A collection of observations, ruminations, predictions and random thoughts from Cornerstone Advisors.

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October 30, 2014 by Terence Roche Terence Roche

The New Lean, Wired, Changing World of Human Resources

141030e“After finding no qualified candidates for the position of principal, the school board is extremely pleased to announce the appointment of [David S.] to the post.” -Actual announcement sent to parents

Last week, I had the pleasure of spending two days with a group of nine HR managers at a GonzoBanker Roundtable discussing their successes, challenges and issues. Now, I’m guessing most bank execs don’t spend a lot of time in HR and spend even less time thinking about their world. Well, here’s a news flash: whatever old school ideas might have prevailed about this group, it’s time to re-think them. This bunch was young, smart, aggressive, tech-savvy and forward thinking (I think I was there to represent the opposite and balance things out).

Here’s a summary of what I took away:

  • 141030bThere is a new 800-pound gorilla of recruiting, and it’s LinkedIn. LinkedIn began as a fairly passive experience where people connected with other people in the industry and occasionally kept in touch with them. Not so with HR. The three biggest communities on LinkedIn center on job searches and recruitment. An astounding 97% of recruiters recently surveyed said LinkedIn is the most common in-house recruiting platform. Everybody at our meeting said they use it almost daily. The search capabilities on even the free version are good, and on the paid version they are very sophisticated. It is an impressive evolution of a cloud-based tool.

Another growing player is Glassdoor. Didn’t Glassdoor start out as a place where people could talk about their companies? It now has a robust hiring, job posting and company branding solution that is getting traction in HR groups.

  • Because of tools like LinkedIn, candidate recruitment is increasingly happening in advance of job openings. It used to be that movement started when a job opening occurred. Now, HR recruiters are able to proactively take these platforms/communities, combine them with historical turnover stats in certain areas, and look for candidates before the company might need them. One service level agreement (SLA) that is being positively impacted is hire time, or the length of time between a job opening and it being filled.

“Recently, I was asked if I was going to fire an employee who made a mistake that cost the company $600,000. ‘No,’ I replied, ‘I just spent $600,000 training him. Why would I want somebody to hire his experience?’”  -Thomas John Watson, Sr., first CEO at IBM

  • 141030cJob interviews and testing via digital channels is becoming commonplace. We’re way past the experience where the video was one to two seconds ahead of the audio and you got dizzy watching. Increasingly, HR groups are supporting a widely dispersed employee base with an oftentimes national recruitment footprint. Necessity being the mother of invention, they have deployed solutions that allow deep digital interviews (recorded for subsequent review by line managers), testing for certain positions, and a success rate that may not quite match face-to-face but is pretty close.
  • People analytics is the new frontier. Broadly defined, it is the use of big data and analytical tools to predict how employees will perform in certain jobs and, from the other side, for which jobs they may be best suited. Several start-up companies are offering solutions that perform these services – check out Evolv, Knack and Klout to see examples of this. ere, a very pragmatic approach is being taken by HR directors. There is a lot of promise in technology that can help predict where and how employees will succeed, but there is a need to balance this against the myriad potential compliance and other legal issues that are always looming. Stay tuned on this one.
  • Human Resource Information System (HRIS) systems go to the cloud! Big, traditional providers such as ADP, Ceridian, Ultimate and Peoplesoft are adding and integrating modules such as workforce management, progression management recruiting and analytics to the more basic products like payroll and benefits administration. Newer players such as Workday, designed for the cloud, are making serious inroads and creating industry buzz. The biggest technology frustration expressed by HR leaders? Lack of system integration and no single sign-on. Boy, does this all sound like our core systems environment or what?
  • If I were a professional recruiter, I’d be feeling the same way travel agents must have felt 10 years ago. These HR directors, with the new tools they have at hand and their new skills at using them, are increasingly turning away from the recruiter path. The only real exceptions are a)“C” level recruitment with national reach and issues of confidentiality and (just maybe) politics; and b) really specialized looks. If I were a recruiter, I’d either get very specialized to meet these new and lesser needs, or I’d get ready to put my resume on LinkedIn.

The takeaways? The same trends and changes we see in delivery to customers – new channels, new experiences and new skills needed to support it – are also happening to HR groups and their internal customers. The same system needs and issues we hear from lending and retail are also being heard from HR. And it’s all happening fast.

Traditionally, HR has been at the bottom of the system upgrade/investment priority list we create every year in Information Technology. Maybe they get prioritized ahead of facilities, but that’s about it. Bank executives need to provide HR teams access to these newer tools and channels. They also need to be looking at their HR groups and asking what they are doing to build new knowledge and skills in this new world of recruiting and HRIS.

Oh, and keep your eye on these new HR professionals. They will be game changers.


Let’s Get Gritty!

At Cornerstone Advisors, we’re all about knowledge sharing. We get giddy when our clients talk amongst themselves in their quests to become – or remain – best practice institutions. So we created GonzoBanker Roundtables for executives at banks and credit unions to get together and dig deep on today’s hottest issues.

We host roundtables for CEOs, CIOs and CFOs and Lending, HR, Marketing, Payments and Risk Management executives.

Contact Emily Waite to learn about next year’s line-up.

Filed under: HR & Training

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October 15, 2014 by Steve Williams Steve Williams

The Miserable State of Cash Management Vendors

“Revenue is vanity … margin is sanity … cash is king.”

My heart goes out to the hard working professionals who run the Treasury Services or “Cash Management” divisions at community banks. For a long time, these rock-solid bankers have seen loan officers patronize them with passive encouragement while rarely referring a customer their way and never taking the time to understand their product offerings. Yet for more than a decade, cash management professionals have shown their resiliency. They have made it a daily ritual to shrug off credit officer arrogance and scrap together a pretty damn fine business of core deposit funding and fee income. It’s not always pretty, but these bankers have learned to package their offerings with duct tape and wire and land the latest big new deal with a health care group, municipality or homeowners association. And they have never asked for much of the bank’s capital to win these big deals.

But lately, there are deeper lines and fatigued expressions on the faces of cash management professionals. Their software vendors are letting them down and wearing them out in a big way. Let’s call it out, GonzoBankers. Most innovation, quality support and healthy competition has left the cash management vendor market, and it’s making it very hard for the resilient community banker to compete with the too-big-to-fail players upstream.

Every morning across America, cash management officers have to hit the streets and do battle with the mother of them all: Wells Fargo’s Commercial Electronic Office (CEO). Sure, it’s easy to poke fun at the big banks for being slow and bureaucratic. However, any banker peering into the screens of the Wells cash management portal has only one thing to say: “That is some very slick stuff.”

Community bank cash managers have long depended on major outsourcers and independent software providers to arm them with the tools to compete with larger players. There are several factors contributing to the malaise in the cash management solution market today:

1. The big vendors have not invested in big cash management solutions.
For such a critical product line to community bankers, it’s sad to see the Big Three outsourcing providers (FIS, Fiserv, Jack Henry) with more than $12 billion in combined revenue coming to market with such halfhearted solutions. Fiserv has been schizophrenic in its cash management offerings: a no-show on a Corrillian version for business customers, slow improvements to its Business Online (formerly E Corp) solution in the Premier core group, and a virtual burying of the former Banklink cash management offering. FIS has acquired solid products from its Metavante acquisition (BEB), but the company moved slowly to interface this solution across all core products. Jack Henry has catered its offerings to community banks but now must address solutions for its growing multi-billion dollar clients. It’s hard to believe somewhere in these behemoths there’s not $10 million to do some major league investing in innovative solutions for one of the most important product lines in bank software.

2. Integration and usability are still pain points.
The value in cash management is unlocked with strong integration and features for the customer such as multi-level security and single sign-on. Today’s cash management vendors are failing to deliver the slick portal offering that large banks are using to solidify commercial relationships. With mobile and web services technology, there has never been a better time to innovate usability. Unfortunately, cash management vendors have been slow to develop mobile and tablet versions of their products. Bottomline Technologies, which acquired Intuit’s cash management offering in 2012, has partnered with Malauzai to deliver business mobile solutions, but there is still a long way to go in integrating and reconciling web and mobile offerings. At Cornerstone Advisors, we applaud the efforts and hope more vendors will be able to deliver on these solutions soon.

141015c3. The unified payments hub is more theory than reality.
For a decade now, cash management providers have been issuing PowerPoints regarding the “payments hub,” which integrates automated clearing house, wire, Check 21 and international settlement into a single, least-cost routing solution. The challenge has been that most banks use separate modules for these payment channels and no easy migration path has been laid out by one vendor. Cornerstone gives credit to ACI Worldwide for doing the most work to further this vision, but the proof will still be in the implementations. ACI has the skills and resources to create a best-in-class offering, but it clearly must address a somewhat bitter client base from its S1 acquisition, which feels it has been given too many empty promises or changes in product direction from too many different owners.

4. Compliance and implementation challenges have frustrated bankers.
In the middle of trying to compete with large bank cash management offerings, community bankers have been smothered with compliance concerns around cash management security, business continuity, anti-money laundering and fraud. In the midst of these challenges, bankers see their own vendors coming under regulatory scrutiny. In the fourth quarter of 2013, the Federal Deposit Insurance Corporation entered a consent order along with the Office of the Comptroller of the Currency against cash management vendor Fundtech. The company was ordered to assess its information security risk and create a better vendor management program that meets agency guidelines. Bankers have also reported that cash management solution providers seem alarmingly scarce on resources to address new upgrade, integration and deployment projects. As one technologist at a $9 billion bank said to me, “They just nod their heads and ignore us.” To some extent, vendors have been able to get away with starving development and project resources because of the technology “lock in” effect – it’s just too big a pain and too much customer impact to switch cash management providers. However, frustration levels are becoming so high that many large community banks will be seeking new solutions and partners in the years ahead.

An opportunity for disruption?

To every vendor or software developer in their garages today, a gonzo wealth opportunity awaits you! With mobility coming to business banking in full force and web services providing new ways to build portal interfaces and facilitate integration, the industry is dying for the next big thing in cash management. It’s encouraging to see retail e-commerce providers like Q2 putting their sights on developing a more robust cash management offering. We applaud when an upstart like Online Banking Solutions snags a big fish like Iberia Bank with its Messenger product. We love when Malauzai CEO Tom Shen promises he will progressively build deep commercial functionality into the mobile platform with Bottomline. These are all encouraging starts, but so much more needs to be done and more resources need to be allocated to this part of our industry. Twelve years ago I wrote a Gonzo column titled “Cranking Up Cash Management” that signaled a new growth era for this product line in community banking. For the past decade scrappy cash managers at community banks have been working their tails off on this crank up effort. It’s time for the major outsourcers and innovative technology companies to do their part.


Vendor Management Made Easy(er) 

Effectively managing vendors can stretch a financial institution’s time, energy and resources. Cornerstone Advisors can ease some of that strain.

Backed by hundreds of core and ancillary system selection and contract negotiation engagements, Cornerstone has the expertise and the proven methodology to help financial institutions make smart vendor choices and manage their solutions in ways that align with their strategic technology visions.

Whether shopping, selecting, converting or negotiating, there’s no better time to enlist the expert assistance of a seasoned partner to help manage your vendor relationships.

Contact Cornerstone Advisors today to learn more.


Filed under: Commercial Banking, Treasury Management, Vendor Buzz, Wealth Management, Web & Mobile Banking

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October 6, 2014 by Ryan Rackley Ryan Rackley

Repeat After Me: ‘I Will Not Overspend on Telecom’

141006aHigh performing mid-size banks are spending double what their low performing peers are spending on data communications circuits. That’s right, twice as much. And if that news isn’t mind-blowing enough, get a load of this: they’ve been doing it for years, according to The Cornerstone Performance Report.

Gonzobankers, what would make one institution pay twice as much as another for data lines?

OK, OK, telecommunications isn’t sexy to talk about. I get that. But it’s something every institution needs, and it is the underlying technology that enables our branches, ATMs, phone systems, vendors and Internet to talk to each other. It is the most expensive monthly recurring piece of any infrastructure budget, and one that can be drastically affected by vendor types, architecture decisions and internal institution choices. While bandwidth, architecture, and vendor type all apply to the cost of data communications, three common themes directly affect the bottom line.

Network Architecture: Design elements relate to how a data network contributes to the cost structure disparity. A review of an institution’s network architecture is the first step in understanding how architecture may be contributing. To get the conversation started, a number of questions must be asked:

  • Are backup circuits needed at all sites?
  • Does disaster recovery replication need to be real time?
  • Do all remote sites and branches need high bandwidth Ethernet circuits?
  • Are bandwidth decisions based on usage versus need?
  • Has Voice over Internet Protocol (VoIP) been implemented and the network circuits overhauled to drive costs down?
  • Is WiFi necessary in the branches?
  • Is employee Internet usage managed?

An institution’s decision making process, level of risk tolerance and sensitivity to cost will all affect how it answers these questions.

141006bMarket Commoditization: Every seven or so years a new technology emerges in the telecom space. Frame Relay was the rage about 15 years ago; in 2007, multiprotocol label switching (MPLS) was the hot technology. Today it is Ethernet. Ethernet offers greater change management flexibility, additional stability and a desirable cost structure at higher bandwidths. However, the cost benefit curve for Ethernet is only beneficial at higher bandwidths. At lower bandwidths it is often much more expensive and may not be the right choice given the fact that MPLS is very reliable and, in most cases, satisfactory. As technology matures, newer technology is introduced and the need for more bandwidth proliferates. While the cost per unit of bandwidth declines as higher volumes are purchased, if left unmanaged this can quickly lead to an overspending situation.

Vendor Choice: Four classes of telecom vendors are contributing to the pricing inconsistency:

  • Direct providers, sometimes known as long-haul providers. These vendors own their networks, have retail and wholesale sales teams, and manage a fleet of service folks to keep the lights on. We see innovation and new services first from these vendors.
  • Resellers, which buy bandwidth from the direct providers and act as middlemen for service issues
  • Brokers, which work with direct providers as well as resellers and typically step out of the day-to-day relationship once a contract is signed
  • Smaller regional niche networks

Gonzobankers can manage this very important piece of the infrastructure budget by following these three simple techniques:

  • Evaluate the contracts. As branches open and close, internal apps are updated or swapped out, and people are shifted internally, data communications needs change. Telecom vendors are typically fairly easy to work with through these changes, but every so often the contract needs to be revisited from a relationship level to hit the “reset” button. Telecom vendors are notorious for non-coterminous circuit dates, making it very difficult if not impossible to seriously consider switching to another provider.
  • Assess the architecture. An understanding of peer spending is very powerful in this area because there are so many architectural decisions to make. Vendors and I.T. infrastructure staff are always very willing to spend as much as possible. Making decisions on a needs basis as well as variance from peers goes a long way toward knowing the correct decisions are being made.
  • Have a three-year plan. Just as Wheaties is an important part of a balanced breakfast, telecom planning is an important part of a strategic technology plan. Telecom upgrades and contract negotiations should be closely coordinated with the overall technology strategy and married to each institution’s application stack, branch strategy and long term technology planning.

An unmanaged or undermanaged telecom environment will eventually put an institution on the upper end of the spending spectrum, but implementing a few simple techniques can go a long way and produce eye-popping results in the bottom line of an I.T. budget.


Where does your spending fall on
the spending yardstick?

A financial institution’s technology solutions play a major role in its growth and success.

A Telecom Contract Negotiation from Cornerstone Advisors can help you determine whether your organization’s systems and processes are supporting your  strategic goals and helping you stay competitive.

Contact Cornerstone today to talk about reaching best practice levels for your telecom contract management.



Filed under: Call Center, Information Technology, Retail Banking, Web & Mobile Banking

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