September 28, 2005

For large banks, the growing complexity of the business and the resulting increase in the number of technology projects makes it difficult to ensure the success of each initiative. Without a formal management process, projects often veer off track and over budget. But even small banks can benefit from established project management guidelines.

With its own banking, investments and other lines of financial services (as well as outsourced business for client financial institutions), Pittsburgh-based Mellon Financial ($707 billion in assets under management) typically has hundreds of concurrent projects, according to Chris O'Brien, the firm's SVP of strategy and technology planning. "Our projects are becoming larger and more complex because the nature of our business is changing," she says. As a result, Mellon has increased its focus on project management over the past few years, including the establishment of a project management office and program management office, O'Brien relates.

Mellon also has adopted procedures for project development and implementation, and established a formalized process that includes certifying project managers through the Project Management Institute (Newtown, Pa.). These procedures provide a predefined guide for each phase of a project, O'Brien explains, defining the steps that the bank needs to follow on any project - from human resources to marketing to technology installation - and ensuring that all projects take into account the necessary regulatory, compliance and budgetary considerations.

For each project, a certified project manager teams with a project architect - while the project manager specializes in project methodology, the project architect is the expert on a particular subject or initiative (e.g., global cash management), O'Brien continues. "It's rare to have someone with both project management skills and knowledge about a particular project," she says.

Before a project can get under way, O'Brien relates, a business case must be built and funding secured. Mellon has adopted a two-step approach to budgeting, she adds. When a project is initially identified, the project architect and project manager determine the expected costs and ROI, O'Brien explains. The bank then reviews this initial projection before the project can move forward.

If the initial proposal is approved, then the budgeting process moves to Step 2 - including a more detailed investigation of costs and the establishment of time lines. "If the business case still exists, then the remainder of the funding is approved," O'Brien says, noting that a contingency budget for unexpected cost overruns is included in funding. This two-step budgeting approach has eliminated most project cost overruns (over and above the contingency budget), but not all, O'Brien admits.

To further keep spending in check, Mellon includes strict quality and deadline qualifications in vendor contracts and enforces them with stiff penalties, says O'Brien, who adds that increased vendor management has been one of the biggest changes in project management at Mellon over the past few years. Additionally, monthly meetings track the progress of a project, including costs.

Each of the bank's business lines is responsible for compliance and risk functions, O'Brien explains. So, ideally, those considerations are taken into account when the project plans are outlined. However, there are times when a regulation changes during the course of a project, particularly one that takes several months, or years, to complete. Any time a new regulation or a new technology emerges, Mellon's program management office, which oversees the project management office, works with the lines of business to ensure that the appropriate changes are incorporated in all current and planned projects.

Project Management Reaches Smaller Institutions

Whereas Mellon Financial has been refining its project management procedures since the beginning of the decade, many smaller financial institutions are just starting to implement a formalized approach to project management. When South Florida-based Eastern Financial Florida Credit Union ($2 billion in assets) hired Robin Lenihan two years ago, she was the only person on staff specifically tasked with project management.

Then, just last year, the credit union appointed her to head the project management office, with three project managers at her charge. "We started the project management office because we wanted to take over the [project management] responsibilities for the people who had other full-time jobs in the credit union," Lenihan says.

Before Eastern Financial instituted centralized project management, many projects progressed far too slowly, Lenihan explains. This was because of the lack of a defined process, she asserts. Now, when someone within the credit union proposes a project, Lenihan says, the employee prepares a predefined initiation document outlining the project and its anticipated benefits.

If credit union executives approve the proposal, then it goes to Lenihan's office, which examines it in more detail to ensure the cost-benefit analysis is solid, and a project manager and project team are assigned to the initiative. The project manager serves as a single point of contact for the business line involved in any particular project, and the project teams include representatives from all stakeholders within the enterprise. Weekly meetings - including project managers and compliance managers - help keep projects on track.

Though ongoing budgetary control is important, it doesn't get as much scrutiny at Eastern Financial as it does at larger financial institutions, concedes Lenihan, who joined the credit union from a larger financial enterprise. Unfortunately, most institutions of Eastern's size have yet to adopt the idea of a project management office, contends Lenihan, but she thinks this will change.

Still, centralized project management has helped the credit union do a better job of ensuring that projects "create an outstanding member experience, create an outstanding customer experience or improve operational excellence or financial soundness," explains Lenihan. "We are doing a better job of making sure that projects are right for the organization and that we understand a project's goals," she adds. "Projects are getting more attention and getting done faster."

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