According to research by our firm, Cornerstone Advisors, the average $1 billion bank spends roughly $2.6 million a year on technology, but does the average bank really generate an adequate return on this spending? Today, I would like to introduce a new phrase I coined – partly because I have never coined a phrase before, but mostly because not knowing this phrase could be costing you hundreds of thousands of dollars per year. Are you ready? It’s Maximum Performance Utilization or “MPU”. MPU measures the leverage a bank is achieving by effectively utilizing all the features and capabilities of your bank’s business applications that are both precious and annoying. Here’s a quick maturity model I’d suggest for MPU scoring categories:
|20%||Only basic, Level I tasks are utlized; redundant data entry from/to other systems|
|40%||Advanced Level II features known by a few; limited integration with other systems|
|60%||Proficient and regular Level II feature usage; spots of integration with little duplicate data entry; solid procedure manuals and training programs|
|80%||All users regularly accessing Level III functionality; high degree of system integration; no duplicate data entry; certification-based training|
|100%||Unattainable with greater than 0% turnover|
As an example, consider all of the functionality built into the hated but popular MS Office application Word. In general, maybe 10% of MS Office features are used by most people. Sadly, most employees have no idea what the other 90% of that functionality is or how to effectively use it to make word processing more efficient. In your bank, try to name three Word-users that can build and imbed a table of contents, format a mail merge, and perform calculations in a table. Tough isn’t it? I would wager that the MPU for Word in most banks on a scale of 1-100 is around 30. (I don’t think even Redmond gets 100 for Word. There is just so much garbage in it.) The same can be said for most departmental applications.
Banks today are infested with software applications like kudzu on a Carolina pine. Don’t believe me? Ask the IT manager to produce a list of supported applications by department. Take the loan operation’s list to the department manager. Lead with the typical blah blah blah about system capacity restraints, staffing shortages and competing projects and tell the manager that two of the programs needs to be de-installed and not replaced. Expect freakage. The truth is, departments don’t appreciate the complexity of running multiple systems but they also believe they cannot live without every one of them. But how effectively are they being used? The MPU score will tell.
Don’t know what you don’t know
To find the root cause of the functional knowledge abyss, let us examine how most projects involving departmental system installations are tackled. Some companies have a departmental business analyst, who is involved in the system selection and implementation process and works with the vendor and internal technical staff to get the system installed and operational. At the end of the day, the analyst trains the department in a two-hour training session. After a few days or weeks of follow-up support, the analyst is on to the next project. Consider your bank lucky if a procedure manual is created before the first upgrade is installed.
Meanwhile, back in operations, 40% turnover results in a new wave of clerks that receive third or fourth generation training. And there you go….knowledge dilution. All of the Level III stuff like efficiency, automation, data mining, institutional memory, etc., that sold the project to management is forgotten. Using the system to get Level I tasks completed results in a 20 MPU. A few years later the bank is ringing up the consultants for a process improvement gig or a new system selection.
Focus, focus, focus
Knowledge dilution itself is only a symptom. The root cause is really a lack of focus. These systems consume several hundred thousand dollars in capital and a few months of development time. To believe that they don’t need regular nurturing, not just care and feeding, is naïve. As in child rearing, building a new system into a mature and integrated component of overall operations takes time, attention, effort and money. The price of not doing it shows up in headcount and quality issues.
A couple of actions can be taken to nurture applications to high-levels of MPU.
For existing applications there are three steps you can take to achieve high MPU.
For new applications, prior to installation establish Level III (high MPU) goals and objectives. Do not allow the project to be marked as complete until these Level III processes are built, tested, documented and part of the operational training program. “Up and running” should not be the measurement of a completed project.
In every area, bankers have opportunities, a.k.a. dollars, to increase efficiency and quality by getting more out of their applications. While MPU is not an exact science, it does provide a judgmental framework for IT and business areas to determine how well business applications are being leveraged. If you think you have a best practice, high MPU installation of a popular application, fire me off an email. I’m sure some other Gonzonians would love to hear about it. And you might get a t-shirt.
Cornerstone’s Technology Asessment and Planning Services can help.
We will work with you to:
Determine what system functionality allows the business areas to operate in a best practice environment;
Integrate customer and financial information for better service and performance;
Cost effectively manage technologies to maintain maximum ROI; and
Create a vision between business areas and the IT group that leads to a common, long-term achievement of strategic goals.
By staffing your engagement team with both business strategy and information technology professionals, Cornerstone helps you develop an integrated strategic and technology vision.