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July 11, 2007 by Michael Croal Michael Croal

Banks Lack a Focus on Maximum Performance Utilization

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:

MPU
Score
Description
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.

Nurturing MPU
A couple of actions can be taken to nurture applications to high-levels of MPU.

  • Procedures – Don’t let the analyst escape after installation until a simple procedure manual is created and placed on the departmental section of the intranet. Common sense says that Level I repetitive tasks don’t need as much detail as the rarely used Level III features. The employees will master these daily processes quickly after the first 50 iterations. It’s those other features that would only be used at month-end or on special request that need the detail.
  • Training – To effectively retain and use the advanced features, there must be a base of knowledge and navigational comfort. The application training curriculum should allow the employee to quickly master the daily Level I features of the application before being shown the MPU-boosting Level III features. Too many departments are guilty of on-the-job Level I training and that’s it. The employee may be curious and learn a few more tricks, but if there is no advanced procedure guide and if online help is typically shallow, they don’t know what they don’t know.An aspect of training typically forgotten is training offered by the vendor. Keeping the analyst and systems support staff up to speed is critical to MPU. When the initial project is funded, the budget should include annual vendor training for these two areas.
  • Interface Development – There are too many chasms between applications. Completed work is dropped into these black holes (i.e. operations) where it is retouched, reformatted, rekeyed, reverified, and regurgitated into another system. Come on, GonzoBankers! Operations managers should be walking the floors and screaming for relief from these inefficiencies.

Improving MPU
For existing applications there are three steps you can take to achieve high MPU.

  1. Assessment
    Take that list of applications and, using the components of procedures, training and interfaces, have a crack at assigning an MPU value to each. Factor in who in the bank installed it and where they are now. For the more strategic applications, spend a nickel or two and have the vendor come in for a day and give an assessment. The vendor will bring to the table that piece of what you don’t know that you don’t know the system can do.
  2. Action Plan
    After the assessment, build a game plan on how to get the MPU up for each application. If you are okay living with a 10 MPU on an application, put some serious thought into whether it is the right solution.
  3. Accountability
    When the game plan is built, assign it to someone and base a big chunk of their bonus on achieving the targeted MPU. Without accountability and someone’s skin in the game, the plan will wither on the vine.

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.
-mc

 

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