipped to compete: Reinventing yourorganisation.



Executive summary

Forces driving changeImagine a marketplace in which service standards are dened by the digital experience, brand value

is determined by chattering on social media, customers know more than salespeople and are readierthan ever to switch if they believe they can get something better elsewhere. This isnt some distantfuture your business can worry about later, but the market realities that youre already beginningto face. A much more urgent and radical organisational overhaul than many FS businesses areundertaking is likely to be needed to reect these rapid shifts in the market.

New organisational blueprint Building on our experience of working FS businesses across a range of different markets, we believethere are ve main building blocks for the new organisational paradigm:


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1. Inspirational: The brands people want to be associated with make lives betterThe starting point for organisational regeneration is a clear vision of what youre in business to achieve

and how this contributes to society and the economy. This renewed sense of purpose can help torebuild trust, restore pride and motivation within your workforce, and strengthen its ability to competefor customers and talent. Making the vision real requires strong leadership and rm control of thelevers that shape culture and behaviour on the ground.

2. Fit for the future: Dening the organisational capabilities needed to competeThe businesses out in front recognise the need for new and sharper capabilities as they seek to keeppace with rapidly changing customer expectations. Key differentiators include the ability to sensedigital signals, anticipate demands and respond instantaneously. A more fragmented marketplacealso requires sharper segmentation, the ability to build relationships across different channels andgenerations, and the more diverse workforce needed to reect demographic and social changes. Theneed to understand and engage with customers, communities and governments will see more staffhired in from clients and the public service. Underlying requirements include dening more relevant

analytics for decision making, more effective information security, social media savvy public relationsand the ability to work with many different types of business partners.

3. Decisive: Big can also be fastDecision-making processes are changing. One of the key challenges is how to become comfortable witha complex multi-speed model in which decisions that affect risk, the brand and the nancials will bemore centralised, while close to customer decisions become faster and more autonomous. As yourbusiness seeks to bring innovations to market quicker, its especially important to move away fromlengthy business planning to a faster and more exible, data-led iterative approach to decision making.Businesses would launch, test, take on feedback and respond in a model similar to that used by manyof todays telecoms and technology companies.

4. Agile: Maximising freedom of manoeuvreThe need for exibility, customer focus and more efcient use of resources is going to require greatermobility, adaptability and collaboration. Multifunctional teams would be quickly assembled to meetspecic customer needs and capitalise on emerging opportunities, then swiftly disassembled ready tomove on to the next opening as part of an agile and cost-effective plug and play model. A new andmore realistic bargain with staff is also going to be needed to bring pay rates into line with todaysmore modest returns.

5. The right people: Bringing skill sets and rewards into line with the new marketplaceThe emerging marketplace demands people who are comfortable with change. They will use theirnetworked capabilities and new decision-making tools to accumulate knowledge much quicker thanprevious generations and move easily between projects and roles.Levels of pay may reect how value was created in the past, not how it is now. Interactions nowcover a number of different channels, so its harder to allocate value to any one in particular, forexample. Value creation is also less dependent on individual expertise and more on the strength ofthe organisations brand, relationships and access to customer data. As a result, simply paying thegoing rate will give way to a mark-to-value approach, in which staff are rewarded in line with theircontribution to customer understanding, sustaining relationships and other sources of long-term value creation.



Forces driving change

What is striking about the changes in the FS marketplace isnt justhow far theyre likely to go, but how quickly theyre taking hold.What are the organisational implications of this accelerating markettransformation?

1



Through our FS-wide Project Blue 1 and a series of sector-specic perspectives for insurance, 2 retailbanking 3 and asset management, 4 weve been exploring the trends that are reshaping the industry andthe new competitive battlegrounds theyre opening up.

Its not our intention in this section to look at these developments in detail, rather to consider whatthey mean for the way your business is organised. Weve grouped the organisational implicationsaround our ve building blocks for change:

1 www.pwc.com/projectblue

2 Insurance 2020: Turningchange into opportunity(http://www.pwc.com/gx/ en/insurance/future-of-in-surance/index.jhtml)

3 Retail banking 2020: Evo-lution or revolution (http:// www.pwc.com/gx/en/ banking-capital-markets/ banking-2020/)

4 Asset management 2020: A brave new world (www.pwc.com/am2020)

1. Inspirational:The brands people want to be associated with make lives better

2. Fit for the future: Dening the organisational capabilities needed to compete

3. Decisive: Big can also be fast

4. Agile: Maximising freedom of manoeuvre

5. The right people:

Bringing skill sets and rewards into line with the new marketplace



New economic realities A combination of technology, easier price

comparison and new regulation are intensifyingcost pressures and changing price/valuepropositions.

Organisational challenges

1. How to respond to shifts in what customers value and are willing to pay for.

2. The need for greater ruthlessness in focusingon core sources of value, withdrawing fromunviable business and using automation,offshoring and outsourcing to cut costs in lowmargin transactions.

3. How to turn data into insight and revenue.

4. How to make sure the way clients aresegmented and the workforce that servesthem better reect demographic trendsincluding differing gender and generationalexpectations.

5. Forging the more realistic bargain with staffneeded to bring pay rates into line with todaysmore modest returns.

Changing customer expectations and

the power to punishPower has shifted to the customer as they becomemore connected, more demanding and less loyal.


1. Instilling the vision and values needed torebuild trust.

2. Harnessing big data analytics, social mediamonitoring and other new forms of insight toanticipate and respond proactively to changingcustomer demands.

3. How to gain clearer line of sight to customers,speed up decision making and overcomeinstitutional resistance to change

4. Shift from product-push to customer solutions.

5. Accent on product specialisation (depth) gives way to broader engagement, analytical andchange management skills (breadth).

Digital competitors and the age ofinnovation As the pace of innovation accelerates,developments that would have taken years toimpact on the market can now become consumerexpectations in a matter of months.


1. New competitors have head start on trust. 5

2. Operational barriers to entry are disappearingas tech-enabled entrants use digitaldistribution and advanced customer prolingto break into the market.

3. How to create a business model that isexible enough to reinvent itself when bettertechnologies or potential partners come along.

4. How to lead innovation even fast followingcould leave your business marginalised.

5. How to create an adaptable workforce,

unbound by hierarchy, organisational siloes orrestrictive practices.

Rise of state-directed capitalismStrategies and organisational design shouldreect the extent of government intervention inthe nancial system.


1. Judging how to deliver shareholder value while shouldering increasing levels of socialresponsibility.

2. How to compete in a market in which highercapital and compliance costs are eating intomargins and making some once-protablebusiness unviable.

5 The Edelman TrustBarometer 2014 shows thatFS continues to be the leasttrusted industry globally,with technology being themost trusted



3. How to plan and respond quickly to shifts ingovernment policy and investment.

4. How to manage ring-fencing, which is leadingto the creation of what are in effect standalonebusinesses.

5. Designing the role of the corporate centre toprovide more central oversight and operate ina favourable scal and talent rich location.

6. With so much value tied up in the relationship with government (e.g. regulation and jointinvestment), having the people in place toengage.

Equipped to compete As the returns from some of the mainstays of

your business begin to dry up, youll at the veryleast be forced to rethink your target marketsand massively cut costs. The most successfulbusinesses are going much further by re-engineering their organisations towards new ways of meeting customer demands and openingup new market opportunities. So is your businessup to speed? Our work with FS organisationsraises ve key questions that we believebusinesses should address to make sure theyreequipped for these new realities:

1. Is your thinking radical enough?

2. Does your mission embrace the values of thepost-crisis world?

3. Do your organisational capabilities reect yourcustomers changing expectations?

4. Do your organisational capabilities reect thenew economics of your business?

5. Is your organisation ready for change?

The new marketplaceDigital banking Banking

Follow Lead

Transaction Solution

Product innovation Client intimacy

Marketing Dialogue

Peers Digital competitors

Shifting to digital Whatever the customer wants

Cost control Allowable costs



New organisationalblueprint

Your organisation is under pressure to change as fast as or even fasterthan the market. What kind of capabilities, decision-making processes,operating model and talent do you need to respond?

2



1. Inspirational: The brands people want to be associated with makelives better FS is facing hostility from politicians, media andsociety as a whole and is seen as less attractiveto talent. Yet, the sectors contribution to societyis essential in areas ranging from helping peopleto buy a home or support themselves throughretirement to nurturing business innovation. Theproblem is that as products and organisations

have become more complex, this clear sense ofpurpose and value can be lost.

Organisational regeneration therefore starts witha compelling vision of what youre in businessto achieve and why it matters. This renewedstatement of purpose should provide a core set of values, shared expectations and driving goals.

This focus on socially benecial good growth isan opportunity to re-engage with disillusionedcustomers. It can also form an important elementof your new employee value proposition,fostering a renewed sense of pride and purpose within your workforce, and helping to attracttalent at a time when many of the brightestcandidates are looking for more meaning fromtheir chosen careers. 6

Many boards and management teams are lookingat how to strengthen transparency and makechanges to their organisational culture. Buttheyre nding it difcult to translate the tonefrom the top into tangible changes on the ground.Clearly, wholesale change cant be achievedovernight. But it is possible to make an immediatedifference by focusing on the decision points andcustomer interactions that have the most tellingimpact (moments that matter). This might behow the suitability of a product is judged or how anew insurance claim is dealt with.

Putting customers rst The core of this renewed purpose, vision and values is putting customers rst. This includestaking the time to understand their needs andonly providing a product or solution that is rightfor them, even if this means foregoing a sale andthe bonus that might come with it. It also meansclear price transparency and a commitment to notmaking money when customers mismanage theiraffairs.

A key element of this fair deal is judgingbehavioural traits, an area that is only nowbeginning to gain sufcient focus. Why dontmore people switch when teaser rates nolonger apply, for example? It will therefore beimportant to make sure customers have the rightinformation to make informed choices.

Leading by exampleLeading executives personify the mission in themessages they convey and how they act. Thereare many styles of effective leadership, but theseare the cues employees take to shape their ownbehaviour.

A number of FS organisations have started toaddress these challenges by developing newleadership programmes and reshaping selection

and succession planning criteria. The resultscan be evaluated through enhanced voice ofcustomer insights, use of social media sentimentanalysis and tailored employee engagementsurveys. While such initiatives are an importantstep forward, the evaluations highlight the needfor further work in changing the managementapproach and its impact.

6 Millennials at work:Reshaping the workplacein nancial services, PwC,

April 2012



2. Fit for the future: Dening theorganisational capabilities neededto compete

Leading in times of disruptive changeIn times of transformation, businesses oftenprefer to be fast followers rather than innovators,covering competitors moves and learning fromtheir mistakes.

Yet, as customers begin to dictate their ownterms and switching providers becomes easier, waiting for others to make the rst move is nolonger a luxury your business can afford. Moreinvestment isnt necessarily the answer. The keyquestion is how to develop the faster decisionmaking and organisational mobilisation needed tocommercialise new ideas and respond to marketdevelopments ahead of your competitors.

Anticipating customer needs As customer engagement and insight become thekey differentiators, FS organisations are lookingat how to improve their ability to anticipate whatcustomers want and shape services around theirchanging lifetime needs.

Were already seeing a shift in business modeland approach as banks partner with new digitalcompetitors and insurers focus more closely onhow to protect against risks rather than simplypaying insurance claims after the event.

The competitive benchmarks for how well youunderstand and can respond to customer needsshould be the internet and technology companiesthat are seeking to move into the sector, rather

than just traditional peers.

Smarter business intelligenceEmbedding analytics at the right granularity,speed and precision would foster faster andsmarter decisions across the organisation,enabling you to prole customers more precisely.

The businesses that are leading the way arefocusing on how to make sure the entireorganisation is digitally literate. Marketing teammembers are comfortable with big data decisionmaking, for example. In turn, IT people are awareof marketing and product development demandsas they look at how to turn the surge of data intocommercial insights.

While most FS organisations are looking at how

to increase their capacity to mine and analyse(bottom up), better results are coming fromadopting a more focused top-down approach, which identies the key questions that should beaddressed. Examples might include determining what service elements customers prize and aretherefore prepared to pay a high margin for aspart of a more precise approach to segmentation,pricing and service design.

Managing at the pace of network interaction The ability to analyse payment, social mediaand other digital trails would fasten decision

making by enabling your business to anticipatedemand and proactively shape product,marketing and public relations strategies. Thenew social media command centres being set upby a number of banks allow them to see whatcustomers are thinking in real-time and respondinstantaneously.

The need to monitor and inuence the newsocial-ecosystems is heightened by the speed with which dissatisfaction can go devastatingly viral. As uncertainty and upheaval become thenorm, the ability to monitor emerging threats,mobilise quickly and communicate effectively aretherefore going to be crucial. Public relations willbe broadened beyond the traditional media toembrace social media and other new consumernetworks.

More than

70% of FS CEOs recognise the needto satisfy societalneeds, balancethe interests ofall stakeholdersand protect theinterests of future generations 7

Turning information into advantage A fast-growing US insurer is building its business around information rather than just insurance.

Its main differentiator and source of value is its in-depth knowledge of its customers. People within the company are encouraged to think in this way and are rewarded for how well they acton this information and insight.

Technology is at the centre of the companys ability to reinvent itself and increase its market shareover the past decade. The development of sensor technology has allowed the business to movefrom vehicle-based to usage-based cover and create more precise risk pricing. If drivers are a lowrisk they can qualify for a discount, which encourages safer driving.

7 338 FS CEOs were polledas part of 17th AnnualGlobal CEO Survey Fit forthe future: Capitalising onglobal trends, PwC, 2014(www.pwc.com/ceosurvey)



Engaging with a broader set of stakeholders As social responsibility becomes an ever greaterpriority, leading organisations are looking at what new roles and engagement capabilities willbe needed. This includes working more closely with governments, academic institutions andcommunities as they look at how to bring mutualobjectives closer into line. As a result, communityand government engagement teams could becomeas important as investor relations, rather thanoperating at the periphery of the organisation.

At a time when governments are interveningmore directly in the economy, the benets of thisengagement include helping to make sure yourstrategy anticipates and is aligned to governmentpriorities and investment plans. You can also work with governments and education providersto foster the skills you will need in the future more than 60% of FS CEOs see this as a priorityfor their business. Opportunities range frominternships to helping to shape the curriculum.

An acid test for social responsibility will be how your company responds to widespread job lossesas more and more of your routine processes andcustomer interactions are automated. Its nolonger possible to ignore the impact on jobs andcommunities. Plans for redeployment, community

enterprise and investment are therefore essentialelements of automation strategies. Investingin enabling staff to develop new skills andre-enter the workforce will greatly enhance your reputation, brand value and long-termcommercial potential.

Adaptable organisation needs all-round athletesThe more exible, customer-centric and sociallyengaged organisation demands fewer people withspecialist product expertise and more people witha broad range of skills. These people will havethe varied technical skills and multi-industry

experience to move easily between clients,countries and assignments.

Partnership as a core skill As collaboration with joint venture partners,tech start-ups, communities, governmentsand third-party providers becomes ever moreimportant, partnership will become a core skill.Key priorities include the ability to communicateand align objectives. Were seeing signicantmovements of staff from client to service provideror from one joint venture partner to another.This exchange of experience and ideas is not onlygood for corporations and society, it also benetsemployees who now see career paths openingup beyond the boundaries of their organisation.Some of the closest partnerships are betweenFS and technology/information rms and werelikely to see an increasing blurring of the linesbetween these two types of organisation.

New skills to compete in maturing markets As more low value retail business is automated,the priority within many organisations isalready shifting to devising solutions for morecomplex needs such as pensions and mortgages(consultative selling). Complex interactions withmore signicant outcomes will demand fewer butbetter trained people.

As populations age, it will also be important todevelop the skills needed to help people fund

longer retirements. This includes the managementof higher yield investments and how to managetax and legacy arrangements.

One step ahead of cyber threats As more and more business moves over to onlineand mobile channels, fraud vulnerabilitiesincrease. Indeed, many now see a majorbreakdown in cyber security as the sourceof the next nancial crisis.

Our research shows that compliance is still thebiggest driver for information security spending inFS.9 By simply adhering to regulatory rules, youregoing to nd it difcult to keep pace with theconstantly morphing cyber threats you face. Cybersecurity is most effective when its everyonesbusiness, rather than just IT.

61% of FS CEOs see cyber insecurityas a threat to their growth prospects 8

8 338 FS CEOs were polledas part of the 17th AnnualGlobal CEO Survey Fit forthe future: Capitalising onglobal trends, PwC, 2014(www.pwc.com/ceosurvey)

9 993 board executives anddirectors of IT and securityfrom the nancial servicesindustry were interviewedfor the Global State ofInformation SecuritySurvey 2014, a worldwidestudy carried out by PwC,CIO magazine and CSOmagazine (please seehttp://www.pwc.com/gx/ en/consulting-services/in-formation-security-survey/ download.jhtml for nancialservices and cross-industryndings)



Key priorities include identifying and focusingresources on the crown jewels most in need ofprotection. Its also important to carry out morefrequent risk assessments to keep pace with theever changing threats.

3. Decisive: Big can also be fast

Managing at the speed of changeThe need to lead rather than follow calls for amove away from long and sweeping business

planning cycles, in which executives set directionand stake their reputations on the success ofits execution, to a faster changing and data-lediterative approach to meeting customer demand. Your organisation would monitor digital signals,test, take on feedback and shift in a model similarto that used by many of todays telecoms andtechnology companies.

Medium-term planning, which typically extendsthe status quo with some modications, willgive way to a constant process of creativedestruction identifying the new entrants and

emerging business models (ercest competitors)that could marginalise your business and thenaddressing the vulnerabilities. In a marketplace where market share is going to be far lessstable and even subject to sudden shocks, theresults would enable your board to challengeconventional assumptions and accelerate the paceof innovation.

Central control would still be exercised overdecisions that could impinge on your brand,budget, risk or compliance. But as long asthe right values are embedded within yourorganisation, appropriate control need noterode autonomy over customer strategy andmanagement. Indeed, the more condent youare that that your employees are acting with theintegrity and insight needed to put customersrst, the more licence you can give them to makedecisions and capitalise on opportunities.

The two-pronged decision-making modelrequires signicant change in managementthinking. While a number of organisations areseeking to create clearer and more consistentaccountabilities across business unit, productand geographic operations, a lot more workmay be needed to take account of what is both agovernance and cultural shift.

Breaking down siloesWhile many FS organisations are looking toeliminate complexity and are shifting operatingmodels from product to client focus, many are stillorganised around product siloes, which make itdifcult to meet multiple customer demands anddrive cross-selling goals. The siloes can also makeit difcult to execute enterprise-wide initiatives,

such as cost reduction or harmonisation oftechnology platforms. The operational separationbetween design, marketing, distribution/tradingrisk and compliance requires a more collaborativeapproach, in which personnel come togetherto understand and develop solutions to meetcustomers needs.

Operating through separate siloes also raisesxed costs by making it difcult to switch peopleand systems onto other tasks. Companies withmore adaptable people and support functionshave found it easier to redeploy resources than

those with highly specialised capabilities.

Developing an organisational baseline As part of a large cost transformation programme, a global FS group shifted a considerableamount of work to lower cost locations. To inform the planning, the group carried out activityanalysis to chart the roles and responsibilities of its global workforce. The results were used tocreate a baseline for setting cost targets and dening the future organisational model including

shared delivery centres, regional centres of expertise and external service providers acrossmultiple locations. Today, this baseline is used as a key input into the development of futureglobal workforce plans based on alternate future talent demand and supply scenarios, such aschanges in business model, workforce demographics and anticipated attrition. The baselineis also being used to dene some of the future capabilities the group will need and determineappropriate talent strategies. While the organisational baseline is not a solution in itself, thecommitment to dening and maintaining a clear reference point has enabled the group to moreproactively respond to the constant change in its internal and external environment.



4. Agile: Maximising freedom ofmanoeuvre

Managing allowable costs As you strive to control costs on the one sideand invest for the future on the other, the realquestion is not what costs you cut, but what youmaintain and why.

The most enduring savings have come fromlooking at costs strategically rather than seekingarbitrary cuts. This includes determining whatcosts are allowable and how to make surethat resources are focused on key competitivepriorities. For example, if regulation, easiercomparison and/or pressure from newcompetitors have shaved 40% of your margins,then cutting administration expenses by 10% isntgoing to make the business sustainable.

Key priorities include ensuring processesare scalable and cost-effective. It will alsobe important to create simple and exiblecapabilities that can be easily switched and

adapted.

Simplication and rationalisation will openthe way for a fresh wave of automation andoutsourcing. If certain activities are stilluneconomic through human input, they couldstill be protable if run from machine to machine.This would have the additional advantage offreeing up employees for more complex andhigher margin activities. There could also beopportunities to create best-in-class serviceoperations, which could be used by otherinstitutions in a utility model.

Standardisation opens door to more shared service operationsBetter communication around the organisation will open up opportunities to develop sharedservice operations for areas that might havebeen distributed around a variety of local ofces,such as compliance and operational risk. Thekeys will be greater process standardisationand consistency in how common demands aremanaged.

Rethinking where and how you operateJust as organisations follow their customersand key sources of growth, so should executiveleadership. As a result, were likely to see moreboards relocating to fast growth emergingmarkets.

With more than 50% of graduates aged 2534likely to be living in lower cost emerging marketsby 2020 (includes China 29%, India 12% andIndonesia 6%) 10, it would make sense to tap intothis pool by redistributing operations to thesemarkets.

Team value has in the past been limited by theexpense and logistical problems of bringingpeople together. But increased use of networktechnology for communication and collaboration

means that you can mobilise virtual teamsquickly, efciently and to greater effect.

The challenge for management is how to becomemore comfortable with the virtual workplace andthe opportunities to reduce costs and enhanceexibility it opens up. This includes less travel andphysical secondments and an improved ability to work on several assignments at once.

Plug and play Shifting to an adaptable and transferable plug-and-play organisational model would make iteasier to move people and operational supportaround to capitalise on emerging opportunitiesand disassemble them efciently as demanddictates. Some of your people could be workingon a loan book evaluation for an acquisition in Africa on one week before being reassigned to 10 OECD Education

Indicators in Focus, 2012

With morethan 50% of graduates aged 2534 likely to beliving in lower costemerging markets

by 2020 it wouldmake sense totap into this poolby redistributingoperations to thesemarkets.

Building an adaptable organisation A leading hedge fund is looking to build plug and play into itsorganisational and job design by making the rotation of peoplebetween front and back ofces an intrinsic part of employeedevelopment and broader culture. This has enabled staff to develop

an end-to-end view of the hedge fund value chain, which acceleratesthe identication, analysis and implementation of changes in strategy,business and organisational model.



set up a new credit business in the Middle East,for example. Making this work requires a clearinventory of what skills are needed and what exist within the organisation and outside.

Getting used to more than one bossThis more exible model will see more peoplebrought in on an as per need contract or freelancebasis, which can create challenges for loyalty,engagement and career development.

As people move around, management will haveto become more comfortable with not owningtheir people. In turn, staff will need to get used to working with many different managers and takemore responsibility for the development of their

careers.

The strength of your core values, expectationsand culture will be crucial in creating a sharedsense of purpose and identify within this moreuid and disparate organisation.

Career paths extend across geographies,industries and companiesThe need to understand and engage moreclosely with customers and communities couldin turn see more people brought in from clientsand governments. Eventually, moving back andforth between client and FS provider is going tobecome a normal part of the career path.

5. The right people: Bringing skill sets and rewards into line with thenew marketplace

Its important to identify the pivotal jobs withinthe new market realities. Examples might beanalytical or client-facing roles. You can thenmake sure that people in these positions haveall the training and technological support tomaximise the value they deliver.

Attracting people from different backgrounds As analytical, cyber security and other digitalskills come to the fore, many organisations arebeginning to bring in more people from outsideFS. Examples include recruiting people fromdigital start-ups, internet providers or those withintelligence backgrounds.

As many businesses move back to basics, it maynot be necessary to hire graduates from thetraditional preferred universities. There maybe desirable candidates from other universitiesor backgrounds who may actually prove moreattuned and adaptable to the needs in hand thantheir elite counterparts. Today, we see a numberof FS companies developing closer links withacademic institutions to inuence the designof university curricula. Looking ahead, thepartnership between education and FS is likely toinclude the development of more vocational andcontinuous learning programmes as FS staff lookto adapt their skills to changing demands.

Remotivating your peopleMoney has been the main driver for recruitment,retention and motivation within the FS sector.In many ways, it also has been a surrogate forengagement. But there are no longer the returnsto sustain this.

As money ceases to be the main driver ofrecruitment and retention, it will be important todevelop a new employee value proposition thatmatches nancial and non-nancial rewards.This includes offering broader career paths andgreater workplace exibility.

As workforces become more mobile,organisations are looking at how to makeretention strategies more pragmatic by focusingmore closely on the talent they most want andcan realistically expect to stay. Others can bekept close as part of an alumni network, whichcan project your culture in the marketplace andprovide a source of talent for future recruitment,once they have gained experience elsewhere.

Reecting the people you serveCustomers naturally want the most effective products and best people to manage their money.But they also want to deal with people they can relate to and who instinctively understand theirparticular needs and aspirations. Some FS organisations are responding by matching customers with relationship managers and nancial advisors of similar background, age, gender and/or

ethnicity. Examples include hiring doctors to manage relationships with healthcare clients orbringing in people from the home markets of high net worth expatriate customers. While thismatching of the client coverage model is not realistically scalable in all instances, we believe thatall FS organisations will need to challenge their assumptions about best producers, best advisorsand best relationship managers to reect the realities of an increasingly micro-segmentedcustomer landscape.



Managing a contingent workforce As the adaptable plug-and-play model takes hold,it will be important to look at how to managethis mobile and exible workforce in the mostefcient way. Options include creating an openmarket for assignments in which people from within and outside the organisation apply andcompete for postings and projects. Bids mightcome in on an individual basis $500 per dayfor a compliance professional, for example. Amanager or contractor might also bid for theentire task and take responsibility for hiring andproject delivery $500,000 for implementing anew system over 18 months, for example.

Rethinking value and rewardIn the past, success in the market was attributedto the individual skills and experience of theemployee and rewards have reected this. But the vital importance of connections with customers,suppliers and new information sources meansthat employee value is now less dependenton their personal skills than the strength ofthe brand and the digital infrastructure thatsurrounds them.

A particular challenge is how to assign customersales or satisfaction to the input of a particularindividual or team for performance measurement

and reward when customers now interact over somany different channels. A number of techniquesare emerging to measure each channelscontribution. The basis for measurement includesrevenue conversion rates, weighted attributionsand sophisticated algorithms. Even with thisassignment, were likely to see a move towardsmore team-based and other collective bases forreward designation.

Similarly, its generally assumed that employee value increases with experience. But as part of therise of the wise young people, todays networked

employees are able to acquire new skills muchmore quickly and make use of technology tosupplement any gaps, making the rewards forseniority and experience less relevant.

As you look at how to put pay on a moresustainable basis, it will therefore be importantto ensure that reward assumptions reect thesedevelopments. In particular, what conventionalcompensation surveys indicate is the going ratemay not reect how much value people deliver inthis changing marketplace. An important priority will therefore be the move from mark-to-marketpay scales to a mark-to-value approach to rewardin which staff are paid in line with the pivotalimportance of their role and their contribution tocustomer understanding, sustaining relationshipsand other sources of long-term value creation.

Embracing diversity As your business becomes more customer-centric, it will be even more important to makesure the make-up of your workforce reectsthe increasingly diverse characteristics of yourcustomers.

More than 80% of FS CEOs see improving workforce and board diversity as important totheir business. But gaps remain. Women hold lessthan 20% of senior positions in FS, for example,despite making up around half of the overall workforce. 11 The way your business is organisedshould also reect this growing diversity vegenerations in the workforce as populations age

being a clear case in point.

More than 80% of FS CEOs seeimproving workforce and board diversity

as important to their business. But gapsremain. Women hold less than20% of senior positions in FS, forexample, despite making up around halfof the overall workforce .

11 Mending the gender gap: Advancing tomorrowswomen leaders innancial services, PwC,May 2013



Laying the foundations fororganisational renewal

Winning organisations will have clear insights into where in thecomplex new value chain theyre best able to compete. They will beusing the latest developments in technology to enhance customer proling, improve customer experience and reduce costs. They will alsobe able to make and enact decisions quicker than their competitors,even if they occasionally get it wrong.



So how can you judge whats needed and laythe foundations for change? From our wide-ranging work with FS businesses in planning

their organisational strategy for 2020 andbeyond, weve identied the key considerationsfor preparing and beginning to put in place aneffective blueprint for change:

Vision1. Dene the purpose, vision and values needed

to take your business forward.2. Assess whether these driving goals are

compelling to your stakeholders.

3. Assess how to translate these driving goals intothe way your people work and engage withcustomers and each other.

Capabilities1. Develop a clear understanding of potential

future industry scenarios.

2. Assess how future industry scenarios willaffect your business model (strategy, markets,clients, channel, products and regulatoryenvironment).

3. Dene the core capabilities needed to execute your future business strategy.

Governance and decision rights1. Map existing decision-making roles, processes

and accountabilities.

2. Identify changes in the way decisions aremade.

3. Determine impact on existing governance,oversight and accountability including

committee structures and reporting lines.

Organisation1. Map and evaluate existing organisational

model including functions, structure, roles andheadcount.

2. Assess the impact of changing strategies andcustomer demands on role and value deliveryof central functions.

3. Dene changes to organisational model,including role of shared services or centresof excellence, decentralised and centralisedfunctions and location strategy.

4. Chart current process and technologyarchitecture.

5. Analyse changes required to core processes,systems and tools.

Talent 1. Map and evaluate existing talent strategy and

programmes.

2. Identify changes required in talent strategy(build, hire or contingent).

3. Analyse impact of changes.

4. Develop and implement change plan.

Successful executionOur experience of the challenges organisationsface in planning for and executing the changes,

highlights the importance of choosing leaders with the appropriate skills, experience andmindset, and freeing them up to steer thetransformation. Its also important to agree arealistic planning horizon (generally three to ve years), ensure the exercise is not overly reliant onfuture technology and embed the organisationalrethink into wider strategic and business planningprocesses wherever possible. Working sessions,accelerated design prototyping, crowdsourcingand other techniques can be used to gather, testand evolve ideas.

Reinventing the organisation isnt going to be aone-off. Its going to be a way of life in a world thatis constantly shifting. The benets include creatingan inspirational organisation that can attract andretain the best people and is fully equipped for thecompetitive battles that lie ahead.



Contacts

If you would like to discuss any of the issues raised in this paperin more detail, please contact one of the following or your usual PwC contact.

Co-authors

Bhushan SethiPartner, PwC USTel: +1 646 471 2377Email: [email protected]

Andrew JurczynskiGlobal leader, Project BluePwC NetherlandsTel: +31 (0)622461820Email: [email protected]

Contacts

Jon Terry Partner, PwC UKTel:+44 (0)20 7212 4370Email: [email protected]

Chris BoxPartner, PwC UK Tel: +44 (0)20 7804 4957Email: [email protected]

Ed DonovanPartner, PwC USTel: +1 646 471 8855Email: [email protected]

Emma GroganPartner, PwC AustraliaTel: +61 (2) 8266 2420Email: [email protected]

AcknowledgementsWe would like to thank the following for their insight and contributions to this paper:

Michael Rendell - PwC UK, John Garvey - PwC US, David Price-Stephens - PwC UK,David Edelheit - PwC UK, Julian Wakeham - PwC UK and Jon Williams - PwC Australia


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www.pwc.com/fsfutureorgPwC helps o rganisations and individuals create the value theyre looking for. Were a network of rms in 157 countries with more than 184,000 people who arecommitted to delivering quality in assurance, tax and advisory services. Tell us what matters to you and nd out more by visiting us at www.pwc.com.This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon theinformation contained in this publication without obtaining specic professional advice. No representation or warranty (express or implied) is given as to the accuracy orcompleteness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty ofcare for any consequences of you or anyone else acting or refraining to act in reliance on the information contained in this publication or for any decision based on it

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