Last week a couple of my friends in senior banking technology roles spoke to me about the challenges of re-shaping their organisation so that the right people are working productively in the right roles. As I’ve written before, this isn’t a question that can be properly addressed by treating it purely as a hunt for talented stars; seeing it that way is actually counter-productive. Rather the organisation itself has to change so that good people are naturally effective.

Aces

As an IT employer, a bank holds several high-value cards in its hand. Banks have plenty of talented technologists and they have them across a wide range of disciplines and domains: the pool of expertise available in a large IB IT department is enormous. Moreover, at least in the major financial centres and despite a strong and stubborn gender bias regarding roles, banks have done a great job at attracting a diverse workforce, giving them powerful access to a vast global talent pool.

To motivate a potential employee, banks can offer plenty of opportunities to acquire new knowledge and to deploy the expertise that an employee already has. In general, they have also have the technical and HR infrastructure in place to support flexible and home working. And there is also that other motivation… Although costs are under tremendous pressure, banks are by no means impoverished and still pay super-competitively. According to the FT, the pay gap between staff at Investment Banks and professionals such as lawyers, doctors and engineers has narrowed over recent years – but from a multiple of 9.5 in 2006 down to a multiple of “only” 5.8 times in 2012.

Jokers

Despite all of this, IT morale is currently very low. The troubles that banks face are testing all of the stress points at every part of the organisation, not least in IT. The stress points themselves are not new but the need to address them is now acute. There are three core structural features of banking technology that cause a lot of the trouble…

1. Scale. The sheer size of banking IT departments makes it really tough to manage them well. For a start, it’s very hard to understand what goes on across the whole range of software in detail. This creates obvious challenges from an architectural point of view and also makes it difficult to optimise allocation – or aggressive de-allocation – of resources. The inevitable fragmentation of knowledge into zones of manageable size leads to local fiefdoms in which the incentives of staff, especially mid-level managers, to argue for more investment in their own area may run counter to what is best for the whole. The lazy way out of this is to let the business counterparts for each area punch it out amongst themselves. This is not without merit as it least allows senior non-IT managers to channel resources between business units according to strategic value but it fails when the relative need for IT investment is not congruent to the relative business value. A common illustration of this occurs when Front Office areas secure IT funding that is not matched by the corresponding funding for downstream Middle and Back Office systems, leading to exactly the failures you would expect.

However the allocations work out, in tight times it isn’t possible to fund the staggering number of proprietary systems that banks run purely for themselves. Apart from the operational risk this generates, it’s demotivating to be working on a team that simply lacks the resources to do a good job.

A more insidious problem generated by scale is that it can stretch an organisation beyond the point at which trust works. In a small organisation in which one CIO has, say, ten direct reports, each of whom has ten staff doing (non-managerial) work, the CIO can reasonably hope to assemble a team of strong managers, each of whom is capable of hiring people you can leave to get on with things. Furthermore, each of the 100 workers has a line manager who is responsible for a sizeable chunk of the organisation and is only one rung away from the CIO, who can be expected to know them personally and speak to them enough to explain how their work fits into an overall IT plan. Contrast that with an organisation with thousands or tens of thousands of IT staff. Then, the connection between the (or more likely one of the) CIO(s) and a worker buried several levels down in the org chart is likely to be tenuous. Not only is this de-motivating for the majority of staff, it understandably leads to the CIO putting in place a heavy bureaucracy to enforce consistency of practice; and this does not secure more great place to work points.

2. Ghettoism. Once an IT organisation is so large that technologists lose both a solid grasp of the whole architecture that shapes what they can do and the personal authority to change it effectively themselves, their business partnerships are also at risk. This is especially costly when dealing with senior non-IT managers who are themselves poor at partnering with IT. The banks that do technology well are those that treat IT staff as equal partners – obviously – and this happens more often in smaller firms where IT retains its agility. When the dynamic of healthy partnership starts to fail, IT is at risk of becoming a ghetto with too weak a role in management, little organisational mobility in and out (especially at senior levels), and sensitive or proprietary knowledge withheld from IT, even when technologists need it to do their jobs properly. It’s no accident that The IT Crowd is so popular.

3. Insularity. One of the valuable functions of the financial software community, which ought to be especially true in the Open Source community, is that it promotes intellectual liquidity. When the large majority of a bank’s software is developed in-house, with some degree of software import but hardly any software export from the major banks, this intellectual liquidity is lost. The high financial cost of this, together with the adverse impact on quality, is argued frequently elsewhere by eCo and I won’t repeat that reasoning now. There is also an existential “soft” cost for employees: insularity exacerbates the palpable sense of social disconnectedness arising from press commentary, sustained over years, identifying bank staff as the villains who caused the crisis and stole everyone’s wealth. It takes the thickest of skins to be completely impervious to this.

Next week’s article proposes a number of remedies that banks can pursue in (to steal the title of a talk I once attended) the continuing search for the happy productive worker.