The role of change management in trust formation in commercial banks.
Skvarciany, Viktorija ; Iljins, Juris
JEL Classification: G02, G21, M10.
Introduction
Trust is a weighty component in relationships, regardless of
whether they are interpersonal or business (Sekhon et al. 2013) as trust
is one of the vital factors in creating a long-term relationship between
organizations and their consumers (Al-hawari, Mouakket 2012).
According to Dearmon and Grier (2009), high trust level may
decrease contractual costs and legal costs by reducing litigiousness.
What is more, trust is a factor, which reduces transaction costs in
banking relationships (Moro, Fink 2013; Fernandez-Olmos 2011), which
means that trust is one of the most significant elements that determines
the future development of business relationships (Jucaityte,
Mascinskiene 2011). However, the level of confidence in financial
institutions and banks in European Union reduced in last few years and
Sonnenschein (2012) says that according to the last survey conducted by
TNS Gallup in 2012 trust level reaches only 34%, whereas the number of
respondents who do not trust their country's financial institutions
and banks gets at 61%. What is more, according to the Association of
Lithuanian Banks (2015) the trust level in banking sector is 6,5 points
of 10 now.
Laksamana et al. (2013) claim that by increasing the level of
customers' trust banks could increase the returns. Therefore, it is
necessary to identify the factors, which influence trust formation in
commercial banks. Moreover, after identifying the factors having
influence on trust formation it is crucial to determine the factors
having impact on the change of trust level as, according to Ben-Gal and
Tzafrir (2011), factors that promote the effectiveness of an
organizational change turn out to be more than important. What is more,
it is required to discuss the ways of managing the change of trust
level, as trust in commercial banks is considered to be a factor that
ensures successful commercial banking operations and development, and
provides continuous, high-quality customer and commercial banking
cooperation. To determine factors of change management and trust
formation the questionnaire and expert evaluation methods were used. The
correlational research method was used to determine if there is a
relationship between variables and for the strength of the relationship
establishment.
Hence, the object of the research is assessing the trust through
change management in commercial banks. The aim of the research is to
create a model of trust formation and managing the level of trust. The
following objectives are set: to identify the factors having an impact
on trust formation in banks; to distinguish the determinants influencing
the change in trust building in banks; to create a model of trust
formation in banks through the change management.
1. Literature review
1.1. The concept of trust
Scientists agree that trust is a substantial factor, which is
necessary for building relationship of high quality between financial
institutions and customers. Therefore, it is essential to define trust
in banks. However, exploring the scientific literature revealed that
there is no generally accepted definition of trust. Wu et al. (2012)
maintains that trust can be identified as a multi-component variable
with detached but correlated dimensions.
Trust is often defined as a factor, which ensures the quality of
relationships between partners and the main characteristics of trust, is
safety (e.g. Laeequddin, Sardana 2010; Simpson 2007; etc.). In other
words, there are researchers identifying trust as a confidence in other
party's behaviour security. Laksamana et al. (2013) explain trust
as the bank's aptitude for acting as promised. According to Hauff
(2014), trust is a level of reliance on organization.
There are scientists claiming that trust is related to customer
satisfaction. For instance, Zhu and Chen (2012) identify trust as an
element, which mediates the relationship between fairness and customer
satisfaction. DeOrtentiis et al. (2013) support the view that
satisfaction is one of the key mediators of trust, which he defines as
team effectiveness of the relationship.
In this study trust in banks is defined as a component which
ensures customers' beliefs that they will feel comfortable using
banking services.
1.2. The concept of change management
Change management is associated with change. Yilmaz et al. (2013)
define change as a principle which organization shall follow in order to
survive and be doing well. In turn, Wetzel and Van Gorp (2014) assert
that organizational change attracts more attention than even
organizational problems, and, because of this change management is
appreciated highly. In fact, change management might be considered as a
method that is not used for solving particular problems, but is used in
assistance to change organization's policy and structure to avoid
problems in the future. This is to say, change management is a vital
element for organization's sustainability in long-term dimension.
Thus, it is necessary to define change management to understand its
significance for large organizations such as commercial banks.
Most scientists define change management as a phenomenon, which
leads to organization's structural changes to achieve the top of
business activities' efficiency. For example, according to
Barratt-Pugh et al. (2013) change management is "the systematic,
continuous and iterative practice of altering specific workplace
systems, behaviours and structures to improve organisational efficiency
or effectiveness". Parker et al. (2013) argue that change
management is the utilization of process for monitoring organizational
change performance. According to Xiang et al. (2014), change management
could be defined as the soft part of the change process as it might help
in solving human resource problems within organizations, such as
employee resistance and structural adjustments.
In this article, change management is defined as a process of the
management of change and development within a business or similar
organization in order to decrease resistance and negative effects of
change.
2. Methods. Empirical findings
2.1. Factors affecting trust formation in commercial banks
As trust is considered to be the critical factor in maintaining
harmonious relationship (Ling, Tran 2012) it is necessary to distinguish
factors affecting the high level of trust in banks. For identification
of the factors having an impact on consumers' trust in banks, a
qualitative research was conducted. The respondents were asked to
determine 3-5 factors that influence their intention to trust a
commercial bank. The answers of the interviewees were systematized and
seven main factors affecting trust in banks formation were
distinguished. Detailed respondents' answers and distinguished
factors are presented in Table 1.
According to the conducted research, it can be said that there are
seven main factors leading to having confidence in commercial banks.
They are as follows:
--satisfaction with bank's services (was mentioned by 59%
respondents);
--reliability (was mentioned by 46% respondents);
--image of a banks (was mentioned by 42% respondents);
--privileges to loyal customers (was mentioned by 27% respondents);
--competence of employees (was mentioned by 24% respondents);
--information (was mentioned by 15% respondents);
--reputation of a bank (was mentioned by 10% respondents).
2.2. Change management factors having impact on trust formation
The level of customers' trust in bank is one of the key
factors that influences bank's successful activities, bank's
competitiveness's level and consumers' intention to use the
particular bank's services. Therefore, it is necessary to increase
trust level, that is to say, to change it to the higher. In reality,
effective change management is necessary for alteration to achieve. For
instance, Jurisch et al. (2014) state that change management is one of
the factors that have a positive effect on business process
change's project capacity. What is more, Avila et al. (2012) assert
that change management has a great impact on promotion of high-quality
entrepreneurship, which leads to superior business sustainability.
Because of that, it is imperative to determine change management's
factors affecting leading to trust building and, consequently, to
effective commercial bank's activities.
To change the level of trust in banks to higher, it is necessary to
select appropriate methods as, according to Friedl and Biloslavo (2009)
the right selection of change methods helps to ameliorate the quality of
the company and, hence, enhance business efficiency. Actually, business
efficiency is the goal of every organization including commercial banks.
As was mentioned above, trust is the key factor that leads to
bank's successful activities. Therefore, it is critical to pick up
the factors, which are essential for trust in banks formation process.
For determining change managements' factors and the
connections with trust factors, the method of expert evaluation was
used. Experts known to the authors were asked to take part in the study.
Five experts participated in change management factors establishment and
setting connections between change management and trust factors.
Evaluating the experts' responses six factors having an impact
on trust formation factors were identified. They are as follows:
top-management commitment; visioning and visioning planning;
communication plan (internal communication and external communication);
customers' involvement; team morale and motivation; IT and
innovation.
2.3. The model of change management factors influencing formation
of trust in commercial banks
To collect data to determine the relationships strength between
factors the research has been conducted. The survey was conducted in
Lithuania. The method of questionnaire was used for the research. All
the respondents were different commercial banks' customers. Data
was collected using electronic survey system. In fact, 268 of the
distributed questionnaires were returned. All of the data was included
in the analysis. The strength of relations between factors are presented
in Table 2.
According to the conducted researches and experts' evaluation,
the model of trust in banks formation through change management has been
established (Fig. 1).
The model of change management factors influencing the trust
formation in commercial banks summarizes impact factors' relations
between factors influencing trust in banks and change management
factors. This model is a description of relations between various impact
factors. All the relations are quite strong what means that the factors
are significant for trust formation. Model is divided in two change
process approach types: top-down approach and bottom-up approach. Each
has its significance to achieve expected results and set goals.
[FIGURE 1 OMITTED]
Top-down approach
--It is proposed that top management would design various short and
long term planning. Performed actions would be decision, policy planning
and corresponding the strategy of the bank that would influence
reliability, reputation, image and information (transparency) of the
bank. This is the most direct way to achieve desired change in trust.
--Visioning and vision planning most directly will affect long-term
perception and image of the bank. This mainly is done due to changes in
forming the strategy and fiscal policy of the bank. Assess the risk
margin the bank is willing to take.
Top-down, Bottom-up approach
--Communication plan will surely decrease the resistance to change.
This action involves direct commitment from top management and incentive
from employees as well. Internally it is necessary to focus more on
clearly explaining and providing with information employees of desired
changes and future targets. Externally to communicate the changes to
consumer in the way that would be less damaging to current clientele.
Therefore sufficient communication plan and execution of it will lead to
most significant change in information flow, image of a bank, competence
of employees and clients' satisfaction with bank services.
Bottom-Up approach
--Customers' involvement most directly will influence
satisfaction with bank services and create new ideas, programs and
services for the privileged clientele. The more it will be possible to
communicate and get feedback from the customers, the more the quality of
provided services will increase.
--Team morale and motivation is critically important aspect for
internal support and carrying out the necessary plans and ideas. As
change is always connected with resistance and lack of motivation for
changes, the morale and motivation will significantly increase
satisfaction with bank's services.
--IT and innovation is one of the most typical bottom-up ways how
technology can help to increase reliability from safety aspects in the
bank, make service more easy with the help of modern IT solutions. In
addition, different innovations from employees can help to change
various ways. It is important to achieve environment where the ideas are
treasured and taken into consideration, not accumulated in never ending
bureaucratic process.
Conclusion
Analysing scientific literature regarding trust formation in
commercial banks, it has been found that change management plays a key
role in trust building. To identify the factors that have impact on
trust formation the empirical research has been conducted. Actually,
after empirical research seven most influential factors for setting the
trust in banks and six most significant factors perusing the change in
trust have been defined. In fact, for trust in commercial banks impact
factors are as follows: information, reliability, image of a bank,
reputation of a bank, satisfaction with bank's services, competence
of employees, privileges to loyal customers. What is more, the most
significant change management impact factors on trust were mentioned.
They are as follows: top management commitment, visioning and visioning
planning, communication plan, customers' involvement, team moral
and motivation, it and innovation.
After distinguishing the factors, the model of change management
factors influencing formation of trust in commercial banks has been
proposed. In reality, the model describes relations between key impact
factors. Moreover, the processes behind the model are divided into
top-down and bottom-up approaches. Each of the process has different
task to achieve and different decisions or actions should be performed.
To change perception and increase trust in banking system certain
change has to be made in the bank. Changes can be welcomed as
opportunities, but also they are connected with resistance that can have
negative internal and external effect. Therefore, we must not only take
into consideration that there are key impact factor for forming
customers' trust in banks but also how the proposed changes can
affect the key factors behind building the trust and which actions to
take will lead us to desired results. The model of change management
factors influencing the trust formation in commercial banks can help
bank management and staff to take the right decisions and point out
direction how to proceed when trying to improve trust in their bank.
Actually, to determinate how significant each relation in forming
trust in commercial is further research should be done. Because of that,
more data should be gathered and further analysis should be conducted to
more precisely define impact significance between key factors in the
established model. Therefore, the authors are going to conduct the
specific research in the Baltic region to get data to check the model
statistically.
doi: 10.3846/btp.2015.557
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Viktorija SKVARCIANY (1), Juris ILJINS (2)
(1) Mykolas Romeris University, Ateities str. 20, LT-80303,
Vilnius, Lithuania
(2) Riga Technical University, Kalku str. 1, LV-1658, Riga, Latvia
E-mails: (1) viktorija.skvarciany@mruni.eu, (2) juris.iljins@rtu.lv
(corresponding author)
Received 22 November 2014; accepted 25 May 2015
Viktorija SKVARCIANY, lecturer and PhD Candidate of the Department
of Banking and Investments, Faculty of Economics and Finance Management,
Mykolas Romeris University. Research interests: banking, trust and
satisfaction within financial institutions, econometric analysis.
Juris ILJINS, PhD Candidate of the Department of Management Science
and Economics, Faculty of Engineering Economics and Management, Riga
Technical University, the head of RTU International Institutional
Cooperation Unit. Research interests: business. administration, labour
management, change management.
Caption: Fig. 1. The model of change management factors affecting
the trust formation in commercial banks
Table 1. Systematized respondents' answers and distinguished
trust factors
Factor Respondents' answers
Information Accessibility and clarity of information
provided; transparency; clear contracts
without hidden unclear conditions.
Image of a Bank Banks employees' communication style
(openness, honesty, kindness,
politeness); attractiveness of banks'
branches; banks' participation of
organization of social projects; banks'
participation in social activities;
tasteful, attractive advertisements;
attention to each customer (presents,
discounts).
Privileges to loyal Flexibility of a bank; special offers
customers for loyal customers; adaptation to
customers' needs.
Reputation of a No negative feedback.
Bank
Reliability Stable long-term activities; size of a
bank; bank's fame; no financial
incidents; security; confidentiality;
assistance to the customer in financial
difficulties; a low turnover of staff,
especially of top-level managers.
Satisfaction with Quality of provided services; ease of
bank's services access to loan; solution of problems
with e-banking; availability of personal
consultation; accuracy and speed of
services; ATM's and bank branches'
network development; banks branches'
appropriate working hours; service fees
are appropriate to transactions and do
not change often.
Competence of Fairness; proficiency; honesty; dutiful
Employees staff.
Table 2. Correlation coefficients of the factors influencing
trust formation and factors having impact on trust factors
Trust in Banks Factors Overall Trust in
Banks (Pearson r)
Information 0.547
Reliability 0.473
Image of a bank 0.457
Reputation of a bank 0.487
Satisfaction with bank's services 0.689
Competence of employees 0.354
Privileges to loyal customers 0.140
Information Factors Overall Satisfaction
with Information
(Pearson r)
Top management commitment 0.200
Communication plan 0.197
IT and innovation 0.188
Reliability Factors Overall Reliability
(Pearson r)
Top management commitment 0.383
Visioning and visioning planning 0.332
IT and innovation 0.420
Image of a Bank Factors Overall Image of a
Bank (Pearson r)
Top management commitment 0.227
Visioning and visioning planning 0.267
Communication plan 0.456
Reputation of a Bank Factors Overall Reliability
(Pearson r)
Top management commitment 0.392
Visioning and visioning planning 0.450
Communication plan 0.451
Satisfaction with Bank's Overall Satisfaction
Services Factors with Bank's Services
(Pearson r)
Communication plan 0.392
Customers' involvement 0.592
Team Morale and Motivation 0.450
Employees' Competence Factors Overall Competence of
Employees (Pearson r)
Customers' involvement 0.392
Team Morale and Motivation 0.450
IT and innovation 0.451
