My Life as a Dog: Putting Teeth in I.T. Management

Last year I wrote a Gonzo piece on the potential benefits of having co-CEOs managing a bank, one with a left brain and one with a right brain (see WICKED and the Concept of Co-CEOs). One CEO is the big picture, strategic, “face to the Street” thinker while the other is detail oriented, focused on execution, and holds management accountable for results. Some of the most successful, international companies in the world, and some of the banks in our backyard, have enjoyed the benefits of this power-sharing arrangement. In response to the article, a number of readers shared the sentiment that both the concept and the real world case studies bore closer inspection, but at the end of the day banks were just too conservative and rooted in their old ways to consider the idea.

I thought about this and decided I had to disagree – at least to a point. This type of yin and yang relationship exists all over the banking world right now but tends to be less “public” then co-CEOs might be. For every commercial lender out there trying to close his/her next big strip mall deal, there is (or should be) someone in credit administration just waiting to say, “Hold on a second, I think we better look at this one more closely since the borrower appears to be asset free at this time.” For every retail EVP demanding the implementation of mobile banking, remote consumer check capture, online account opening, and mobile bill pay next week, there is someone in product development saying, “Hold on a second, we should probably prioritize these initiatives, build a business case, and possibly scrap all of them since we’re a commercial bank and our cash management system consists of providing customers an abacus and our fax number.” For every bank exec saying they need to get email on their new iPad, there is a neo-maxi-zoom-dweebie in risk management saying, “Hold on a second, we might have some customer privacy and security issues with Apple’s TCP/IP protocols and our network firewall.” And lastly, for every mortgage our originators are trying to close in this frigid environment, we thankfully have the federal government saying, “Hold on a second, we need to create a set of complex regulations whereby the common sense of the government is substituted for that of the borrower who thought he could afford a $700,000 home on a salary of $52,500.”

Which brings me to my point, albeit in a roundabout way. When one looks at management of the I.T. function in the typical bank, this yin and yang is either non-existent or badly broken. There’s simply no Natasha and Boris for my Bullwinkle; no Darth Vader for my Yoda; and certainly no Snooki for my Bruno Mars. While most bank functions have strong executive bosses or “counterparties,” I believe banks unwittingly organize I.T. to bear the brunt of institutional frustration precisely because there is neither an effective counterparty nor boss. Retail, marketing, treasury and ops all want their projects done and I.T. is there to please. Hell, even the CIO’s boss wants his projects done. There simply isn’t anyone to “just say no.”

Why is this important you ask? Because there are big simoleons at stake, my friend, and that should get everyone’s attention. According to Cornerstone Advisors’ recent 2010-2011 benchmarking metrics from mid-size banks across the country, which will be published soon in The Cornerstone Report: Benchmarks and Best Practices for Mid-Size Banks, the average  bank in the $10 billion to $40 billion range spends somewhere between 26 and 33 basis points of assets on technology (the numbers are fairly similar for the $1 billion to $10 billion crowd but shoot up to 29 to 43 basis points for banks under $1 billion). Even a non-finance, non-I.T. guy like myself can figure out that that adds up to $26 million to $33 million every year for a $10 billion bank. Over the life of a five-year strategic plan, that bank is going spend an average of $150 million on I.T. So how do banks generally organize to manage their annual spend of $30 million, or $15 million, or even $5 million?

The first thing banks do is identify the CIO – a Golden Retriever – and all he wants to do is please his constituents. Sure, the bank may have some minor hurdles in place like a business case write-up that could get a solar powered ATM project approved, or a toothless I.T. steering committee that has a “yes/no” reputation like a husband being asked by his wife if she looks good in this dress.

 But by and large the Golden is left to his own devices. In turn, the Golden needs support to keep everyone happy (which is impossible of course) so he hires frenetic Jack Russells to work the help desk; pontificating Sheepdogs to write code and do integration work; introspective Poodles  to manage infrastructure; nervous Nelly Chihuahuas  for the “program office,” and the list goes on.

Nowhere in this scenario has the bank said, “You know, our Golden could probably use some company from a Bulldog or Pit Bull or Rottweiler.” There simply isn’t anyone at the kennel to keep things in check – no Forrest Gump who had to apologize, “Sorry for ruining your Black Panther party.” You wouldn’t give a lender $30 million, wish her luck, and advise her to “Please lend responsibly.” No, you have checks and balances in place. So why do banks give their CIO $30 million of the bank’s assets, cross their fingers, and say, “Please manage this responsibly.”

So here’s an idea for all our loyal Gonzo readers that I think is a good one – hire the Bulldog! Whether you call that person the co-CIO, the Chief Technology Financial Officer, the Chief Technology Accounting Officer, Mrs. No, or whatever – I don’t really care what you call them – it’s what they do and how they do it that’s important.

What does your Bulldog look like?

• Finance – Some type of finance or accounting background – she has to be good with budgets, numbers and financial planning. An MBA would be nice but not absolutely necessary.
• Bulldog Face – Strong personality. The ability to tell a senior executive why his project isn’t getting approved along with the factual basis for the decision.
• Tech Savvy – Familiarity with I.T. but not a techie that gets thrilled by bits and bytes for their own sake. This is one of the harder qualities to find but I think a young, hungry tech savvy kid taken out of the finance or profitability/reporting group can be developed on the I.T. side.
• Project Experience – Past exposure to project management, project planning, project budgeting.
• Type A – Detail oriented, impatient, workaholic. Let your Golden think big picture about cloud computing and SOA architecture. Let your Bulldog decide if you really need to convert your ATM fleet to solar power so you can seem “Green” or allocate the scarce dollars to a new cash management system.

Where does your Bulldog report and does anyone report to her?  

• Reporting – This is a tough one as we start to get into politics and turf so I’ll lay out some options. Have your co-CIO report to the same person your CIO is reporting to. That keeps things simple. Another idea is to have your Bulldog report into the CFO/finance function or a CAO function (as long as the CIO doesn’t report to the CAO). She can still be joined at the hip with the CIO, but this allows her to operate more independently, keeping the big picture in mind.
• Staff – Your Bulldog doesn’t necessarily need any staff per se but at $10 billion+ banks you may consider some type of dedicated or shared resource (with finance) that helps with reporting and budgeting.
• Direct Reports – A radical idea from a reporting perspective would be to have the project management office function that most $5 billion+ banks have report into your co-CIO Bulldog. IMHO, the PMO needs to be transformed from an order taker function that loosely follows some type of project planning/implementation methodology into a function that holds lines of business and I.T. jointly accountable for project success. When the PMO reports into I.T. (which it most typically does) or a business function, that impartiality is lost as it’s difficult in most bank cultures to hold your boss accountable.

What does your Bulldog do?

• Run the I.T. Steering Committee – Putting the Golden in charge of I.T. Steering (or if the bank doesn’t have a committee – in charge of project approval/prioritization) is a recipe doomed for failure since the approver/facilitator is also the implementer. You don’t put your lenders in charge of approving their own credits do you? Let the Bulldog run I.T. Steering as the independent, dispassionate Switzerland because everyone else on the committee has a vested interest in their own business line/areas. Your Bulldog doesn’t, so she can credibly get the group to a “yes/no” on a project focusing on what is in the best interest of the bank as a whole and not what is in the best interest of one particular area. This allows the Golden to go off and run a true service organization, taking the orders as they are handed over.
• Reporting and Performance Management – Most Gonzo execs are probably pretty tired of seeing the lengthy reports from the CIOs on uptime, calls to the helpdesk, network speed, etc., accompanied by all those charts and graphs. Those are important but generally not strategic. Let your Bulldog develop an I.T. Management Dashboard that tracks things you’d probably want to see like the following:
  • Projects on time and on budget
  • Projects either not on time or not on budget or both (the double red light is vewy, vewy bad)
  • Success metrics by project including an auditing of those metrics
  • I.T. staffing metrics vs. peers (cheap plug: the Cornerstone Scorecard can provide awesome guidance here)
  • I.T. spending metrics vs. peers (ditto on the cheap plug)
  • Lines of business performance against their share of I.T. budget
  • Back office functions performance against their share of I.T. budget
  • Project Payback – your Bulldog needs to audit projects post-implementation to see if the project sponsor achieved those rosy projections set forth in the business case.
  • Share of I.T. budget that goes to: core; infrastructure, datacom/telecom, strategic projects, and electronic delivery (the five categories Cornerstone benchmarks for I.T. spending) and how successful the bank is at shifting I.T. dollars from low impact categories like core and infrastructure to high impact categories like strategic projects and electronic delivery
  • Ten other metrics you can probably think of as you read this
• Prioritization and Negotiation – Not that I’m bashing retail, but why does 70 percent of the I.T. budget seem go to retail projects at most of our mid-size bank clients when their bread and butter is commercial, cash management and, oftentimes, wealth management? While lines of business should be free to prioritize projects within their lines of business, the Bulldog needs to be in the thick of how projects get prioritized and negotiated between lines of business. A neutral third party needs to assess the business cases presented and say “no” or “next year” to the mobile banking project in retail and “yes” to the contact management implementation for commercial and cash management.Putting the Bulldog in the mix of prioritization and negotiation also has the added benefit of keeping I.T. objective and honest. Now the Golden also has to come to I.T. Steering to plead his case on why we need to spend $300,000 on upgrading the entire bank to the new Cisco XP84.1a routers and not spend the money on that contact management system. I can’t tell you how many times I have heard senior bank execs bemoaning the fact that they have no idea why the I.T. group needs to spend $X on a server upgrade but the project gets pushed through because I.T. says “We have to do this.”
• Process/Methodology Watchdog – Police the methodology and processes used in the I.T area for compliance. Your Bulldog should ensure that I.T. Steering isn’t an “I’ll approve your project this time if you approve mine next time” committee. Your Bulldog should ensure that the PMO utilizes processes and methodology that ensure project success. Your Bulldog needs to ask the hard-nosed questions when project business cases are presented and send the exec back to the drawing table when it doesn’t pass muster. The point is that your co-CIO shouldn’t be seen as a roadblock but there to ensure impartiality and fairness – credit administration is not an obstacle and neither is your Bulldog.
• Manage that Spend – At its most basic level, the Bulldog’s ultimate duty is to ensure that your annual budget of $30 million, or $12 million, or $5 million is being spent wisely and judiciously. She needs to be in the middle of fairly carving up that spend in alignment with the bank’s overall strategic goals, saying, “Commercial – you get $4 million; Retail – you get $2.5 million; I.T. – you get $7 million for projects and staffing,” and so on.

At the end of the day, if your I.T. spend is large enough I think the Bulldog would be worth her weight in gold. Heck, if she can prevent one failed project she’s likely paid her salary for the year. Having put some teeth into I.T. management, your executive team can sleep well at night knowing someone cares passionately about how those simoleans are being spent.

All for now.
–SAS

 

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