The CIO of Global Equities and Commodities Derivatives at BNP Paribas describes the unique challenges of bringing lean to a bank’s IT organization.
BNP Paribas is one of the world’s largest banks, with approximately $2 trillion in assets and a Standard and Poor’s AA rating as of the end of 2010. With a deep European presence across all business lines, the group also has an extensive international network, including operations in 84 countries. In corporate and investment banking, Global Equities and Commodities Derivatives (GECD) brings together the complementary activities of structured equity, flow and financing, and commodity derivatives.
GECD started with a lean transformation in the operations area, and then the IT organization launched its own multiyear transformation program at the end of 2009. The goals of the program were to improve the productivity of software-development and application support teams and to instill a new performance culture. Capitalizing on these successes, a global lean program was recently launched across all IT and operations units that were focused on activities related to capital markets.
Thierry Pécoud joined BNP Paribas in 2008 as global CIO for GECD, after serving in a variety of IT leadership roles at Société Générale. McKinsey’s Christophe Chartrin sat down with him in Paris to discuss the company’s lean IT program.
McKinsey: Why did you decide to launch a lean program?
Thierry Pécoud: There were two main reasons. First, during the 2009 crisis, I needed to optimize resource allocation, as my people were under pressure to deliver more projects without increasing costs. Second, I wanted to instill some new managerial practices to allow the IT organization to grow and mature. Lean was the right approach, as it is not just an ordinary performance-improvement exercise but a comprehensive transformation program that allows an organization to make constant improvements in its way of working.
McKinsey: What were your goals for the program?
Thierry Pécoud: We implemented three successive rounds of cost reductions just after the crisis of September 2008, when it was absolutely necessary to reduce our cost base quickly. For me, however, the essence of lean is radically different from a one-shot effort at lowering costs. It is a continuous commitment to improve your organization by constantly eliminating inefficiencies. Lean transformation is about giving your people the right tools and teaching them how to evaluate and improve their own way of working permanently, without undermining the creative nature of the software-development process. This approach is particularly relevant in an IT environment, as software developers are usually not experts in tracking their time and energy. It is also especially relevant in capital markets, where IT is a true business differentiator.
McKinsey: How did you select the initial areas to pilot?
Thierry Pécoud: We wanted to start somewhere that was representative of the type of work we perform. We decided to choose an IT team working directly for the traders and another team working cross-functionally with the various IT departments of GECD. Also, we made sure we picked people for the two teams who would keep an open mind, so that we could experiment a little and learn from our mistakes.
McKinsey: What did you learn in those early days?
Thierry Pécoud: In the beginning, we focused too heavily on the numbers. When we conducted a diagnostic, people thought that the discovery of waste in their team implied that they were bad managers. As a result, resistance to lean started to grow. We stepped up our communication efforts and explained that lean is about seeing the bigger picture and trying to improve the organization’s way of working. Now we are getting more positive responses. People understand that if they do things differently, they can realize resource economies that are beneficial, maybe not always for them individually but for their colleagues and thus for the organization as a whole.
Like our experience with lean in the GECD operations arena, our experience with lean in IT confirmed that lean is a very good tool for revealing the managerial maturity of an organization. While I observed many of our employees blossoming and rapidly developing new skills, I also saw others recognizing their own limitations when we prompted them to do things differently.
McKinsey: Were there any surprises?
Thierry Pécoud: I think everyone was a bit surprised by the intensity of the first wave. We performed a thorough diagnostic in only three weeks and a complete turnaround of our way of working in the pilot areas within two months. We knew such an ambitious transformation would require us to work hard but we were still surprised by the pace of it all.
McKinsey: How does implementing lean differ in an organization with a specialized, highly skilled workforce?
Thierry Pécoud: The implementation of lean in an IT department will face a number of specific challenges. I have always felt that IT professionals in general and software developers in particular bring an artisanal mind-set to their roles. Developers must grasp unstable business needs and translate that understanding to build stable and efficient applications. This requires a flexible and creative mind, capable of developing innovative solutions. You cannot simply impose ready-made working methods on a team of software developers. In addition, IT developers are not necessarily at ease with performance-management tools and KPIs, so it is particularly important to ensure that their mind-sets are evolving in the right direction. This sometimes requires one-on-one coaching to allow people to get used to the tools and working instruments you provide them with.
McKinsey: Did the transformation affect the way you engage with other departments?
Thierry Pécoud: It did. Right from the start, we decided to assess and revise all phases of the IT application-development process, including the way we interacted with end users working on the trading floor or in the back offices. A strong partnership with our end users was indispensable, particularly to understand their needs and update them on what to expect from the changes. This partnership is particularly important in a capital markets environment because of the intensity of business demands.
The diagnostic and implementation phases caused a temporary short-term reduction in service levels and a longer-term change in our alignment model, from direct to team-based support. I learned that ongoing attention needs to be directed to the expectations of end users about how the changes will affect them. Also, you need to be sensitive to the fact that not all the teams you interact with will be equally willing to accept the new practices.
McKinsey: How do you measure the success of the lean program?
Thierry Pécoud: I look at three things. First, I check if my managers have adopted lean principles in their own work habits—Agile programming methods, performance management, waste tracking, and a continuous-improvement mind-set. To me, that behavioral change indicates a true understanding of what lean is all about. Second, I want to achieve the targets we set for increasing our capacity. We set up an investment committee comprising the management of the front office and the IT and operations organizations of GECD. This is where we keep track of the capacity freed up by the lean transformation and allocate it to new initiatives. So far, we are on track and we will be able to reallocate 10 percent of the people in the transformed teams. Finally, in line with the raison d’être of an IT department, we measure our client satisfaction through specific “voice of the customer” surveys to assess the improvement of our users’ experience.
McKinsey: What is lean bringing to your people?
Thierry Pécoud: This initiative is now perceived as a cultural transformation. We trained the staff in powerful work habits that are easy to describe but harder to practice on a large scale and on a regular basis. For example, performance management, feedback sessions, formal rewards, and people development are now part of our culture. Such developments have strongly empowered my managers, which is my ultimate goal.