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Ready or Not: Managers’ and Employees’ Different Perceptions of Digital Readiness

by Anne Gfrerer, Katja Hutter, Johann Füller, and Thomas Ströhle

Ready or Not: Managers’ and Employees’ Different Perceptions of Digital Readiness
Digital transformation is now an essential requirement in the financial sector. It is important to align the perceptions of both managers and employees to ensure a successful transition.


Digitalization is putting pressure on established firms, particularly those in the financial sector. Anticipating the disruptive potential of new developments like blockchain technology, leaders at large banks - like JPMorgan Chase CFO Marianne Lake - have publicly stated that their intention is to run their businesses more like technology companies. This is understandable given the $135.7 billion global investment in fintech startups in 2019 alone.

Yet many retail banks still struggle to transform. Part of the problem is that traditional banks have difficulty converting into digital banks. A bank’s “digital readiness” refers to both the readiness of their people - in terms of positive beliefs, knowhow, and skills - and the readiness of their organization - in terms of capabilities like budget restrictions, leadership buy in, and innovation culture. As a result, it is important to understand the drivers of perception surrounding digital transformation among both managers and employees.



Background

Successful implementation of change proceeds through three stages: readiness, adoption, and institutionalization. Readiness refers to the state of being fully prepared. Adoption refers to the shift in employees’ attitude and behaviors that occurs during the change itself. And institutionalization refers to the point at which the change becomes a stable part of employee behavior.

In the context of readiness, digital readiness represents a specific change scenario that can be described by difference factors (related to an individual’s beliefs) and structural factors (related to a firm’s unique circumstances).

Perception plays an essential role in understanding difference factors at both the individual and organizational level. It is important that employees perceive that they are ready to make a change. Even if they are not ready, the peception itself will lead them to take the first steps instead of remaining indecisive.

Structural factors also vary along individual and organizational lines. On an individual level, one structural barrier could be a fundamental lack of skills in using relevant digital tools. On an organizational level

Managing Change

Managers play a critical role in digital transformation. First, they need to make sure that they are ready to embrace change themselves. As the most visible leaders of the organization, they need to be prepared to serve as role models - and in the context of change readiness, role modeling requires demonstrating a strong belief that their preparation can lead the team toward a successful transition.

Second, they have to empower and involve their employees actively in digital transformation projects and ensure the necessary organizational capabilities. This process essentially involves providing support by dynamically reallocating resources and promoting the development of new skills.

Third, they have to be aware that their readiness perceptions may differ from those of their employees. Because managers have different networks than their employees, it is likely that their perceptions of readiness will differ as well. In particular, top-level management is often isolated from actual day-to-day activity and should make sure to maintain an awareness that their high expectations (while still important to develop as a role model) might actually be the result of overconfidence.

Conclusion

An empirical study focusing on the banking sector revealed that differences in perception do exist concerning beliefs on individual readiness, skills, and capabilities. Knowing and addressing these different perceptions will be important for managers looking to ensure the successful digital transformation of their firms.

To find out more, please read the full article in California Management Review, Volume 63 Issue 2.


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California Management Review

Berkeley-Haas's Premier Management Journal

Published at Berkeley Haas for more than sixty years, California Management Review seeks to share knowledge that challenges convention and shows a better way of doing business.

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