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ESTD 197

DEPARTMENT OF MASTER OF BUSINESS ADMINISTRATION

GSSS INSTITUTE OFENGINEERING AND TECHNOLOGY FORWOMEN
(Affliated to VTU, Belagavi, Approved by AICTE, New Delhi &Govt. of Karnataka)
KRS Road, Metagalli, Mysuru 570 016, Karnataka, India
Accredited with GradeA' by NAAC
Batch 2020 -2022

HARVARD BUSINESS REVIEW CASE STUDY

CASE STUDY NAME: Will aBank's New technology Help or
Hurt morale

SUBMIT TED TO, SUBMITTED BY,

Mrs. Pavithra Gowtham NS Bhuvaneshwari M
ASSISTANT PROFESSOR 2ND MBA 3 Semester
Department of MBA 4GW20BA022
GSSSIETW, Mysore GSSSIETW,Mysore

W Edit with WPS Office

 During a meeting Beth, Vanir's CEO, sIts silent as her cofounders,
James and Mariko, disagree over the bcst course of action for their
young bank's future,
We're orr trackith or goals,
but competitorsare cirding.
Luckily, our new A-based IT
system is Ieady to launch, and
it's gcíng to reduce the staff's
workload and help usgro.

JAMES MARIKO
CFO of CHRO of
Vanir Bancorp Vanir Bancorp

BETH When was the last time

CEO of new tech created less work
Vantr Bancorp for anyone? Our employees
are already stretched too thin.

BRUCE CHANTELLE
TO of Kelattonshíp
Vanír Bancorp managere

"IF WE GROW too fast, well industry, they were a tight-knit,

Case Study break from the strain"
"If we stop growing, we'll
battle-tested tearm. But the
current meeting was turning ito
Willa Bank's New be eaten for lunch by our a civil war.
competitors." James Donnold, the CFO,
Technology Help Beth Daniels, the CEO of Mich
igan's Vanir Bancorp, sat sílent
had just presented an update on
Vanir's aggressive goals: expand
or Hurt Morale? as her chiefhuman resources ing to 15branches, with loans and
officer andchief financial officer deposits increasing threefold in
traded jabs. The trio had founded five years. Having already grown
by Leonard A. Schlesinger their community bank three to five branches and $180 million
years earlier with the mission of in assets, the bank was right on
HBR'S fictionalized case studies present problems serving small-business owners, track. But, James warned, com
faced by leaders in real companies and offer soButions particularly those on the lower petitors were circling, and Vanir
from experts. This one is based on the HBS Case end of the credit spectrum, After needed to stay on the offensive.
Study Athena Bancorp" (case no. 919517-PDF-ENG), getting a start-up off the ground
by Leonard A. Schlesinger and Sarah L. Abbott, whlch It couldn't let bigger banks lure
isavailabe at HBR.Org
in a mature, heavily regulated away the previously underserved

Harvard Business Review

llustrYtions by ANUJ SHRESTHA
144 July-August 2021
 stretched Vanir too thin and
tthem happily
HWIthout
that believing IT would lighten
rstrategy another,bank.
weteJust the burden on employees was
optimistic. "When was the last Experience
time a newtechnologycreated
less work for anyone?" she asked
sarcastically.
But then her tone turned
serious, and she delivered her Beth, "Without them happily
familiar-compelling--spiel: serving customers, we're just
Working with new or underserved another bank." Case
banking customers was extremely Study
Classroom
arduous. Vanir's branches were
open early and late to accommo
OFF TO SEE THE WIZARD Notes
date customers' schedules. To Leaving the meeting, Beth felt
make banking less intiidating, torn. She'd started Vanir to help
etieçte
tellers and relationship man hardworking customers who'd
meeting?
agers were told to take as long been neglected by large banks HoN canBeth
as needed to answer people's and poorly served by misman ailow disser
questions. They were trained to aged community-development
institutions. Her father had discourse G?
be unbiased, whereas some AI
tools in the industry had come been a general contractor, andit 2. Academias
under criticism for discriminating infuriated ber that the developers
he worked for seemed to have
against minority applicants. And unlimited access to debt while he
servioe
that human touch was what drove organizaticns
growth; loan applicants often bad struggled to secure a new loan to have found
a strorg nk
such a great experience at Vanir upgrade his tools and equipment.
She suspected that most of the oetwee
that they transferred their other emolayee
accounts to the bank, opened new bigger players were interested satistacIon anc
in her customers only because
ones, or recommended it to other
CUstcmer oya.
they needed a certain number of
small-business owners.
small-business accounts to meet 3. One way to
Vanir's associates enjoyed make smail
above-market salaries but also regulatory mandates and keep
worked harder than their peers their banking charters; after turing cusiomers more
at other banks, Considered small chients away with introduc croritabie is to
customers that it had brought tory promotions, the large banks
into the financial system or let "essential workers," they'd even torce nam o

new "fintech" start-ups with come in to the office during the would give them the same shoddy uSe seif-sece

worst months of the pandemic, service that had held ber father atrer chan
digital-only banking services dis back. Meanwbile, the fintech Customer serve
intermediate its business. Luckily, managing all the loans that cus
James noted, the company's tomers had applied for through start-ups were low touch and
long-awaited new enterprise IT the U.S. government's economic untested; they could leave their
Was nearly ready to go live, and relief package. But now employee clients high and dry.3
tpromised to greatly reduce the engagement was down, absentee It hurt Beth's soul to imagine
staff's workload-by, for example, ism was up, and customers were that possibiity, so she shared
using Al toautomate tasks like starting to notice,2 Net Promoter James's fervor for quickly
calculating pricing and credit lines Scores had fallen, and comments expanding to serve as many
fot austomers. in customer surveys incuded people as possible with the help of
That prediction prompted complaints like "hassled-looking technology. The goal was to build
Mariko Wang, the CHRO, to let teller" and "unhelpful manager." a loan underwritingsystem that
ut an audible scof.
She felt that "Our people are our strategy" would apply proprietary aBgo
ABETessive growth had already Mariko said, locking eyes with rithms to create a single score that

Hatvdrd Business Review

iuly-August 2021 145
 ipte that eay Beth metts wih Erue her chiettechnology ocer

The gaod news ts

thai Yhe entire And the
stark s ready to go. bad news

No. Hold off for

unexpected!WWhat
matters nom. Ineed to
Thisisn't to launch
hnally ready think this through.
Is that we're trigger next week
We can pull the

The staff who were part of the

pilot hated it. The feedback
was that no one had time to
learn a complicated new system.

tie-dyed-T-shirt-wearingchief
signaled whether a loan should be would require lots of busywork. technology officer, Bruce
For instance, along with the
approved and what the credit line Richards. "What's the update?"
and the interest rate should be. lendíng algorithms, theIT team office.
4.Cost Dverryns she askedas she entered his
8E0JOUSUS! That promised to free up staffto had builta customer relationship the good newsor
management system that would "Do youwant
MIt enteprise focus on the face-to-face service
Tpcjecs that Vanir had become known for. allowa review of customer proft the bad news?" he replied, chuck
ablity across multiple products. ling. Beth frowned and rossed
McKser founc But building the enterprise IT
Information on that now was her anms.
had taken longer and cost more "OK" Bruce continued. "The
large !T projects than anticipated.4 Meawhile, stored in loan officers' heads and
associates had become accustomed hard drives, and getting it into the good news 0s that the entire stack
bucget to doing the calculations and system would be laborious. As is ready to go. We can roll out
Vanir opened more branches, it tomorrow:"
5. Soe ecor deision-making thenselves, and "And the bad news" Beth
Gmists order an inefficient process had become would need to hire more associ
#productviy routine. The stafalso enjoyed the ates, who would have to be trained asked.
Esifs haVE (on, among other things, the new «The bad news is that the
autonomy the process provided:
stoed in
developed Lending officers were encouraged technology) by its existing staffers, pilot we ran in the Lansing
ecoromies to get to know their applicants further burdeningthem. Beth branch uncovered sOme, wel,
and to combine objective criteria, hoped thatthe new system's birth resistance
IEGhaologies such as credít scores, with pains would be short-lived and "Go on"
make workers
more distrscted
subjective ones, such as personal quickly lead to greater efficiency "The staff hated it" Bruce said.
increase t6sk character. Still, the strain on the and lighter workloads. But she "The feedback was that no one
Switching, and employees was starting to show, also worried that in the long term, had time to learn a compicated
create iDore andBeth took Mariko's warnings Vanir's earliest employees would new system. Some people refused
ybersecurity about burmout seriously. miss the algorithm-free autonomy to attend the training. Others
challenges Would ashíft to the new they'd become accustomed to.
system help or hurt Vanir's staff? brought their laptops to class and
Beth knew she needed to talk worked the entire time"
Certaín elements of the transition to "the wizard," her white-haired, "Oh" Beth said.

Harvard Business Review

146 uyAugust 2021
 evening, Beth stops bythe desk of Chantelle, arelationship manager.
What makes thís bank speclal Is that we're run by
people, not by formulas. I'm worrted that the
How'smorale? algorithm will end up hurting our customers

Alot of people
are struggling.

|know. But the

tech solution is
almost ready.
Help Is on the way.

sons wh¡d been homeschooling the baker, tomake sure people

his isnt unexpected!" Bruce business."8
through most ofthe pandemic. likehímcan stay in &. Sro.:^
interjected. Learming a new "How are you holding up,
On Chantelle's desk was one
systemtalkes time and can be frus Chantelle?" Bethasked.
photo ofher kids and another of
trating. You can expecta period of "Tmiving the dream, boss!"
her first anir client--a bakery Chantellejoked,gesturingto the
negative labor productivity before
oWner wh¡d had trOuble obtain
Wesee any gains, but that doesnt because openfle onherdesk.
ing a loan at other banks
mean the gains won't come.5 "No,really.Höw's morale?"
What matters is that we're finally of híspriorissues with credit "Wel" Chantellesaid, a lot
card debt. Following company
ready to launch. We can pull the
protocol, Chantelle had looked
ofpeople atestruggling. You
trigger next week if you give us Combinethé long hours with
and
more closely at his situation
thê go-ahead" realized that the debt had coin challenges on thehome front, and
No Bethreplied. "Hold off it's tough."
fornow. We might have to delay. cided with his wife's illness four "Iknow;"Beth said. But Ijust
time his
years earlier. Since that
Ineed to think this through" spoke to BruceRichards, and he
credit history had been spotless. saidthe tech solutionis almost
Vanir hadgiven him a loan, and ready. Help ison the way."
SOME FRANK FEEDBACK inreturn he not only made his Chantellesighed.
Beth checkedher watch as she monthlypayments on time but "What isit?" Bethasked. "Are
colected her coat from her accompanied them with deliveries
delicious cannoli. "I don't you woried about the transition?
ofice-8:3O PM. SO much for ofhis
had There will be some work up front,
bankers hours. As she headedout stay latefor you," Chantelle
thanked butIassure you that-»
ofthe branch where the executive once told Beth after she'd "That's not what I'm worried
"1
team worked, she saw relation the manager for her long hours.for about" Chantelle interrupted.
Ship manager Chantelle Williams, school tuition
stay lateto earn "Well, then, what?"
ne of her first hires, at her them"-she nodded to the picture
desk, "Look, what makes this bank
tuing over pages in a file. Beth ofher sons-"and"she added, special is that we are run by
Knew that Chantelle had shifting hergaze to the photo of
two
Harvard Business Revie
July Agust 0 t 147
 Experience

people, not by formulas. We can

make a human connection with
our customers. Ijust don't think
an algorithm can replace that.
Truthfully, I'm worried that we're
goingtoendup double-checking
the algorithm all the time or,
worse, that it will end up hurting
our customers."
"Absolutely not" Beth saíd.
I wouldn't let th¡t happen."
"You know how you call Bruce
the wizard?" Chantelle contin
ued. "Well, have you actually
looked behind the curtain? Are you
sure this technology won't jast end
up discriminating agafnst the very
customerS we strive to serve?"7
After thanking Chantelle for
her candor, Beth wished her a
good night and headed for the
Should Beth go ahead
exit. She knew she faced the
biggest decision of her tenure
with the bank's expansion
as CEO. Should she rethink the plansand IT rollout?
implementation of Vanir's new
rT system, knowing full well that
her employees were stretched
The expertsrespond.
thin but that a delay might allow
of its competitive advantage. Beth
competitors to pounce on Vanirs
should delay the enterprise IT rollout
current and future customer base? BO8 RIVERS I the for at least a year.
Or should she risk her employees chair ang CEO of
The CFO is worried that this will
trust and dedication by pushing tastern Bank.
past their concens, sticking to her provide an opening for fintech and large
tech-enabled strategy, and forging
bank competitors, Idon't agree. Big
ahead? She opened the door and banks are built for efficiency, so they
stepped out into the cold Detrot The bank's key differentiator typically do very little hand-holding for
small-business customers and transfer
night. isat risk. Beth should hit much of the paperwork to them through
LEONARDA. SCHLESINGER S
pause on the expansion. self-service. The fntech approach is even
The chncher fox me is that more extreme-a customer might never
the Baker foundatiaon Professor Vanirs Net
at Hanvard Business School where Promoter Scores are faling, Superior interact with another human. And Vanir's
e senes &s the chair of the schoofs Customer service is the technology isn't what's most important,
bank's value propositionfoundation of the
and tbe source
because it's not what its ciernts are
buying. What they want is great personal

Hanard Business Revtew

AAugSt 2021
 smal).
-businesS Although competittve pressures
and
eaDdadvice
stayloyalto a CHRISYEH is a call for Beth to implement the systen,
will
particUlar Vanir she needs to do so thoughtfully. She
it
s nprovides
That's why cofounderof Blitzscaling
incustomer Ventures and the shouldcharacterize the launch as a beta
tthat uptick release, slowBy introducing the system
sthe anythingelse. Blitzscaling Acadermy
before
in two branches and having employees
oalaints bringNPSnumbers back
work with the technology team to test
wdoyouBethcantake care of her and improve it. She should reassure
mately
taktng
shesaheadypaying
gcareofher
staf.
above-marketsal-
Beth shouldmove forward staffers that it's meant to be a tool to
Astoanersby
Eventhe
with the ITrollout and make them better at their jobs, not to
goess onlysofar, replace them or change the culture of
but
aries,
that
employees may decide
dedicatedd
business expansion. the company.
worthitif At the same time, she needs to lift
well-payingjobsaren't can't see
Mast
Afledgling bank can't risk being morale by being both a comforter and
tthertebeingoverworked.and outflanked by its competitors. She's
ofthe
tunnel. a commander in chief. It wil take sincere
sHchtattheend strategyofcharac understandably worried about the new
public expressions of empathy and
Sofarthebank's algorithms and the stress thatimple
consideringqualitative mentation will causeemployees, but
compassion-to the entire workforce
wrending"andreditworthinesshasbeen and individual ernployees-to address
neSuresof Ithinkshe can assuage their concerns the extreme toll taken by thepandemic.
bankshavetaken
snessful.Butmany withamorë measured, inclusive But Beth must rally the troops around
andfailed, because appröach and better messagingthat
aaimiarapproach alwaysreliable, the growth plans, too, because people
humanjudgnentisn'tbanksneedmore emphasizes thesystem's augmented also want to feel they'repartofa
win
andasarule of thumb rather thain artificial-intelligence. must explain that Vanir
be repaid to ning team. She
than95%oftheirloans to havefound Vaniris atapivotalnoment. When sprit to ensure thatit
seemsto employees all is currentlyina
stay solvent.Beth their a companystarts out,its on because delivers on its promise ofhigh-touch,
exercise
Joan oficerswho can know exáctly what's going technology- enhancedpetsonalservice
make goodloans. But
own judgmentto scalable they're literallyintheroom when now even duringthemosttrying oftimes.
Iwonder how sustainable and decisions are made.Butthisbank team
that The dynanic on her executive
thatis. Werecently acquiredabank hasfivebranchesandprobablydozens cofounders should
made loans in a similar fashíon-what also needs work. Her
ofemployees. Bethneeds to changeher Disagree
senior executives described as "working communication strat not be snipingat each other. Given the
mánagementänd mentis healthy; conflict isn't.
in the comfortable shades ofgray" That increased complexity.
bank did this well, but it took more than egytohandlethe tri¡'s historytogether,Isuspectthat
the
15 yearsfor itto grow to $1 billion in First, there doesn'tseem to be any strain ofoperating duringa pandemic
assets. Vanir's growth plan is far more Consensusonthedesirability ofthe new isgetting tothem too. Beth
should be
aggresstve than that--so its risk profle techor whãsincharge ofrolling it out. isn't up-front about addressing this with her
Concerns me. Ialso question whether its Iames,the CFO,isan advocate but executive team.
goals are even realistic. The algorithm involved, while Mariko, theCHRO, is As Beth works to calm the current
enbanced IT system might be a welcome againstit but is probablyoverseeing the crisis and roll out the new tech, she
addition to the process, but it should be training forit.Bruce, the CTO, seems must also undertake the harder and
without
Implemented thoughtfully and carefully to havedesigned thesystem more important workofchanging how
when employees are ready, not in a rush adequatelyinvolvingthe loan officers she leads. Irecommend that she start
right now. andrelationship managers who will use writing aweekly email to the entire staff
a
Although Vanir's CTO will be frus t. These are flashingredlights. When should or launch aprivate intemal podcast
trated by adecision to halt the rollout, projectis this far along, the team
with other team members so that
and each
Beth can emphasize that she's not kling beon thesame pageabout it,and explicit. people can get to know their cowork
t,just delayíng ít until employees are person'srole should be clear ers, raise concerms, and perhaps most
Jess stretched and the NPS Thefrontline workers who willuse important, share stories that inspire
figures
back up. Yes, IT-enabled scale will cone
even thesystem should have been
consulted
them to keep going.
ually ofter adyantages to Vanir and throughout, providingfeedback toberefine
nake it more sustainably profitable. help not HBR Reprlnt R2104M
But theproduct. Chantelle shouldconnection Repcint Case only R2104X
ebankcan't worried thatit will harm her
relinguish what makes it with customers or be
discrininatory. Raprlnt Commentary only R2104Z
Competive today.
Harvard Business Revlew
July-August 2024 149