Banking Executives - Stop being stupid about technology.
May 3, 2008
This post is for the executives of the financial world. Please feel free to forward on to the appropriate people.
It’s no surprise to hear that many banking executives still do not understand the value of the IT department. They still see it as only a cost center and generally don’t try to not get involved in understanding the potential or advantages the IT department could provide to the business. Status quo, status quo.
I sat down last week with a group of banking technology people and we discussed some of the main problem areas on why these problems exist. Here’s are some of the themes that came out of the discussions:
1) Execs hire to fill a space, not to build the business. Somebody asked during the session, “How many of us are IT ppl that got into banking or bankers that got into IT?” I was surprised to see that it was about half & half. Many of these IT positions are being filled by the closest person to the IT door & not with experienced folks. Now I’m not saying that some non-IT types out there can’t make this work but time isn’t on their side. Having someone that is experienced not only in IT helps understand the day-to-day but can help set strategy to leverage the technology for business advantage.
2) It’s the executives goal to set the strategy for IT. The majority of our clients are in the small, community banks/CUs space and we often see the same story of the small institution that has limited people wearing 100 hats of responsibilities and they just don’t have time to do anything else but deal with the day-to-day operation. It’s not their fault, right? I think this is crap. The issue isn’t lack of time, the issue is lack of focus, the issue is lack of proper organizational duties, the issue is executives don’t delegate properly. Some people aren’t built for management, I understand that but if they can’t do it and you can’t afford to hire someone that can then banking exec, YOU SHOULD BE DOING IT! Become apart of the process and set measurable goals to validate the IT departments existence.
3) Both parties need to be bilingual As we sat and discussed these issues these IT people would say things like, “My boss just doesn’t get that we don’t have proper bandwidth capacity in our T1’s pipe….zZzzzZZZZzzz.” You aren’t going to listen or validate that type of language. Executives and IT have and always will struggle with understanding each others ‘languages’ but the gap is getting smaller as more executives get comfortable with technology and learn to ask the right questions. Your challenge? Find an IT person that can translate things into business terms and how it will help grow the institution. People like that are worth their weight in gold.
4) Listen to your people! They know stuff. You hired these people. You trust them with your systems and really, your businesses reputation. So why do you listen to a consultant over your own folks? Consultants only get a very short time to understand your organization but you often listen to 3rd parties instead of your people more. Now, I think it is always a good idea to get ‘a fresh set of eyes’ on a problem but try to not go with it solely, balance the consultants with the people that understand it better than anyone.
Would love to see comments below to continue this conversation. Can this gap be bridged or are we doomed for failure?
Posted in Banking, Business, Day in the Life, Thoughts
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May 3rd, 2008 at 12:18 pm
I think there remains one overarching problem … banks/ CU’s do not understand the strategic role of technology in their business. This might be caused by being in denial that technology is the business, but whatever the reason, this acknowledgment is essential in my mind.
Banks/ CU’s tend to be run by a combination of marketing & product. Both think in terms of product and service design based on fees, interest rates, terms and conditions etc. Once technology is a core component of the design process, then new elements such as UI design, screen flows, product explainability, become essential elements of the design. One of the first questions oiught to be “Will the product work in a self service web site, or mobile phone browser?”. This question has to be answered by a technologist.
Just my take ….
PS .. nice redesign
May 4th, 2008 at 10:11 pm
Great article, Brad. As I mentioned on Banktastic, the IT Administrator of my FI before me was definitely an “old time banker” turned IT Admin. She openly admitted she didn’t like working with computers, but essentially she was told “it’s either this or we have to let you go.” Obviously, she chose the former. When I came along, initially as the assistant IT Admin, I immediately took over the bulk of IT-related tasks, while the current Admin concentrated on other duties such as home banking administration, risk assessment, etc. After our annual audit from our audit firm, they recommended that the current Admin be re-assigned to be the Information Security Officer, while I was to become the IT Manager.
It’s been about a year since the changeover and it’s worked wonderfully. Seeing as how a) I enjoy working with computers and b) I have the time to devote to expanding my knowledge, I feel that our FI has benefited greatly from it.
As I am also a contract IT Auditor for an auditing firm, I’ve audited several banks, and I have seen a similar trend that you talked about; banking execs who are NOT IT people, but are nonetheless in charge of the network infrastructure. One bank I went to had an IT Admin who was faced with a similar situation as our former admin… she was formerly the proof manager; when the bank started outsourcing the proof/operations, they gave her the choice of managing the network infrastructure or being let go. Not really a “choice” when you think about it. Still other banks I’ve audited have tremendously bright individuals, but they don’t seem to be utilized to their full potential, which I feel is another downfall.
Anyway, there’s my two cents. Thanks, Brad!
May 7th, 2008 at 4:40 pm
Excellent post. I agree with Colin, there is real problem when executives don’t think about technology from a strategic perspective. Most seem to think it a cost centre and be done with it.
Today I had a discussion with another CU. They pay a minimal yearly renewal fee for their core system and all the tech assets surrounding their banking system have been depreciated. The money they save is phenomenal but they think their current system is deficient so have started to look for something else. Now they are amazed at what they are going to have to pay. But they haven’t done any development work or even kept aware of what is necessary for them to accomplish their vision through technology. They could have taken 50 % of their savings and used it in one fashion or another to augment their current system. They didn’t even hire an IT person but kept that area bare bones. Now they will pay more than what they assumed they saved. And it all boils down to “Stop being stupid about technology.”
May 9th, 2008 at 11:49 pm
I think it’s executives in general, not just banking executives. But that’s a topic for another day. It continually amazes me when executives don’t get it. I can say that our CEO keeps up on technology. He is constantly forwarding articles to our VP of IT and E-Commerce manager. If only the others were as enlightened. The biggest frustration I’ve seen is that sometimes, the IT people understand the department functions better than the department heads. Even worse is when they won’t listen to IT’s ideas because they didn’t think of it first. Months later, we see our competitor doing exactly what we suggested.
June 6th, 2008 at 9:27 am
Colin, I think you’re right when speaking specifically about banks, but I also agree with George…this malady is typical of executives in general. So long as “business” and “technology” are thought of as separate organizational entities, Brad’s going to keep writing articles like this.