Most weeknights, there is a typical scene at my house. You can almost set your watch to it. Stroll into the kitchen on a random Tuesday night around 5:45PM and you’re likely to see pouty kids in front of a plate of vegetables. Arms crossed, lips puckered and foreheads wrinkled showing their frustration because they can’t leave the table until the vegetables are eaten. Our kids do a decent job eating the mashed potatoes and chicken strips. But they always seem to leave the steamed broccoli, or the sautéed green beans until the end. And after the obligatory “can I be excused from the table” is answered with “eat your vegetables” we all know the process has begun and it’s only a matter of time until the negotiating begins; ‘but they’re cold now and don’t taste good’, or ‘I’m full and can’t eat anymore’. It’s certainly not the way my wife and I like heading into the home stretch of a long day.
As a consultant in the investment management industry with countless technology and operations projects under my belt, I can’t help but notice parallels between the ‘eat your vegetables’ anecdote and the pitfalls investment managers sometimes fall into with their projects.
I’ll explain. In its basic form, the projects we help our clients deliver are a collection of tasks, deliverables, timelines, and the resources who do the work. And although technology and operations projects aim to improve the investment management process and increase efficiency, they do come with a price. Just about all projects, regardless of the size and scope, include challenges that the project team and client will need to plan and solve for. And when project planning gets to the complex investment types (OTC derivatives as an example) it’s somewhat natural, and certainly understandable to plan for those deliverables to come later. This makes sense from the standpoint that client executives and project sponsors may see tangible results earlier if the project team tackles functionality for the vanilla investment types first. An obvious example of this, and one that I’ve seen several times in my career is to deliver equity before fixed income. Furthering that point, it’s also common to plan for the delivery of fixed income before OTC derivatives.
But is tackling the easier, less complex work first always the right thing to do? What if that early work isn’t as easy as anticipated? If those ‘quick wins’ are not as quick as anticipated, the project begins to get delayed. It could be extremely difficult to get back on track if the project gets behind schedule before work even begins on complex investment types. In my experience, it’s nearly impossible and likely that the project will continue to get further behind. As you press up against deadlines, you can be sure the investment manager will want a plan for getting back on track to the original timeline. And that can be risky, because you certainly don’t want to rush the most complex part of the project.
To me, a technology and operations project that pushes the most complex investment types to the end, is akin to a 6 year old eating the meat and potatoes before the vegetables. If the veggies are so hard to eat, why not make the sacrifice early in the meal and at least eat them when they’re hot? Most kids will admit, after the carrots and peas are gone, dinner is a breeze. I wouldn’t use the term ‘breeze’ to describe investment management technology and operations projects. But I think most project managers would agree, if you solve for the cleared interest rate swaps and bank loans, the common stock and treasury bills should seem like a breath of fresh air.
When it comes to technology and operations projects, circumstances vary for each investment manager, service provider and software vendor. Technological maturity and methodologies can be drastically different from one investment manager to the next. Project management philosophies can differ a great deal too. And we haven’t even scratched the surface on scope and budget. So it’s understood that there certainly can be times when delivering functionality for less complex investment types first, is the right thing to do. But project sponsors and managers should be cognizant of the potential risks with scheduling the complex investments at back end. Like my 6 year old at the dinner table, it may just be better to get the hard stuff out of the way first.
Comments