The System Conversion Survival Guide

As we head into strategic planning season, it’s a sure bet there will be financial institutions that determine their current core system just won’t get them where they want to go.  If you find yourself in that situation, read on!  There is a light at the end of the tunnel, and it’s not a train headed your way!

A few weeks ago, we described a nightmare scenario for those banks considering a change to their core system.  While nothing we say or do will ever make such a project a fun experience, there are a series of steps that can be taken to make a conversion a worthwhile experience for employees and customers—and an important strategic enhancement for banks with core systems that have run out of gas.

1. Choose the timing carefully.  A bank that is running satisfactorily today, with customers opening accounts and receiving loans, regulators not growling and stockholders pleased with the ROE, should be very deliberate about making such a major change.  Don’t be afraid to do what is best for your organization—after all, as bankers we make investments in our communities and our employees every day—but we make those investments only with great care and after careful deliberation.
2. Carefully select and organize a team.  If the right people are chosen and organized properly, any effort will be more successful, whether it’s a core system conversion or the rollout of a new loan product.  Banks undergoing a core conversion must be prepared to commit a large percentage of their best people’s time for the duration of the project.  This is an opportunity for a training ground for the next generation of business analysts; there is never a better time to learn the intricacies of a new system than during a new system installation.
3. Keep good records and share the information among all parties.  We have seen conversions where—literally!—a major back office department’s staff does not talk to the rest of the conversion team.  Sometimes one particular group either tries to do it all by themselves and with no oversight/assistance from anyone else, or they just expect IT to “get us converted.”  GonzoBankers, core conversions are about ALL users making sure their areas of responsibility are ready to convert.  The IT part is typically the easiest part. After all, there are few systems that haven’t been converted before by the first-tier vendors, so there should be no surprises in data formats, data element mapping, etc.
4. Have an agreed-upon vision of what the conversion will encompass. Now is not the time to also roll out that new free checking product and those five new branches in Alaska and Hawaii.  As a wise project manager once said (they were building a new jet fighter for the Navy):  “At some point we have to freeze the design and actually build this thing!”  The same thing applies to a bank’s products and services—at some point it is necessary to freeze new product development and get converted.  There will be time enough for new products later, especially if the bank is adopting a system with rapid product development capabilities.
5. Clearly define the objectives, both at the macro level and at the micro level.  While banks don‘t want to add new products immediately before or after conversion, they will want to benchmark current performance in key areas so that it is known before going live if the new system will take, say, twice as long to do end-of-day teller balancing as the current system requires.  There is some information that simply must be analyzed ahead of time. The bank does not want to find out on “Monday morning after” that routine daily operational performance has suffered, no matter how many other slick features the new system offers. 
6. Perform a risk assessment.  This isn’t just good advice because the regulators will require it, it is good advice because banks need to know where the big risks are and what has been done to mitigate those risks.
7. Analyze workflow with the old system as compared to the new.  In addition to the need to be concerned about how long it takes to perform key activities, there is also a need to ensure that all the correct non-system activities continue unabated (e.g. CTR forms are completed, large dollar items are verified, insurance expiration dates are tracked, etc.).
8. Develop a written communications plan.  You thought IT was going to get this conversion done, right?  And now we’re asking Marketing to write down what will be communicated, when it will be communicated, and how it will be communicated.  Helpful hint: Avoid words such as “terrifying,” “vile” and “titanic” in these communications.
9. Test everything that can possibly be tested.  A good test planning scenario will include testing every single product (on three or four test accounts), every single transaction, every possible delivery channel and every ancillary system interface.  OK—probably no one does that.  But why not do a little statistical analysis and test, at the very least, the routine transactions that account for the majority of activity?  Even better, test 100% of several days’ worth of activity but do it over all delivery channels.  Pay particular attention to those activities that are instantly visible to customers—ATM transactions, Internet banking activity, and check images delivered via e-statement, for example.  Not testing these channels is not worth the risk!
10. Develop a written project plan, review it frequently and update it regularly. Don’t worry about whether or not it is in some fancy software package with Gantt charts and sophisticated labor cost analysis capabilities.  Off-the-shelf packages like MS Project have some shortcomings… sometimes the tool dictates the approach, and that doesn’t make sense. Some very good conversions have been accomplished using Word or Excel, and I once converted nearly 100 locations that were located hundreds of miles apart using only WordPerfect! 

Like old soldiers, old banking systems never die, they just slowly fade away.  If your system is slowly fading away, consider carefully how long you want to wait before you upgrade.  It is always difficult to make such a wrenching change to an organization, but there are situations when a conversion simply cannot be avoided.  If your bank must decide “when” and not “if” to upgrade, remember that there is a right way and a wrong way to accomplish that conversion.
-bm

Many thanks to Santiago Patiño and Michael Croal for their important contributions to this article.