July 7, 2014

Banking Performance Programs

For the last 10-12 years, much of my work has been with mid-market banks.  The corporate culture of most banks, especially mid-market banks, is based on tradition and a history of personal relationships with customers. Many banks were founded by the grandfather or great-grandfather of the current President, so banking is the family business. There is great pride in having served customers for over 100 years. It is no surprise then, considering how the economic crisis imposed dramatic changes on the banking financial model, that traditional business processes and behaviors are not producing desired – required – results. What will it take to help mid-market banks survive and prosper through this challenging period?

Consider how leading companies in other industries produce sustained high performance. Most start with a formal Strategy Statement with Vision, Mission and Value Statements, and then develop a plan to fulfill the strategy. The plan is usually based on a performance model, like the Balanced Scorecard, Six Sigma, Economic Value Added, and other models. We can say, “That doesn’t apply to us,” or “Only the big companies can do that.” But it does apply to mid-market banks, especially when a good plan and solid execution are required for survival.

A growing number of banks are beginning to use some form of a Balance Scorecard as the basis for developing plans and measuring leading and lagging performance indicators. Lagging indicators are the results we want to see: EPS, Account Growth, Net Income, Asset Growth, etc. These metrics are directly impacted by leading indicators, the business processes that nurture and produce the  lagging indicators of growth and profitability. Leading indicators include, but are not limited to: Customer Contacts (e.g., calls, letters, events and meetings), Customer Satisfaction, Associate Satisfaction, Account Attrition Rate and others.

It is an iterative process to define strategically aligned goals and objectives, implement strategic initiatives with business process and outcome metrics, measure activity, analyze results, make adjustments, set new goals and re-execute the plan. If we do this annually, we will all be long dead before any real progress is achieved. Performance Management must be ongoing. Leading Performance Indicators must be measured daily and analyzed weekly to maintain high productivity. Lagging indicators are traditionally measured monthly.

Rather than try to put all my thought into a single message, I’ll submit this for your consideration, and submit additional thoughts about Banking Performance Programs - and Banking Performance Analytics - in subsequent messages.

Comments and challenges are invited and encouraged.

“If the laws are not observed, rogues and scoundrels can present themselves as perfectly normal. If standards of performance are not observed, incompetents and mediocrities can present themselves as stars." – R. Emmett Tyrrell