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Using performance measurement to assist culture change. Case study – banking and financial services. Sue Davey-Evans University of Portsmouth. Case Study. Major banking/financial services organisation - PowerPoint PPT Presentation
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Using performance measurement to assist culture change
Case study – banking and financial services
Sue Davey-EvansUniversity of Portsmouth
Case Study
Major banking/financial services organisation
2 year programme of change – redefining roles and changing culture in the customer facing network, 1,200 branches and 15,000 + staff
Focus on the implementation of new performance measurement reporting
Review implementation issues associated with change
Developments in Financial Services
Life, pension, insurance Investment Portfolio managementBusiness sector
Financial Service Act, changed role of “banking” from traditional savings, deposit and lending
1987
1990
2000Cost control - centralisation of processing
Integration needed for customer service – “connecting” the products, people, systems - seamless customer interface
Major growth area – separate business units
Redefining role of networkTeam based approach to meeting customer need
Business Model - original
Branch managersTraditional banking
AccountsLending
mortgages
Financial planning Managers
Life pensions investment
Private Banking ManagersInvestment Management
Portfolio Planning
Targets Targets Targets
Performance related pay
Performance related pay
Performance related pay
Original – extract monthly reporting
Financials
Actual Plan Variance
£ £ £
Income x x x
Costs:
Staff x x x
Premises x x x
Other x x x
x x x
Profit x x x
New business targets
Actual Plan Variance
Life, Pensions
and Investment
commission (£) x x x
Investment funds(£) x x x
Mortgages value x x x
Current a/c nos. x x x
Live a/c’s x x x
FTE x x x
Financial Results
Original – extract monthly reporting
Financials
Actual Plan Variance
£ £ £
Income x x x
Costs:
Staff x x x
Premises x x x
Other x x x
x x x
Profit x x x
New business targets
Actual Plan Variance
Life, Pensions
and Investment
commission (£) x x x
Investment funds(£) x x x
Mortgages value x x x
Current a/c nos. x x x
Live a/c’s x x x
FTE x x x
Financial Results
Jostling for space for product targets
Targets set at product level
Different basis of measurement
Measurement influenced perception of importance interpreted by staff
Behaviours followed measurement method
Performance Measurement – new business, followed individual business unit methods
Life, pensions and investment business£ Embedded value income basis – actuarial method.Broadly, discounted present value of net cash flows from new business allowing for experience – claims, lapse, death etc..
Investment funds£ Annualised income from new funds
Mortgage funds£ Value of new mortgages
Original – extract monthly reporting
Financials
Actual Plan Variance
£ £ £
Income x x x
Costs:
Staff x x x
Premises x x x
Other x x x
x x x
Profit x x x
New business targets
Actual Plan Variance
Life, Pensions
and Investment
commission (£) x x x
Investment funds(£) x x x
Mortgages value x x x
Current a/c nos. x x x
Live a/c’s x x x
FTE x x x
Financial Results
Good performance on profit line incorrectly seen as measure of achievement
No real link between performance and profit
Hides the reality
No real connection to responsibility
Accountability and controllability issues
Business Model – where we want to be?
Strategy
CustomersCustomer focus - Customer needs driven
People Service and Sales Team
Lending, Mortgages, Life. Pensions. investmentInvestment Management,Portfolio Planning,
Business
Performance Measurement
Issues
Lack of integration at service and sales level
Strategy and operational focus misaligned
Lack of understanding of business dynamics across all levels of the business
Change in behaviours needed
Redefine roles and responsibilities
Alignment from top to bottom of measures
Horizontal as well as vertical link
Improve knowledge and understanding – connect customer information systems, product systems and reporting
Customer needs vs product push. Create performance measurement framework
Changes
Financial Perspective
ProfitabilitySales growthValue Added
Innovation & LearningPerspective
Employee skillsSatisfaction
Information systems
Internal Business Perspective
Service indicatorsQuality indicators
Customer Perspective
Customer satisfactionLoyalty
Market shareCustomer acquisition
How do we look toShareholders?
What must we excel at?
Can we continue to improve & create value?
How do customers see us?
Balanced Scorecard
Change programme included…
Using a balanced scorecard approach to integrate financial and non-financial measures
Creating a common language across diverse product ranges – challenging the measurement framework and redefining what “good” looks like
Improving the knowledge and understanding of the business – ensuring link with strategy.
Linking performance measurement to recognition and reward to assist much needed culture change
How….Focus….
Small, multi- disciplinary team (5!) with clear focus on culture change – authority from the top
Pooled significant resource of knowledge across all “product provider” areas, experience in tools and frameworks plus detailed practitioner experience re “customer facing” staff.
“Champions” selected across the country (20) where culture was more advanced, performance deemed to be excellent in the areas where change needed and where strong leadership skills exhibited. This focus group acted as a feedback forum, pilot testing and as a communication route as implementation progressed
Where do we want to be? extract monthly reporting
Customer satisfaction scores x
Staff satisfaction scores x
Meeting Customer Needs FVA Actual
Life, pensions and investment xPortfolio investment funds xMortgage funds xLending xNew business customersx
Total FVA x
Customer base FVA x
Quality :
Retention measures
Penetration measures …..
Financials Actual YTD
£ £
Income x x
Costs
(exc allocations) x x
Profit x x
Service and Sales Scorecard
Where do we want to be? extract monthly reporting
Customer satisfaction scores x
Staff satisfaction scores x
Meeting Customer Needs FVA Actual
Life, pensions and investment xPortfolio investment funds xMortgage funds xLending xNew business customersx
Total FVA x
Customer opportunity FVA x
Quality :
Retention measures
Penetration measures …..
Financials Actual YTD
£ £
Income x x
Costs
(exc allocations) x x
Profit x x
Service and Sales Scorecard
New basis of measurement – Financial Value Added (points not £)
Product level targets removed
FVA planned by customer base opportunity
Target to achieve Total FVA
Change perception
Behaviours followed measurement method
Financial Value Added (FVA) (points)
Reflects the value added today and in the future from new business.
Broadly, discounted net future cash flows allowing for experience
Points accumulated from a range of activities - lead, referral, sale etc…
Recognises different team members role
18 months….
Focus on customer need – meeting these across full range of products and services
Profit – information only, no plan Financial value added – not £, points Customer information systems identified potential for
meeting customer needs resulting in total FVA Planning and budgets changed, communicated and
aligned to all measures Job objectives and performance related pay linked Joined up planning, allocating responsibility, managing
activity, objectives, measurement and reward
Culture change
Move focus away from product push to customer need Recognition for customer needs delivered – not individual product targets
Reports drilled down – summary at branch
Analysed data by individual, customer, products, penetration etc
Managers managed activity – daily, weekly reporting aimed at identifying steps in customer process
Assisted control over quality and training requirements
Recognition and reward aligned
Key learning points
Learning - shared knowledge and understanding consistent, objective and holistic. Agreement on where we are now
Focus on the controllable
Adapt frameworks and tools - Keep it simple (KISS)
Use a common language to “connect” all areas of the organisation focusing on behaviours required
Key learning points…
Integration - ensure it is embedded in all aspects of management - planning, knowledge, communication, measuring individuals performance (Performance related pay)
Get champions for the cause, celebrate success, share best practice, benchmark “what good looks like”
“Strategy without metrics are only
wishes”(Charles E. Phillips Jr., Co-President
of Oracle)
‘What gets measured gets managed.’
(G.Bennett Stewart III, Stern Stewart)
