What IT Takes

Six steps to perform true strategic information-technology planning

By Judith Sears

The notion of community banks performing information-technology strategic planning is a bit like FDIC insurance—everyone’s for it. However, reports from the trenches indicate that perhaps too many community banks aren’t truly living up to the ideal of performing IT planning.

Instead, technology consultants contend, too often IT strategic planning devolves into tactics or implementation. Occasionally, strategic IT planning efforts can be almost comically circular, maintains Paul Schaus, president of CCG Catalyst, a bank consulting firm in Phoenix. “The bank’s plan is often just a tactical plan with action items,” he says. “Lots of times, the action item is to develop a technology plan!”

Missing the mark on true IT strategic planning appears to reflect the struggle some community banks have with planning in general, some consultants say. “What many banks think of as a plan is really a budget,” offers Brad Smith, president of Abound Resources Inc. in Austin, Texas.

Smith worries that some community bank executives have almost given up on achieving true IT planning. As technology seems to be changing at warp speed in an uncertain economic and regulatory environment, more and more community bank executives are saying, in effect, “What’s the point?”

Even when community banks have an adequate strategic plan for the business side, too often this doesn’t extend to IT strategic planning. Technology experts agree the reason is due to a gap in alignment and communication between the bank’s business and IT sides. Such misalignment reflects sometimes deep-seated attitudes among executives on both sides of the IT and business divide. On the business side, executives tend to see IT as a cost center. For their part, IT executives may see themselves as heading up a shop that provides the bank with the most basic of services, such as keeping the computers running and the dial tones on.

In practice, IT may not have a seat at the table for strategy planning. Business tends to treat IT-related issues as the sole responsibility of the IT department. If something involves a computer, it must be IT’s responsibility. The result is that neither business nor IT obtains a sufficient understanding of the goals and expectations of the other side. IT may not be able to fully and efficiently anticipate the needs of the bank and its lines of business, and the business side may not be fully aware of the latest technological capabilities.

Kent Conrad, director of technology advisory services for McGladrey LLP in Minneapolis, often asks community bank business managers to name the one thing they wish their IT systems could do to make their jobs easier. Many times, he says, their banks already had those systems—but the managers didn’t know that, nor did they know whom to ask about it.

Alternatively, the lack of communication that strategic planning is designed to overcome can mean that business executives hand IT departments a budget, but give little or no direction on how to spend it. This can enable what Schaus calls the “shiny object syndrome,” where IT latches on to whatever new technology has the most “buzz.” The result, he says, can be, for example, the IT department at a retail-focused bank spending thousands of dollars on tools to do Small Business Administration lending—when the bank does little SBA lending and has no plans to expand in that area.

In short, at a time when technology costs are rising, inadequate IT organizational communication and planning is generating inefficiency that is costing community banks money and performance.

In keeping with Federal Financial Institution Examinations Council guidelines, many community banks have created IT steering committees. Industry observers worry, however, that such a planning solution could simply displace the same communication and planning problems to

a different group or location. For one thing, some steering committees may only meet a few times a year, which is not nearly often enough for business and IT to come to a consensus on strategic priorities.

A deeper problem, however, is that IT steering committees too often operate with the same divide between business and IT functional perspectives that interferes with the pursuit of a true strategic perspective. These steering committees can get mired in the details of risk and compliance updates, reinforcing the bank leaders’ views of IT being all about infrastructure. Soon the business executives stop coming to the meetings or start sending their junior people. The upshot can result in another failure to effectively collaborate and communicate to align business and IT strategy.

To break down the strategic business and IT divide and introduce real IT strategic planning may require a culture shift for many community banks, consultants say. “We need to get it in mind that IT is the future of the bank,” says Jonathan Nason, senior manager of consulting services for Reynolds, Bone & Griesbeck PLC in Memphis, Tenn. “It needs to be considered as more than a means of making things work.”

Such culture shifts can be hard to define let alone orchestrate, but consultants cite the following six steps as a good place for the true IT planning process to begin.

1 Make IT strategic planning a two-way street. Business executives should stop thinking of IT as the “red tape” between their business plans and the achievement of their objectives. Instead, realize that the IT department has strategic insights and solutions that can be crucial to the bank’s eventual long-term success.

But turnabout is fair play in the process, too. Give the business lines more ownership over relevant IT projects. For example, loan department managers should “own” their bank’s lending platform system, providing direction for current and future system capabilities. “It’s IT’s responsibility to support and provide infrastructure and security, but the business should be the owner of the application,” Conrad insists.

Conrad explains that when business line managers have input and influence over technology relevant to their jobs, they take on responsibility to keep up with new releases and pay attention to new features and capabilities, particularly automatic functions can replace inefficient manual work. This includes exploring and learning the functions and capabilities of existing systems.

“If you assign ownership, that creates accountability,” Conrad offers. “Now people are paying attention to changes in the system.”

2 Make planning a regular, ongoing process for the bank, not just something that happens once a year or once every few years. The rapid pace at which technology develops requires frequent IT strategic planning updates. “Good planning is an ongoing, evolutionary process,” says Smith, who advises reviewing plans monthly and updating plans quarterly.

3 Assemble an effective IT steering committee. To be strategically effective, consultants advise that the IT steering committees meet bimonthly. Their meetings should focus on long-term strategic issues, not tactical to-do lists. To do that, consider requiring all presentations to the steering committee to use a one-page “business case” addressing technological issues in a future-focused framework. The business case should identify why a project should be undertaken, its benefits, and its projected costs and risks. The business case should also map out the project’s estimated schedule or timeframe.

“Usually, what happens is that management has IT come in and present without any guardrails as to what technology needs to be implemented,” offers Dean Lemons, principal of McGladrey’s technology consulting group. “It’s not presented to them in a way they can evaluate it relative to all other projects. It’s very, very hard for management to truly strategically plan if they’re not receiving information that bridges the communication gap between management and IT.”

4 Aim for high-level IT strategic plans that look out five years.

Good IT strategic plans should include some version of the following:

– three to five initiatives that support the bank’s goals over the next three to five years;

– a plan to identify in increasingly greater detail what needs to be done to achieve the initiatives;

– an IT budget to support the initiatives;

– performance metrics that will be used to track success—for example, an allowable budget variance, meeting on-time/on-budget deadlines, requirements to fulfill internal service level agreements;

– general but key achievement milestones for initiatives. For example, if your bank has identified a new customer relationship management system to implement within two years, decide when to make a vendor decision.

5 Consider using external IT planning consultants to pursue additional best practices. Community banks with a lean IT staff can tap the experience of consultants, who are routinely hired to keep strategy sessions focused on the long term with up-to-date market information.

6 Keep your plans high-level, dynamic and flexible. Save the details for the budgetary process. Your bank’s strategic plan should identify long-range goals and leave it free to switch tactics when the market or technology changes.

It may be a challenge, but Schaus points out the practice will make any community bank more effective at IT strategic planning. “Ten years ago, banks didn’t do risk assessment; now they do that every time they turn around,” he observes. “IT strategic planning is something that you have to get in the habit of doing. It has to be at the forefront of their thought process.” endmark

Judith Sears is a writer in Denver, Colo.