COLLEGE OF BUSINESS

Assignment Bank USA

Prepared by:

QUESTION 1

What are that major problem?

Major problem of BankUSA‟s Credit Card Division include the customer satisfactions

on company performance. Conflict occurs between two departments, operations and

marketing. Conflict between two different sources of information, customer perceives the

company‟s performance as poor based on marketing‟s survey while the internal

operational seem to be good. The performance measurement system in this case study

analysis is to achieve some balance between having a few key measures on one hand, or,

on the other hand, having many detailed measures or information. Broadly, a compromise

is reached by making sure that there is a clear link between the operation‟s overall

strategy, the „key‟ performance indicators (KPIs) that reflect strategic objectives, and the

bundle of detailed measures that are used to „flesh out‟ each key performance indicator

and as a result a good respond and satisfying customers to the company. The poor quality

of after-sales services attributed to the lack of management depth, which in turn give rise

to organisational cultural issues and operational process flaws that include the failure to

utilise technology and inadequate financial control over costs and as one of the leading

bank player in the industry which is possessing vast financial capital to back its

operations and expansion, they are need to up-to-date with adopting and implementing

the latest technologies, attracting for itself a large base of customers.

QUESTION 2

What steps are required to develop a good internal and external performance and

information system?

Performance measurement

The activity of measuring and assessing the various aspects of a process or whole

operation‟s performance. Performance here is defined as the degree to which an operation

fulfils the five performance objectives at any point in time, in order to satisfy its

customers which is consist of quality, speed, dependability, flexibility and cost and all of

this performance are really composites of many smaller measures. The more aggregated

performance measures have greater strategic relevance. The more detailed performance

measures are usually monitored more closely and more often. In practice, most

organizations will choose to use performance targets from throughout the range.

All of these measures individually give a partial view of the operation‟s cost

performance, and each of them does give a perspective on the cost performance of an

operation that could be useful either to identify areas for improvement or to monitor the

extent of improvement.

Good performance measures are actionable, providing the basis for decisions at the level

at which they are applied. Performance measure should be support not conflict with

customer requirement. Another characteristic of a good performance measurement

system is the ability to accurately aggregate performance from the lowest to higher level

of organization to support the management. Good performance measures enable

managers to control process and make decision on the basis of facts not opinions. The

balanced scorecard attempts to bring together the elements that reflect a business‟s

strategic position, at the same time it restricts the number of measures and focus

especially on those seen to be essential.

It presents an overall picture of the organization‟s performance in a single report, and by

being comprehensive in the measures of performance it uses, encourages companies to

take decisions in the interests of the whole organization rather than sub-optimizing

around narrow measures. Another trend is banking institutions having a strategy known

as BSC (Balance Score Card) whereby the performance targets are not of financial

measure only but of customer and internal business measures also. The bank had

concentrated on hitting targets by mobilizing of valued accounts but has realized that

competition has made customer service and care and means of delivering the service and

care to be the basis of measuring performance targets. In turn, the bank is assessing the

performance of the front liners of the bank; relationship officers and customer service

officers on how well you treated the customer and how efficiently and effectively you

did.

Setting target performance

After identified each partial measure, it has to be compared against some performance

standard to make it meaningful. There are four types of performance standard commonly

used:

Historical standards, which compare performance now against performance

sometime in the past;

Strategic target standards, which compare current performance against some desired

level of performance;

Competitor performance standards, which compare current performance against

competitors‟ performance;

Absolute performance standards, which compare current performance against its

theoretically perfect state.

Benchmarking

Benchmarking is „the process of learning from others‟ and involves comparing one‟s own

performance or methods against other comparable operations (obtaining competitor

performance standards).

It‟s based on the idea that (a) problems in managing processes are almost certainly shared

by processes elsewhere, and (b) there is probably another operation somewhere that has

developed a better way of doing things.

Types of benchmarking:

i. Internal benchmarking - a comparison between operations or parts of operations

which are within the same total organization. E.g. a manufacturer with several

factories benchmarks each factory against the others.

ii. External benchmarking - a comparison between an operation and other operations

which are part of a different organization.

iii. Non-competitive benchmarking - compare with organizations do not compete

directly in the same markets.

iv. Competitive benchmarking - a comparison directly between competitors in the

same, or similar, markets.

v. Performance benchmarking - a comparison between the levels of achieved

performance in different operations. E.g. compare its own performance in terms of

performance objectives – quality, speed, dependability, flexibility and cost –

against other organizations‟ performance in the same dimensions.

vi. Practice benchmarking - a comparison between an organization‟s operations

practices and those adopted by another operation. E.g. a large retail store might

compare its systems and procedures for controlling stock levels with a department

store.

Criticism of Benchmarking :

Information may be inaccurate

What works for one company doesn‟t necessarily work for another

Stifle innovative thinking

Homogenises market

To generate useful operational performance measures a systematic process is required.

1. Identify all customers of the value chain and determine their requirements and

expectations. Organization should to know who their customers and what their

expected. Customer survey should be used.

2. Define the work process that provides the good or service and impacts to customer

needs.

3. Define the value-adding activities and outputs that compose the process. This step

to identify each part in the system in which value is added an intermediate output

is produced. Analysis performance in this step identifies the internal customer

within the process along their needs and expectations.

4. Develop specific performance measures. Each activity in step 3 represents a

critical point where value is added to the output for the internal customer until the

final output is produced.

5. Evaluate all the performance measures to ensure their usefulness.

The market is now dealing with plastic anywhere and everywhere. This trend was only

used by the affluent in society a few years back but due to convenience, safety, security,

the bank has realised that it can earn income from the cards at the same time offering the

client 24 hour access to his or her finances. 24 hour card centre specific for this purpose

as it has realized that most of its clientele prefer plastic to hard cash. It deals with debit

and credit cards locally and internationally.

The ATMs have made some transactions such as withdrawals, deposits, mini statements,

balance enquiries and payment of utility bills, all transactions that would have had to be

done in a banking hall at specific hours, easily accessable at any time of day from

numerous points of access. These service delivery channels have made banking so much

easier and cheaper.

The computer has made banking a whole lot easier, efficient, effective, safe, fast and

convenient. The introduction of the internet in the bank has made internal and external

customer service to be exceptional at the bank. For instance, one can actually check on

what the internal market is offering in foreign currency and compare with what the bank

is offering. Employees are also very cautious on time management and execution and

countable of duties as there is instant communication via email. All these technological

changes, though expensive, have brought a positive effect in the organization and the

whole of the banking sector as a whole.

QUESTION 3

How should internal and external performance data be related?

Internal environment may be defined as forces within an organization directly impacting

it. These forces affect the policies, protocols and procedures as well as resources an

organization may adopt and/or use periodically to achieve its goals

Both internal and external data are important for performance evaluation. External data

include a customer satisfaction and internal data provide the advantages and can add

significant depth to a performance. Managers must understand the cause and effect

linkages between key measures of performance. These relationships often explain the

impact of internal and external performance. The operational performances on external

results such as profitability, market share and customer satisfaction.

The quantitative modeling of cause and effect relationships between external and internal

performance criteria is called interlinking. This quantitative modeling tries to identify the

performance between all parts of the value chain, goods and services outputs, and

customer experience and outcomes. The manager can objectively make internal decisions

that impact external outcomes. Another example of an interlinking model is the financial

value of a loyal customer (VLC), which quantifies the total revenue or profit each target

market customer generates over some time frame. By multiplying the VLC times the

absolute number of customers gained or lost, the total market value can be found.

The implementation of relationship marketing therefore depends on a well-developed

internal (employee) and external customer orientation. The business should also

understand how customers measure value and how these value expectations can be met.

To attain lasting customer orientation careful attention should be given to detail, meeting

promises and swift response to the requirements of customers – i.e. competitive

capabilities. The same authors define competitive capabilities further as a business‟

ability to meet customer expectations compared to its competitor‟s ability to do the same.

The development of an external customer orientation will be facilitated by:

• leadership. Staff members must experience “an unbroken circuit of passionate,

sincere, unified and committed leadership from top levels to local managers”;

• centrality of customer requirements and performance feedback. This will also assist in

achieving the required inter-functional co-ordination and alignment; and

• collection and dissemination of external customer data. This data, however, only

becomes conducive for customer orientation development when it is widely circulated

in the business to become a shared organisation-wide platform from which decisions

are made.

Internal and external performance data be need to be related so it will stressed that

customer orientation should be explicit, otherwise the business risks over-serving

unprofitable accounts and wasting resources that might be allocated to profitable

customer groups among individual customers and corporate customers.

Relationship raises the need for customer orientation, which in turn raises the need for

customer-oriented employees. Without customer oriented employees it will be difficult to

implement customer orientation because employees are the ones who have to make it

happen. If customer-orientation is lacking, the implementation of relationship marketing

will suffer. This is because dissatisfied customers will never develop good relationships

with the business. Attracting, developing and motivating employees as internal partners

foster an internal customer orientation recalls the efforts made by many businesses to

make employee satisfaction and retention a top priority in recognition of the damage that

high employee turnover and disgruntled employees can cause to customer relationships.

Employee performance and attitude play an important role in service delivery to external

customers. Employee satisfaction impacts on employee attitudes, which in turn influence

employee performance and interaction with external customers. Employee interaction

with external customers obviously plays a pivotal role in the ultimate success of the

business which are distinguishes between internal customer satisfaction and employee

satisfaction.

The relationship between employee and customer satisfaction in terms of value the

business creates for employees, who in turn will be able to create value for customers.

External and technological factors constitute part of the organizational environment.

They shall therefore be merged, for purpose of the Bank USA case, in order to clearly

illustrate their effects on the organization.

QUESTION 4

What is the real services level?

Based on performance data, the average customer satisfaction for 15 months was 96.2%.

This shows the percentage of customer satisfaction is high. Plastic production turnaround

is less than 1 that means the plastic card turnaround performance is very good.

QUESTION 5

What operations measures internally or what marketing measures externally are

needed?

They should have permanent control over the division to provide accurate reports.

Operations department should be creative in making design surveys or customer

performance criteria.

Some journal discusses the theory of measuring service quality is very abundant, and

many scholars often use the index to build a measurement model. The importance and

satisfaction on the service element of the two indicators used to assess the quality of its

services as appropriate. To solve the problem of quality of service and meet the needs of

customers, many scholars suggest a variety of models, as follows:

(1) Importance-performance analysis (IPA)

Importance-performance analysis (IPA) was introduced by Martilla and James (1977) as

a method for developing and analyzing business strategies. This matrix is used to

prescribe prioritization of service attributes for improvement and can provide guidance

for strategy formulation. Although various researchers have proposed minor

modifications to the technique over the years, the basic framework has largely remained

the same. IPA was modified and applied to the bank industry performance evaluation.

The matrix is divided into quadrants according to performance and importance that may

be used to classify actions:

i. Leverage opportunity: The zone can be used as advantage against competition.

ii. Action opportunity: The zone is the criteria/ subcriteria that need attention.

iii. Transfer resources: Organization‟s resources may be better used elsewhere.

iv. Status quo: Generally, no action is required.

(2) Establishment of service quality performance model

To determine the best strategy for improving service quality and satisfaction of family

members, the present study applied a service-quality performance matrix. A 7-point scale

was adopted to evaluate the importance and satisfaction of each item. The study adopted

the „control chart‟ of Montgomery (1991) method; the performance matrix limits its

range to the area within 2 dotted lines to obtain the new performance matrix zone.

Performance upper control limit (PUCL) and performance lower control limits (PLCL)

were established according to the coordinate‟s value enabling objective diagnosis and

judgment of required improvements to be performed. The service quality items are

mapped onto the performance control matrix. The service quality items are fall into the

bottom right (Zone A) demonstrate that importance is greater than satisfaction; resources

to be invested must increase to improve satisfaction. The zone is called the „resources

insufficient zone‟. Accordingly, when the items fall into the upper left (Zone B) indicates

that importance is less than satisfaction; resources to be invested should be decreased to

prevent waste. The zone is called the “resources misspend zone”. Manager attends to

only with the items located outside the control lines for improvement. This new service-

quality performance matrix modified by the authors is called the “performance control

matrix”.

The importance–performance matrix and the priority for improvement which each

competitive factor should be given can be assessed from a comparison of their

importance and performance. This can be shown on an importance–performance matrix.

the „appropriate‟ zone – competitive factors in this area lie above the lower bound of

acceptability and so should be considered satisfactory;

the „improve‟ zone – lying below the lower bound of acceptability, any factors in

this zone must be candidates for improvement;

the „urgent-action‟ zone – these factors are important to customers but performance

is below that of competitors. They must be considered as candidates for immediate

improvement;

the „excess?‟ zone – factors in this area are „high performing‟ but not important to

customers. The question must be asked, therefore, whether the resources devoted to

achieving such a performance could be used better elsewhere.

An organization‟s approach to improving its operation can be characterized as lying

somewhere between the two extremes of „pure‟ breakthrough improvement and „pure‟

continuous improvement.

Breakthrough improvement, which is sometimes called innovation-based improvement,

sees improvement as occurring in a few, infrequent but major and dramatic changes.

Although such changes can be abrupt and volatile, they often incorporate radical new

concepts or technologies which can shift the performance of the operation significantly.

Continuous improvement assumes a series of never-ending, but smaller, incremental

improvement steps. This type of improvement is sometimes called kaizen improvement.

It is gradual and constant, often using collective group-based problem-solving. It does not

focus on radical change but rather attempts to develop a built-in momentum of

improvement.

The differences between breakthrough and continuous improvement are it is possible to

combine the two at different times. Large and dramatic improvements can be

implemented as and when they seem to promise significant improvement steps, but

between such occasions the operation can continue making its quiet and less spectacular

kaizen improvements

The techniques of improvement

Scatter diagrams, which attempt to identify relationships and influences within

processes;

Flow charts, which attempt to describe the nature of information flow and decision

making within operations;

Cause–effect diagrams, which structure the brainstorming that can help to reveal the

root causes of problems;

Pareto diagrams, which attempt to sort out the „important few‟ causes from the

„trivial many‟ causes;

why analysis that pursues a formal questioning to find root causes of problems.