Last week’s column showed that banks hold several powerful attractions as potential employers for technologists but they face deep structural challenges and are currently losing the battle for motivational appeal. On the other hand, a crisis can, through necessity, force the best decisions and smart IT leaders can use harsh fiscal discipline as a lever to motivate a step change. The game plans for those banks that do this successfully are likely to involve the following elements, none of which is controversial but all of which represent a change from the past.

1. Be smaller. If there is one play that’s essential it’s to move to a far smaller base of in-house software. The tactic of reducing the number of technologists while doing nothing structural to reduce the amount of technology leads only to operational risk.

2. Retain the ability to innovate. As regulatory work sponges up all available resource and costs are slashed elsewhere, there is a real danger of losing the ability to offer new services to new clients. IT strategy needs to be able to support business development and strategies that sacrifice agility in the name of cost cutting will ultimately be hugely expensive, just in a different way. The eCo route to squaring the circle represented by this point and that above is explained at length elsewhere.

3. Organise for alternative sourcing. Once a bank embraces the idea that a far greater proportion of its software is going to be sourced externally rather than by developing and supporting thousands of proprietary systems, it makes sense to re-organise with that in mind. The more thoughtful IT managers do this already in the context of off-shoring: business analysis, architecture and high-level design is conducted in the (high-cost) major hubs while delivery is often delegated to trusted development partners in cheaper locations. This mentality needs to be broadened to support sourcing strategies such as eCo’s. Re-organising all of IT so that it routinely works this way is much more profound than, and not to be confused with, tasking a few people to think about it.

4. Rethink pay. Compensation at banks, in technology and elsewhere, generally reflects the belief that there is a pay race for “stars” in the Front Office (and its IT) and that other areas merit less. This is wrong. While there are certainly areas where innovation that is well thought through confers an essential business edge (see point 2), the “well thought through” part of this requires equally good solutions devised by equally smart people paid equally well from beyond the trading floor. And pay overall needs to go down. Any losses arising from key staff getting hired away by the bank next door can be offset by the motivational benefits of working for a classier employer with credible finances and colleagues who aren’t largely coin-operated. In concrete terms, the entire IT bonus pool should be (a) shrunk and (b) given to managers to dispose of, throughout the year, according to exceptional performance on important projects. The management structure should be de-layered sufficiently so that it’s tight enough to be trusted (see last week’s column). If individual discretionary pay is ever primarily driven by last year’s discretionary pay or department or corporate title or rankings that are not assigned by line managers then that’s a big red flag that the system is screwed up.

5. Promote mobility. Banks routinely have an advertised policy of internal mobility. These generally run strongly counter to the actual incentives perceived by bank staff, especially at the more senior levels. How many MD’s move between IT and Trading, for example? More generally, knowledge barriers need to be broken down so that any interested employee can easily learn about the pricing, trading, control, risk management and processing details of any business line, together with a well informed client perspective and an overview of profitability. Alleged reasons why all of this information should not be known to relevant staff should be examined with suspicion. Furthermore, this should extend beyond the walls of the bank and staff should have frequent opportunities to engage in detailed, project-based dialogue with related institutions such as other financial firms, software companies and universities. Again, we believe that eCo can give a context in which this is all practical and meaningful.

6. Budget predictably. In 2000 I left a firm that had run the same budgeting process with the same reporting formats for as long as anyone could remember to a firm that, at the time, devised new budget reporting protocols at the whim of individual business managers every few weeks. Guess which one made for rational planning? In times when budget levels are under the greatest strain, the importance of predictable budgeting processes is ever higher. If you’re in IT and you’re not already aware of how destructive this can be, think very hard before switching employer.

7. Risk manage risk management. A robust security policy is absolutely essential at a bank. However, when decisions about security are made with inadequate awareness of the impact restrictive rules can have on productivity (and hence morale) that itself presents a new type of risk. A consensus is needed amongst IT management that restrictive policies are appropriate to the risks faced otherwise the result can be bureaucratic paralysis.

8. Don’t crush the spirit. It’s a cliché but there really is no need for tech staff to be in the office all the time, to work long hours as a matter of course or to wear anything other than what they want to.

9. Respect the technology. One of the central skills of an IT manager in a lively business environment is to deliver change quickly in the short term while tracking to a medium/long term plan for technology architecture. In the past, the short and the long term have sometimes been under so much strain that they have been pulled apart, with the former dominating the facts on the ground and the latter existing only as a separate “target architecture” in Powerpoint. For the moment, the crisis has rebalanced thinking about IT so that there is more appetite, driven from the reality of severe budget cuts, to invest in a leaner, stronger technology base that can be leveraged across the organisation in place of ad hoc departmental solutions. This considered husbandry of IT resources needs to be stamped into the culture now before the next bull market comes along – or before, in the absence of an upturn, the costs of not doing it drive more banks to the wall.

10. Make up your own tenth step. The proposals above reflect, on the whole, common factors in the IT experience at large banks that are currently stressed by reduced profits and a massive burden of new regulation. Whatever the common factors, each bank and IT shop has a distinctive culture and it’s heartening to think that smart leaders in banking IT will find creative ways to reach towards their own different lights.