Finding SLA Better KPIs for a Bank

KPIs don’t work without a proper business context! Right?! Then how is one supposed to get this business context? If KPIs are just a tip of the iceberg, then let’s talk about the iceberg itself! Here is a business story or a case study reworked and prepared for publishing with the  permission of the client.  

Why KPIs are just a tip of the business performance iceberg

A client from the banking industry contacted us with a request to “prepare better KPIs for SLA.” They had a Service Level Agreement (SLA) between customer service and bank card embossing units. According to the statement of the management these units were under-performing and they hoped to change the situation with better KPIs.

The review of SLA

I’ve briefly reviewed the SLA document, and it was full of the technical details, definitions of the communication methods, and the response time requirements. Sometimes the text was really formal, and it looked like the author had to put something there just because it was required by bank standards; sometimes there were some technical details about bank’s back office that did not sound familiar to me.

  • The only performance indicators implemented were time deadlines for the communication between business units.

After this short review I wanted to understand what exactly the problem was and what exactly was under-performing. Together with the client we started analyzing the situation. The client named some typical problems that both business units face regularly, such as late delivery by the embossing unit or the providing of incomplete information by customer service.

  • I’m simplifying, but the idea of the customer was that good indicators would help to monitor the proper delivery time and ensure that the two business units exchange the correct data and worked well as a result.

Where is a bottleneck?

Instead of reviewing all of the minor business processes one by one, I asked a simple question:

  • What process described in SLA limits the performance the most? E.g. where is the bottleneck of the process described in this SLA?

It was the first insight for the customer. He agreed that the bottleneck should be somewhere there, but reviewing the SLA document again and again did not help much. It was loaded with technical details, but even for a bank employee it was hard to see the big picture.

  • We agreed that it is better to map the most important steps of the SLA in some type of graphical form.

How the customer value is communicated

I continued asking questions about the under-performance and how it was  defined. This time we talked about the value that the bank provides to the customer, why customers open an account, and what the lifetime value of the customer is for the bank. The bank defined some strategic priorities via such vague statements as “to provide the best financial service,” and some were more specific ones like “provide access to banking service from anywhere, using desktop, tablet, or smart phone devices.”

I asked how these values are translated down to the customer service unit. The problem was that nobody thought about this seriously.

  • For example, many bank clients used an iPhone app to access their account. But when they needed to contact their personal manager they were redirected to the main websites that was not optimized for smart phones and customer was supposed to fill in a detailed contact form that obviously repeated information that the bank already had.

In the search of the reasons for the under-performance 

According to the top management one of the aspects of the under-performance were clients who stopped using the services of this bank actively and finally closed an account.

  • The only thing that customer service did in this case was ask a single question: “Why did  you close an account?”

There were some predefined answers like “relocation to other country” or “moving to another bank,” and it was not a surprise that most customers just answered that they opened an account in another bank, while the real reason was not revealed.

A way to improve

For me it was obvious that another set of performance indicators wouldn’t help much. I suggested top managers to:

  • Map again the current risks, challenges, and problems that the bank faced.
    • The biggest problem with customer retention was that there was no clear segmentation of the reasons why customers closed an account.
  • Update the strategy map accordingly with specific objectives.
    • On the top level of the strategy map the two general directions were: attract more clients and control customers’ retention.
    • The bank decided to implement a specific business system to professionally survey customers that are closing their accounts.
  • Use this strategy map to communicate objectives to the departments.
  • Assign specific performance indicators.

Bank Strategy Map in BSC Designer

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The first results were amazing: well formulated questions asked in the right way revealed some problems that were significant for customers:

  • It appeared that getting a copy of the accidentally lost monthly statement was a real nightmare for a customer.
    • In some branches customers were told that it was  not possible, in some they were asked to pay a fixed fee, and only in some was it done for free. Bottom line: there was no standard procedure for that.
  • The biggest security concern as perceived by customers was that transactions were not confirmed via SMS.
    • An early warning signal for this were calls with questions about how to activate this service. Unfortunately, call center specialists had no other opportunity, but just to tell that there is no such  function yet.
  • The process of card recovery (in a case card details were compromised or the card was lost) involved complicated paperwork.
    • Several customers were living in other countries and they were told that they needed to do all the paperwork personally in the bank’s office, which meant  unplanned travel costs for them.

Communicating the strategy to the departments

The big picture of the value provided to the customer was much clearer now for the management. Now, it was not just a set of vague concepts, and management knew exactly what the biggest issue was for their clients. Once the real reasons of the under-performance were revealed they were able to communicate these new requirements to the lower levels.

For example:

  • In a case a card was lost or card details were compromised when a client was traveling abroad, customer service suggested the client  send his new card to the hotel with a high-priority post so that the client would have it in a maximum 2-3 days, or sooner if there was a branch of the bank nearby. This change involved high mail costs, and required some logistics updates, but the number of customers who were closing an account in this case was reduced to zero.
  • The time needed to get a copy of the monthly statement was reduced to 3 minutes on average if a customer was visiting the bank office and it was as simple as 2 clicks if a customer used online banking.

In both cases the additional services were provided for free, and the costs were compensated by a longer customer lifetime.

KPIs and simple indicators in SLA

Before, only the “total retention rate” was measured. That approach actually hide a part of the picture. In the updated version the retention rate KPI was formed by the average of retention rates based on the reason for leaving the bank:

  • Clients lost due to the relocation [weight = 2]
  • Clients lost due to the card security issues [weight = 3]
  • Clients lost due to the administrate issues [weight = 5]

Clients lost due to the relocation had a lower relevant importance (the weight), as management did not see any way to affect it.

Bank Strategy KPIs in BSC Designer

View View Bank Scorecard online in BSC Designer Bank Scorecard online, sign-up with a free account to unlock all functions.

Some additional indicators were implemented into SLA between customer service and card embossing units, for example:

  • For customer service unit: time to react on a “card lost abroad” query.
  • For embossing: time to reissue and send a card processed as “card lost abroad.”

The top managers saw a single indicator “Lost card processing time,” which was formed by a sum of two child indicators.

Finally, some local indicators for process monitoring were implemented:

  • Time to reissue an account statement in the bank office.
  • Client’s time for the paperwork related to the lost card.

Needless to say, all of the indicators were aligned with specific business objectives. Those objectives were placed on a map where they were linked by  cause-and-effect connections with each other and the performance factors.

KPIs is nor the problem neither the solution

With this case study I wanted to show that the KPIs in the most cases are not the problem, and neither are they a solution. When a company searches for a KPI, it actually searches for an in-depth analysis of the current business situation. And it is important to do it before implementing any KPIs.

Here is a checklist that might help:

1. Understand the biggest business challenges.

  • What stops customers from buying?
  • Why do clients leave the company?
  • Are there any bottlenecks that limit performance?

2. Define a possible reaction regarding these challenges.

  • What can a company do to fix this?
  • What problems are outside the company’s interest?

3. Update business systems, and translate these ideas to the lower levels.

  • How can a company’s employees help to achieve these business goals?
  • What business systems do you need to implement?

4. Implement control points to make sure that everything is working properly.

  • How do we know that what we did actually helped?
  • How do we know that we are continuing to do  it in the right way?

Finally, let me repeat another commonplace idea: a performance management is a marathon, not a sprint. Be prepared to repeat this analysis frequently, and to take into account new challenges and ever-changing business conditions. Whatever the case is, it is always wise to start with initial business conditions and then move to the specific KPIs.

Download the project of BSC Designer that was discussed in this case study. To open the project you will need to download BSC Designer PRO.

Use View Bank Scorecard online in BSC Designer Bank Scorecard discussed in this article as a starting template for your own scorecard!

Sign-up with a free account to unlock all functions of the software. Learn how to copy template scorecard to your account.

View Bank Scorecard online

How is performance management analysis/review organized in your company? What tools do you use to describe the strategy and support its implementation?

Related Articles

Scorecard Expert | Speaker | CEO. Aleksey Savkin (LinkedIn, @bscdesigner) is helping companies to better formulate their strategies and make the process of strategy execution more tangible with KPIs. New book by Aleksey: 10 Step KPI System

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