Building a Strategic MIS for a Commercial Bank

Building a Strategic MIS for a Commercial Bank

In this blog we're looking at building a Strategic Management Information System (SMIS) to support strategy implementation in a commercial bank. We're assuming a starting point where we have a well defined Business Plan which describes a rich set of measures and targets which underpin strategic success. This blog is going to focus on how we might organise these measures and targets in a dashboard format, use the SMIS to cascade objectives throughout the bank, and also to structure and capture our data logically. Along the way we'll be covering many tips and pitfalls which I have experienced in strategic data and information management, and I hope to get lots more in terms of comments and suggestions from readers.

Strategic management reporting and the Balanced Scorecard

In the last post, we looked at the three distinct reporting aspects: strategy - things we need to achieve; change - the things we need to do; and, risk - the rules of the road. Taking strategy as our starting point, the Balanced Scorecard in all its variation is probably the best known and most widely used strategic management framework.

Balanced Scorecard

A deep dive into the Balanced Scorecard is way beyond the scope of this blog and will take far too long. Perhaps it is another blog topic for the future. There are a couple of really interesting and relevant elements of the Balanced Scorecard from the perspective of this blog, however. The first is the emphasis on quantifying strategic success in terms specific measures and targets. It insists that the progress towards strategic objectives be objectively measurable.

The second is that having quantifiable measures and targets makes it much easier to cascade strategic performance management down through the organisation structure. For example, let's say one of the Bank's strategic objectives was to 'Increase customer profitability' or something equally straightforward. The Balanced Scorecard would force us to quantify this Objective in terms of one or more specific measures and targets.

For example - one of these measures could be a measurable increase in the average number of products held per customer. Having decided this - it becomes a much easier task then to allocate responsibilities for achieving the relevant target to sub-ordinate business units - for example, retail or corporate banking. Indeed, we could allocate increasingly more granular measures and targets for any number of strategic objectives right down to the individual staff member. Indeed, that is the logical conclusion of the Balanced Scorecard approach.

So how might our Strategic Management Information System handle this? As usual - it's easier to describe using the simulation than in text. The following video explains how you might approach this challenge. If you are not familiar with the Balanced Scorecard, the Balanced Scorecard Institute has excellent resources. If you're really interested in implementing the Balanced Scorecard in your bank, then we have an excellent course, 'Implementing the Strategy' which covers this topic in depth.

BSC, KRIs, and KSIs: Why the three Strategic Reporting Aspects?

While it is important to have a consolidated strategic dashboard, where a user can get an instant visualisation of the overall scenario, there are some compelling reasons to consolidate this information from a number of related but discrete aspects. Again, there are no hard and fast rules for this, and I welcome critiques of my proposed approach, but let me explain the rationale in the first place.

1) Purpose: strategic reporting covers a number of slightly different purposes. It should track what we are trying to achieve - i.e. our progress towards strategic objectives, measures and targets (in this case we have used the Balanced Scorecard or BSC methodology).  I should also track 'the rules of the road', or the key risk parameters within which we must operate in achieving strategic success (the Key Risk Indicators or KRIs). Finally - I think it should also track the changes to the business and operating model (i.e. change projects) we need to implement in order to achieve this strategic success. Our approach uses KSIs or Key Strategic Initiatives to catalyse and implement strategic change. Personally I see some merit in proving a separate reporting mechanism for each of these aspects, so let me elaborate why.

2) Flexibility: we may find in due course that we wish to slightly customise the dashboard template for these three aspects. For example - as a dashboard aligned to the change or project management process within the bank - the Key Strategic Initiatives template may begin to align itself with an in-house or industry standard Project Management methodology and the related reporting framework. Not a high priority at this stage for our work in progress, but certainly a matter for discussing and thought at some point in the future. We'll probably be discussing Change Management in banking in another blog series in due course - at which point the two series may become inter-woven at some points.

3) Audience: to some extent the audiences for these different aspects will be slightly different. For example, general management in Strategic Business Units (SBUs) will probably have a bias towards the BSC dashboard - i.e. to track their progress towards meeting business goals. Whereas Risk Management (including the Risk Committee) will be keeping a particularly close eye on the Key Risk Indicators, to ensure that the risk covenants agreed upon in the Strategic Plan are not breached in the push for strategic success. Finally, the Key Strategic Initiatives will be of most relevance to the various Change Management or Project Teams throughout the bank, as their main goal is the implementation of strategic change.

4) Timeliness and Urgency: in some respects, there is quite stark division between the timeliness and urgency of reporting required from the Key Risk Indicators dashboard which argues for differentiation (this may require different treatment in terms of data integrity and availability). For example, a slight delay in feedback or a temporary error in terms of BSC or KSI reporting is not likely to be an issue of grave concern. In relation to KRIs, it is vital that highly reliable data is available as soon as possible, and should be monitored on a daily (if not constant basis through the automation of risk alerts by email or SMS for example).

So I hope this clarifies why I have adopted the approach I have, in separating the SMIS into three distinct but inter-related aspects. To reiterate I like to think of it as follows:

1) BSC: What are we trying to do? What does success mean?

2) KRIs: What are the rules we need to play by?

3) KSIs: What do we need to change in order to win?

We'll be going into much greater detail about these different aspects in due course. And also explaining these particular tools (i.e. BSC, KRIs, KSIs) and why we selected them in the first place. However - that's a post for another day. Until next time. Take care.  

Overview of a Draft Bank Dashboard

Having thought about this carefully, I think the best approach to discussing strategic information in banking is to dive and have a look at the case study. The case study is for a hypothetical bank called 'Standard Bank of Typica' based in the imaginary country of 'Typica'. It's not material at this stage but these case studies are aides for our training courses and are backed up with a rich set of simulated data and analysis - to make the scenarios as real as possible.

In this case we are looking at a dashboard 'work-in-progress' quite deliberately. Firstly because it's boring and unenlightening to start with a completely blank sheet. It's easier to start with a model and then critique and adapt it on the go. This applies both to the user interface (please excuse my remedial coding and design skills) and, more importantly, the content. Part of the purpose of this blog is as a catalyst for me to really crystallise my thinking about the best ways to organise strategic information (and also to learn from others!).

So let's assume we are consultants (internal or external) to Standard Bank of Typica and we have joined part-way through a Project to build a comprehensive Strategic MIS, embodied by the cascade of a strategic performance dashboard throughout the Bank. Let's see where we are now in the embedded YouTube screencast below.  

Strategic management information. Where do we want to be?

Let's assume we're a general manager in a mainstream commercial bank; it doesn't matter if we're the Chairman or CEO, head of a division, or the manager of a small department or team. It should be the case that when we log in, in the morning or last thing in the evening, whether we're in the office or away on business, that we should be able to quickly and easily access the information we need to tell us whether our strategy is on track or not.

However, in my humble experience, this is rarely the case. Basically I have seen many banks (even those who imagine themselves as quite developed) seriously flounder when it comes to answering seemingly straightforward questions about their strategic performance and the root causes. This blog is going to focus on the key issue of strategic management information. What is it and how do we define it? Why do we need it? Where is it? How should we capture and organise it? How can we use it effectively?

Before wading in to this blog - ask yourself how well your bank organises its strategic information. Do you have a readily accessible, timely and reliable dashboard report which summarises key strategic information in an easily digestible form? Or do you have to wade through piles of paper, make endless telephone calls, and navigate through a labyrinth of files every time you have to update your superiors on strategic performance. Or somewhere in the middle...

Perhaps it is easier to try and imagine where you want to be, rather than where you are. Throughout this series we'll be working with a very simple Strategic Management Information System attached to a hypothetical case study. Modern business analytics/ business intelligence software can be exceptionally powerful (and we'll be covering some options in future posts) - but sometimes it helps to start with something simple to flush out the problems and to crystallise your approach BEFORE you spend big money on software and IT architecture.

So in the next post let's dive on in and look at a simple SMIS dashboard and perhaps you can imagine this as a benchmark at the most, but more likely as an illustration of the key points I'll be making along the way.