Delivering effective performance management in the financial services sector

Streamlining operations, enhancing efficiencies and monitoring performance is critical in the financial services sector.

January 30, 2013

By: David McWilliam, Director at Cortell Corporate Performance Management

Streamlining operations, enhancing efficiencies and monitoring performance across various business units, divisions and branches is critical in the financial services sector. This is the only way for banks to remain profitable, as their prices for ‘selling’ goods and services are determined by the market. Competitive advantage is intrinsically inked into efficiency, innovation and the ability to service customers effectively, and measuring and understanding Key Performance Indicators (KPIs) against predetermined metrics is key in achieving this. For these reasons, Performance Management (PM) is seen as a vital tool in financial services.

However, where many organisations go wrong is in assuming that technology is a ‘silver bullet’ which will automatically deliver the required data in a format which is easy to understand and consume. The reality though is that before technology can deliver, the underlying data needs to be clean and available, and business objectives and goals clearly understood. Ensuring effective PM requires the traditional gap between business and IT to be bridged, so that technology investments are then able to deliver returns and perform as required by the business.

While dashboards and scorecards, which are the end result of performance technology solutions, can help financial institutions to analyse data and produce it in an easily understandable format at a very granular level, in order to leverage this technology it is crucial to have the right information to begin with. This requires drivers and KPIs to be determined, which will help to set goals for operational performance.

However, the biggest stumbling block many organisations face is the actual capturing of the relevant information that will enable these performance goals to be measured. Any goal that is set for measurement without adequate data will be unable to be reported upon, with the result that the dashboards and scorecards will be incomplete. This failing is often blamed on the technology itself, when in reality this is not the case. In order to accurately set goals and measure performance, it is critical for a financial institution to understand the business and its goals and drivers, as well as what can physically be measured, and then to ensure that the data is available to do so.

When embarking on any PM project, it is therefore crucial that business and IT work together. The IT department is often tasked with finding the right technology, in isolation from the business users, creating a well known disconnect. Partnering with a vendor that has strong consulting skills along with technical expertise can go a long way towards bridging this gap.

Software and technology are enablers, but in the case of PM the real value for financial institutions lies in the skill of the consultants. A skilled consultant with expertise in both financial and operational performance will be able to understand the issues faced by banks, and work with customers to resolve these challenges. Working closely with a partner who can provide the right technology as well as the business knowledge and understanding to make the technology work will ensure that PM initiatives deliver true value.

At the end of the day, the onus is on the financial institution themselves to understand precisely what they need to be measuring and what information they need to do this. Technology is a useful tool for replicating processes and analysing large volumes of data, but if the processes themselves do not function on a local level the technology will be of very little use. However if it is not linked into business goals and objectives, technology will not achieve the desired result.

Understanding the business and the business processes, and knowing what information is needed and available are critical steps in performance management initiatives. PM is not a technology decision, but a business decision. This means that bridging the gap between business and IT is vital, and choosing a partner that can deliver both the business and technology aspects will go a long way towards ensuring performance management success.