Jim Young welcomes Q2's Tim Daley to the podcast to talk about not only how to determine whether the time is right for the bank technology you want funded, but how to go about championing the project.
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[Podcast] Making Difficult Choices During Budget Season
Transcript
Jim Young
Hi, and welcome to The Purposeful Banker, the podcast brought to you by Q2 PrecisionLender. We discuss big topics on the minds of today's best bankers. I'm Jim Young, senior content strategist at Q2, filling in again this week for Alex Habet. This is my second episode pinch-hitting for Alex, and also part two of our ongoing discussion about every bank's favorite topic, figuring out the 2024 budget.
The last time we had Dallas Wells on here to talk about a strategic framework that banks can follow as they attempt to figure out what makes it into next year's budget and what gets left out. Today we have Tim Daley, principal digital strategist at Q2, on to talk about his experiences working with budget champions at banks. When we say champions, we're talking about them on two levels, both from the macro perspective—the people who navigate the budget ship for the bank really—and then on the micro perspective. These are the people at the bank who are pushing, or championing, to get their preferred software solution added to that budget. Tim, welcome to the show.
Tim Daley
Hey, thanks for having me. I'm glad to be here.
Jim Young
Alright, well, first let's start off with why you're here for this episode. Obviously, we focus group this to death, and people clamored for you. But on a serious note, tell us what's your background when it comes to the banking budget process.
Tim Daley
Wow. I guess I'll have to back up. I've been in and around banking for about the last 25 years or so. Started my career out on a help desk when we used to send discs out to people for home banking. I mean, just if we put a perspective on that. But ended up working my way up through the IT organization at the bank I worked at. Then, at a point during the financial crisis, I left the bank and joined Cornerstone Advisors, where I was a consultant for nine and some change years, where I helped banks with purchase decisions, selections, implementations, those types of things. Budget is always a part of those conversations. Right? Those are some fairly large technology purchases, and how those become priorities, and then ultimately projects, and ultimately part of the implementation that they have that year. That was something we did pretty often.
Jim Young
Tim, let's talk about then how you've seen that budget process, the ones you've been involved with over the years, how you've seen that change. I'm curious how much of that change is for the better, and in what ways?
Tim Daley
Absolutely, and that's a great question and a nice place to start. I would say when I first got into banking, when I first was familiar with the budgetary process, it seemed to be very static. It seemed to happen once a year. There were one or two big initiatives that you could bite off, as a department, and that could be implementing chat or integrating a new third-party provider.
It then moved to say more of a multi-plan approach—or a multi-year plan approach I should say—with a reassessment of the big rocks that happened annually. I saw this as helping our clients and helping the businesses be able to take advantage of a shorter implementation timelines on technology, and maybe the faster pace of change that we saw in the market. That has since, even more recently, evolved into, we see it's a quarterly process or quarterly exercise, and it seems to be the intersection between operations of the business line, and the strategy of the business, which I find really refreshing, because it's a consistent touch base. There seems to be more flexibility built into those strategies to account for an unforeseen event, a rapidly changing business condition, or even a client preference that we weren't familiar with or expecting.
Those reviews, that pretty consistent touchpoint on what the strategy is in that intersection with the operations, just allows for rapid revisions based on that changing business environment. I've seen that to be the most beneficial outcome of that process. Yeah.
Jim Young
When you talk about that, the ability ... I guess one, I would assume that you basically have to have a built-in cushion, or I guess is ... I know Dallas Wells, a phrase he maybe uses is, some dry powder, I guess to have on hand in that quarterly exercise. But two, are we talking about just ... you said unforeseen events, and the first thing that goes to my mind is the liquidity crisis that we had in the first quarter of this year.
Tim Daley
Absolutely.
Jim Young
Are you saying that in that sort of situation, banks would have ... smart banks basically have some built-in flexibility to actually address something like that, that quickly?
Tim Daley
Yeah, absolutely. What we've seen is those that have that slack, or that flexibility built in their strategy ... so they know there's going to be a project, and they've assigned dollars that are out there, that dry powder that Dallas really very gratefully mentioned, and very sagely mentioned, they do have that dry powder, they've got a slot, meaning they've got resources, they've got the money to invest, they just don't know what that thing is yet. Those that had bit of a cushion were able to pivot, and look more towards deposit-gathering strategies in the second quarter and the summer, and have largely started to address more quickly the deposit dollars that they require, rather than some of those that haven't. They're stuck into the business process. They may have signed a contract, those types of things, where it's ... and they've got X number of dollars, and they've allocated X number of dollars, and that puts them in a bit of a bind.
Jim Young
Gotcha. Alright. But before we continue with the conversation, I want to take a moment here to let our listeners know about a content piece that we think can really help them during budget season. As Tim has said, we're talking about budget season right now, but these are, a lot of places, quarterly conversations. It's a piece of content that we think can help you pretty much any time of the year. It's called Guide to ... excuse me, it is called Guide to Buying Bank Technology. Now let's face it, sometimes buying bank tech can be a painful process, and this guide will help you avoid potential pitfalls. You can find the best tool, and the best vendor, and shorten your timeline from purchasing to ROI. To download this guide, just go to q2.com/banktech, and that's one word, lowercase, banktech, q2.com/banktech, Guide to Buying Bank Technology.
Alright, back to our conversation, Tim. Let's move down a level to tactics and start with the perspective of that person at a bank who has a software solution they want added to the upcoming budget. We tend to, as vendors from the outside looking in, call this person the champion for that product or solution at the bank.
Tim Daley
Absolutely.
Jim Young
What is the key for that champion to navigate this process, this budget process successfully? Success in this case means this is a solution they think is really important, and that solution gets added to the budget.
Tim Daley
Absolutely. For those out there that are facing decisions like this, I mean these conversations happen frequently. If you're looking at a particular software solution, you've probably had to go through certain layers to get that approved, so, "Can I go investigate it? Can I create a selection around it?" If you are at the beginning stages of those things, one of the things that we used to talk about is just focusing on the business case. What's the value that that piece of software is going to add to help you reach the strategic or the tactical goals of your institution? Then sell into that value. You're trying to convince people to do things that you want them to do. The value is there to help you win them over.
Being clear about your expectations and the outcomes. I would say that data is your friend here. Focusing on the how much, and by when, are key to your arguments, those key performance indicators that you want to influence with whatever software that you're purchasing. It could be, "I want higher margins on my loans," or it could be, "I want a faster account opening turnaround time." Those types of things would be critical to your business case. But also ... and to be clear about, "Hey, here's where we are today. Here's where we think we can be tomorrow based on what we know the market can do."
Then lastly, I would socialize the idea, seek input and perspectives from your peers in the organization, because there're folks that are either vested in the status quo, so we have to understand what it would take to get them to move, or two, they are hurting for that change just like you, and so they could become a potential ally. Just the idea is to seek out those perspectives, to understand what their needs are, what impacts a change could have on them and their business line. That just helps you refine the idea. It helps you zero in on those expected outcomes, and also protect against the potential pitfalls of a project gone sideways.
Those are some things that we've absolutely seen folks do that have helped them get their project in the queue, and keep it in the queue.
Jim Young
What do you mean by potential pitfalls? What's an example or two of this?
Tim Daley
Call it the unintended consequence. Every decision has at least three unintended consequences. That's not mine, it's just I know somebody had said that, and it is been around for a long time. What could that change do that could negatively impact your overall business? Sometimes those things are minor. It's a, "We have to retrain two employees," great. But if it's you have to retrain an entire business line on this brand new piece of software, that could raise the hurdle for acceptance of your idea. What you need to do is just address that as a part of the business process, as part of the business case. That's really where we would say ... I've seen, just in my experience of somebody falls in love with a solution, and in years past there's a compatibility issue. It runs on a type of software that we don't actually have as a bank. Your purchase price just went up, because I have to actually invest in new technology to support the software that I want to run.
That's going to happen less these days. But those are the things that you can uncover by talking to folks inside your organization, and around those intersection points of your organization, to just make sure that you get their perspective and understand really what the impact could be, both positive and negative, so that you can build the best case.
Jim Young
Alright. Going into this again, and I'm just curious about this, we've made the case for, "OK, here are the things you should do, the smart things you should do." I imagine you've seen some mistakes over the years. You mentioned some of the unintended consequences, but what are some of the other ways that you've seen someone who maybe has had an impactful solution, one that really should have gotten added to the budget, that didn't?
Tim Daley
Yeah, so there's a couple of things on this one, and I appreciate you asking the question. It's hard to point to one thing, or even just multiple. Your project could finish in the dust bin for, man, any number of reasons. There could be a change in market condition that no longer makes that thing viable, you don't need it anymore. There could be a change in risk tolerance of the bank or the credit union, so that means that they're just not willing to take the bet on a new piece of whatever. It could be a lack of alignment. A common mistake that an individual can make is, "Hey, I want to do this thing," but this thing is a diversion for where the institution wants to go strategically.
There also could be just a change in direction of the FI. Let's say for example, we start out as a retail community-based organization and now we start wanting to invest in business. Those dollars have to come from somewhere. You may really want to revamp something on the retail side, but we're going to take those dollars and we're going to invest on the commercial side. That happens more frequently than you might expect. Then the last one is just if there is a mistake that folks make, it's just the lack of preparation of your project sponsor. You just haven't spent the time to vet that idea, understand what all the cost and benefits would be, and so your presentation just didn't have ... it could be a great idea, but your presentation just didn't have the compelling message that it needed to have in order to make it out of committee, for lack of a better phrase.
Jim Young
I'm curious also whether there's ... I guess because we've seen this from our perspective where we've had someone interested in something, and you mentioned before about being clear about expected outcomes.
Tim Daley
Mm-hmm.
Jim Young
I have to imagine that sometimes the expected outcome, which would be of a previous project might've been, "This will get implemented, and we'll be up and running in six months," and 18 months later you're still trying to get it implemented.
Tim Daley
Right.
Jim Young
I have to imagine that kills your credibility the next time that something comes along that you want to get added to the budget.
Tim Daley
100%. That's that being really candid about what it will take to implement this thing. That gets ... yes, it can absolutely happen. One success breeds success. I would say that there's this fail-fast or fail-forward approach. That's really where you can save yourself from that, is it is hard if a technology project goes way over time, go way over budget, those types of things, your brand certainly gets tarnished, within the organization, and it will take some time to polish that back up, without a doubt.
Jim Young
Yeah. Just as a side note, that actually is a little bit about ... some of that can come from properly vetting your vendor.
Tim Daley
Oh yeah, without a doubt.
Jim Young
Figuring out what that six-month promise for implementation is, what they've actually delivered to others. It's actually a section in that Guide to Buying Bank Technology. But let's shift perspective now from the people that are championing particular projects, to really the people that they're making the pitches to, the people at the bank who are making those decisions about what's going to get included and what's not, or maybe when it's going to get included, as you mentioned with multi-year plans. From what you've seen, how are the most successful ones really approaching this process?
Tim Daley
Yeah, just in my experience, they work with a number of different filter exercises that
they go through. One, "Is the project aligned with our strategy?" That's the big one. The next one is just a, "Hey, does it align with one of the three basic principles of any business? Does it help me make money, does it help me save money, or does it help me reduce risk?" Preferably the project will do more than one of those things. If you can get your projects, of course you can align those things with more than one of those, you have a much higher chance of staying in the queue.
Then this last one is, "Does it address a gap?" It could be a functional gap that we have in the product set that we offer, a gap in the technology that is expected to serve the markets that we have, a gap in satisfaction, so either internal with employees, or external with your clients or members. How those decisions are made is that it typically runs through just a number of filters that helps it align with the overall direction of the institution. It helps them with their business plan again, that make money, save money, reduce risk, and/or it helps them address a gap. That gap, like we said, it could be any number of things, but those are some real ways to help make those decisions.
Then lastly is you play the ... it's not the show me game, but it's just that you get really candid about, "Hey, where are we in the market? Where do we want to be in the market? How do we get there?" That will be the last one is it, "Do we think that this one will actually help us solve the problem we're out there trying to solve?"
Yeah. The last thing I guess I would say is that those folks do know that there is no such thing as the perfect solution. Perfection, of course, being the enemy of great, you've got to start where you are, and then start making incremental movements towards where you want to go, and just iterate through it. Whether that's a big software purchase, or maybe it's an upgrade, it could be just the next ancillary third party that we're integrating into a solution, could be addressed lots of ways. But being very candid about where you happen to be in the market, and then just incrementally making those improvements into where you want to be is absolutely the way that those decisions are made.
Jim Young
Alright. I want you to put on your consulting hat back on again.
Tim Daley
Yep.
Jim Young
And pretend that I'm coming to you for some budgeting advice here.
Tim Daley
OK.
Jim Young
What would be some of the best practices that you would share?
Tim Daley
Yeah, two things that came to mind on this one. One is stay in alignment with the strategy of your institution. As that institution is evolving, of course things will change. I recognize nobody's in a box forever. But at the point in time in which that decision is being made, your institution has a strategy that they're trying to execute against. It's going to be really hard to convince a bank that's focused on high net worth individuals to invest in a mass retail strategy. Right? Those types of things just don't happen. Keeping aligned with where the overall direction of the bank is going absolutely is the first place I would start.
Then the second one that came to mind is mastering your “if-thens” is something that we used to talk about. The idea is as the world continues to change, the pace of change here recently has been faster than anybody has expected and continues to accelerate. You don't have to know the answer to every question, but working through the potential outcomes is how you go through that. It's like, "If this happens, then I'm going to do this. If that happens, then I'm going to do this. If this happens ..." Right? Mastering your if-thens allows you to take advantage of the flex part of your budget to just ensure that you can react as quickly as you can.
For those product owners out there, the idea is, "What are we going to be able to do with the information that we have at the time, and how do we make those best decisions in real time?" Staying aligned with the strategy of the organization, and then spending some time with your team on the if-thens so that you can make a flex ... or I should say a decision to pivot as you need to. That's exactly how I'd go about it.
Jim Young
OK. We talked a little bit before about some of the pitfalls or errors you've seen. Have you seen it from a macro level? Feel free to change the names, or no need for names of institutions here to protect the innocent, but where, on a macro level, you've seen a bank just really go off the rails in terms of its budget process?
Tim Daley
Yeah, so as I thought about this, I'm looking at more on the ... as a project-by-project, and one of those things that I was thinking of is just don't try to boil the ocean. I know that sounds pretty trite, and everybody said it a thousand times, but there are technologies out there that can 100% transform your business, but there's only so much change your business can accept at one particular moment in time. Being able to iterate through that change would help that process. I'm thinking back to ... and I'm dating myself, so I absolutely earned the forehead and the gray hairs, but the enterprise service bus of the early 2000s, and the enterprise architects that were out there, and the millions of dollars that our banks threw at these things, and the careers that ended because the... or should say were derailed, just because they were trying to apply these things to overall ... the massive organization, it just couldn't accept that much change that quickly.
Folks that started, say, with Lending, and then ... or they go into Operations, and they go into Accounting, you tackle each organization. That's how we've seen the CRM projects, call it evolve, over time. Folks would try to implement these massive CRM software systems, and you're just trying to do too much too quickly. You start with, "Where can it have the most impact fastest, and then what's the next one, and what's the next one, and what's the next one?" Just don't boil the ocean. That's the software there.
Then the second one is the lack of diligence. We talked about that just a little bit ago, but it was certainly on the top of my mind is, man, don't find yourself in a position where it's the first time this vendor's ever done that. It could be, "Hey, we actually have to buy something else in order to take advantage of the benefit that this one piece of software could bring." Those are the things that you just really want to protect both your career, and protect the business, by just making sure that you've got the diligence done.
In my opinion, there is some equating of vendors going on in the market where they might be shiny and new, and therefore the risk around that decision is ... because they're new, is not rated the same as doing business with a vendor that's done it 200 times. The idea there is just perform your diligence and make sure that what you're purchasing is actually what's going to help move the needle on the business. Those are my two things on the horror stories.
Jim Young
The way that Carl Ryden, PrecisionLender’s founder, used to put it is, he almost said the way you want to vet a vendor is almost the way that you would do it for a loan, in terms of the thought process of going through it, pretty similar to that. Just to throw it out, and put it in terms that our banker audience should understand.
Tim Daley
Yeah, I think that's very fair. He's a super smart guy. I learn something every time I talk to him.
Jim Young
Well, we certainly learned quite a bit from you today, Tim, about budgets, and thanks so much for coming on the show and sharing your perspective.
Tim Daley
Hey, I sure appreciate being ... the invitation. This is super fun, so I look forward to the next one. Thank you so much.
Jim Young
I was going to say, this is your podcast debut, and it's hopefully the first of many, many to come.
Tim Daley
That would be great. I'd love it. Thank you.
Jim Young
Alright. Well, thanks so much for listening, and if you want to listen to more episodes, please subscribe to the show wherever you listen to podcasts, including Apple, Spotify, Stitcher, iHeartRadio. If you like a visual element to your show, we now have a Purposeful Banker channel on YouTube that you can subscribe to. On any of those platforms, if you have a moment to spare, let us know what you think via your comments and ratings. You can also head over to q2.com to learn more about the company behind the content. Until next time, this is Jim Young, Tim Daley. You've been listening to Purposeful Banker.
