The slow economic recovery and new government regulations are forcing banks to squeeze the last penny out of every dollar. Banks large and small have been looking for ways to conserve cash, do more with less, combine efforts and invest in only what matters—to improve performance and increase efficiency.
To sustain growth, banks need to manage operating costs and translate strategic objectives into actions that lead to measurable results.
You can’t manage what you don’t measure.
According to a Fortune Magazine article, less than 10 percent of strategies effectively formulated are successfully executed.
Where’s the breakdown? Inevitably, it’s a disconnect between the development and formulation of strategy and implementation. Many banks overlook a critical part of strategic planning—the task of translating their strategy into measurements that can be tracked over time.
Without these kind of measurements, banks have no idea how well their strategy is being executed. That makes it very difficult—or maybe impossible—to reward achievement or take corrective action when performance fails to meet expectations.
A scorecard is a management system that translates a bank’s strategic objectives into a specific set of performance metrics and goals that can be customized to each branch, department and team. In short, a scorecard provides timely and relevant information to measure, monitor, and manage progress.
Even though financial institutions plan carefully and develop strategic objectives, they often fail to communicate them effectively with their employees. According to Balanced Scorecard Collaborative, 95 percent of the typical workforce doesn’t understand its organization’s strategy.
A scorecard can help your bank clearly, consistently and concisely communicate key strategies and goals to all employees.
By communicating your strategy and linking it to goals, scorecards create a shared understanding and commitment among all bank employees. When everyone understands your bank’s goals, as well as the strategy for achieving those goals, all bank efforts and initiatives become aligned.
Scorecards can be used as a motivational tool to help employees reach their goals and improve their performance. For example, when bank staff is aware of the metrics used for their evaluation, they typically strive to perform well on those measurements.
Seeing how their performance stacks up with their peers fosters a competitive environment—everyone wants to be viewed as a top achiever and not as an under-performer. And that means employees will be more inspired to strive to reach their individual goals and contribute to team performance.
Besides being effective at motivating employees, scorecards also help banks hold their staff accountable. Without accountability, measures are meaningless. And without measures, it’s difficult to transform or change a bank’s culture.
To be held accountable, staff needs to know their role in affecting the outcome and the expectation about how they can affect the measures. As an example, a bank may measure retention and ask its people to reduce attrition by 10 percent, but fail to provide them with the tools and means to meet this goal.
Success today is contingent on your bank’s ability to set expectations, motivate and hold staff accountable for their actions and results. Scorecards make it possible to monitor and measure performance, and analyze and share tangible data with all your employees.