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
 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
1987
1990
2000
Financial Service Act, changed role
of “banking” from traditional
savings, deposit and lending
Life, pension, insurance
Investment
Portfolio management
Business sector
Cost 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 network
Team based
approach to
meeting
customer need
Business Model - original
Branch managers
Traditional banking
Accounts
Lending
mortgages
Targets
Performance
related pay
Financial planning
Managers
Life pensions investment
Private Banking Managers
Investment Management
Portfolio Planning
Targets
Targets
Performance
related pay
Performance
related pay
Original – extract monthly reporting
Financial Results
New business targets
Financials
Actual Plan Variance
Actual Plan Variance
Life, Pensions
and Investment
Income
commission (£)
£
£
£
x
x
x
x
x
x
Costs:
Investment funds(£) x
x
x
Staff
x
x
x
Mortgages value
x
x
x
Premises
x
x
x
Current a/c nos.
x
x
x
Other
x
x
x
x
x
x
x
x
x
Live a/c’s
FTE
x
x
x
x
x
x
Profit
Original – extract monthly reporting
Financial Results
New business targets
Actual Plan Variance
Financials
Jostling for space for product
Actual Plan Variance
targets
Life, Pensions
£ level£
Targets set at £product
and Investment
Income basisx of measurement
x
x
Different
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
FTE
x
x
x
Costs:
Measurement
influenced
perception of importance
Staff
x
x
x
interpreted by staff
Premises
x
x
x
Behaviours followed
Other
xmethod
x
x
measurement
x
x
x
Profit
x
x
x
x
x
x
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
Financial Results
New business targets
Good performance on profit line
Variance
incorrectlyActual
seen asPlan
measure
of
achievement
Life, Pensions
No real link between performance
and Investment
and profit
commission (£)
x
x
x
Hides the reality
Investment funds(£) x
x
x
No real connection to
Mortgages
value
x
x
x
responsibility
Financials
Current
a/c nos. and
x controllability
x
x
Accountability
issues
Live a/c’s
FTE
x
x
x
x
x
x
Actual Plan Variance
£
£
£
x
x
x
Staff
x
x
x
Premises
x
x
x
Other
x
x
x
x
x
x
x
x
x
Income
Costs:
Profit
Business Model – where we want to be?
Strategy
Customers
Customer focus - Customer needs driven
Performance Measurement
People
Service and Sales Team
Lending, Mortgages, Life. Pensions. investment
Investment Management,Portfolio Planning,
Business
Issues
Changes
 Lack of integration at service
and sales level
 Strategy and operational
focus misaligned
 Redefine roles and
responsibilities
 Alignment from top to
bottom of measures
Horizontal as well as vertical
link
 Lack of understanding of
business dynamics across all
levels of the business
 Improve knowledge and
understanding – connect
customer information
systems, product systems
and reporting
 Change in behaviours
needed
 Customer needs vs product
push. Create performance
measurement framework
Balanced
Scorecard
How do customers
see us?
Financial Perspective
How do we look to
Shareholders?
Profitability
Sales growth
Value Added
What must we
excel at?
Internal Business
Perspective
Customer Perspective
Customer satisfaction
Loyalty
Market share
Customer acquisition
Service indicators
Quality indicators
Innovation & Learning
Perspective
Employee skills
Satisfaction
Information systems
Can we continue to
improve & create
value?
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
Service and Sales Scorecard
Customer satisfaction scores
x
Quality :
Staff satisfaction scores
x
Retention measures
Penetration measures …..
Meeting Customer Needs
Life, pensions and investment
Portfolio investment funds
Mortgage funds
Lending
New business customers
FVA
Actual
x
x
x
x
x
Financials
Actual YTD
Income
£
£
x
x
Costs
Total FVA
x
(exc allocations) x
x
Customer base FVA
x
Profit
x
x
Where do we want to be? extract monthly reporting
Service and Sales Scorecard
Customer satisfaction scores
x
Quality :
Staff satisfaction scores
x
Retention measures
Meeting Customer Needs
FVA
Actual
Penetration measures …..
New basis of measurement –
Financial Value Added (points not
£) Financials
Actual
YTD
Product level targets
removed
Life, pensions and investment
Portfolio investment funds
Mortgage funds
Lending
New business customers
x
x
x
x
x
Total FVA
x
Change
perception
(exc allocations)
Customer opportunity FVA
x
Behaviours
followedx
Profit
measurement method
£
£
FVA planned by customer
base
opportunity
Income
x
x
Target
Coststo achieve Total FVA
x
x
x
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)