Citibank – Performance Evaluation
INDIAN INSTITUTE OF MANAGEMENT LUCKNOW Written Executive Communication PROJECT REPORT Citibank – Performance Evaluation Submitted to – Dr. Payal Mehra Date – 26/10/2012 Submitted By Group 8, Section C Anuradha Tyagi (PGP28128) Aditya Singh (PGP28158) Bholendra P. Singh (PGP28143) K. Aditya Das (PGP28139) Vishal Raju (PGP28155) Shweta J. (PGP28159) Table of Contents 1. Abstract2 2. Brief Overview of the current situation3 3. Strategy for Case Analysis5 4. Case Analysis6 5. Recommendations9 6. Implementation11 7. References12 Abstract
Frits Seegers, President of Citibank California was put in a tough spot when he had to evaluate James McGaren. Mr. McGaren had for long been a good performer, but with the new performance evaluation criteria that take customer satisfaction into consideration, he fared “below par”. It is now up to Mr. Seegers to take a call on James, should he be given an “above par” or a “below par” rating and how will this be communicated to him. Brief Overview of the current situation James McGaran is the manager of the flagship office of Citibank in the Los Angeles area which also happens to be the most important of Citibank’s 31 branches.
He has been a veteran not just in the banking sector but also at Citibank. He had delivered impressive financial results for four years in a row exceeding expectations every single year. But when customer satisfaction was included as a decision parameter in when it comes to evaluation, it was evident that James did not fare very well on that front. The new criteria for employee evaluation are as follows: * Financial Measures: Focus was on total revenue and profits * Strategy Implementation: Tracks revenue from a particular segment relevant to the Bank’s strategy. Customer Satisfaction: Surveys were conducted. Emphasis was laid on long term association. * Control Measures: Based on banks internal control processes. If rating < 4, bank is said to be at risk. * People and Standards: Focused on the efforts of the manager to develop and communicate with peers/ employees. Based on the employees performance in these factors a rating was given, the various ratings that can be given were “Par”, “Below Par” and “Above Par”. Finally, a global rating and overall rating for the manager was awarded.
Due to the change in performance evaluation criteria, two major complications flared up: First and foremost, Lisa Johnson has to decide the rating of James. According to bank’s rule an employee can be given above par rating if and only if he is performing at par in all the criteria. John has been excellent at five performance measurement statistics but lags in one i. e. customer satisfaction. So as per the rules he can be given “at par” rating at best. But Lisa believes that John deserves an above par rating because of his excellent work when it comes to revenues.
Secondly, if Lisa decides to give him an “at par rating”, she has to decide the best possible way to communicate her decision. She has to inform him in such a way so that it does not have any negative effect on James. Lisa wants James to stay with the company and she has to make sure that the message is communicated properly. It is clear that James will not accept a “below par” rating and at this juncture, Citibank cannot afford to lose an employee of James’ stature. This is a typical Human Resources related situation which has to be dealt with extreme caution, else there can be dire consequences.
Should James’ ego be hurt, there is a good chance he will quit the company and with his credentials, he should not have much trouble getting another job. At the same time, should he be given an “above par” rating, it would go against the long term vision of the company. Strategy for Case Analysis This case focuses on the performance evaluation James McGaran. Though the performance evaluation parameters adopted in Citi is highly quantified, the performance of Mr McGaran is better measured qualitatively. With a consistent “above par” rating Mr.
McGaran has been a model employee. His financials were outstanding- 20% above target. His strategy implementations were highly rated. It was his branch that generated highest revenue and made the greatest margin contribution to the business. The only area he lagged was “customer satisfaction” rating. James McGaran was extremely sensitive towards his ratings. He had worked hard to improve the customer satisfaction rating during the last quarter. He felt that extremely disappointed that even with fabulous financial results his rating had suffered due to customer satisfaction.
The customer satisfaction rating depends on many factors like the location of the bank, the kind of customer it catered to etc. Mr McGaran’s branch was in Los Angeles. It catered to some really high profile people. The expectation of such demanding clientele from the branch would be comparatively higher. Besides the customer rating also involved Citibank services rating over and above the branch rating. Hence, judging it on completely quantitative factor wouldn’t provide a completely objective rating. Case Analysis Analyzing James on the new parameter is a very difficult task.
As James is the manager of the most challenging branch with highly demanding clientele, it is difficult for him to be the best on all the parameter specially customer service. In five out of six parameters James has been rated above par and it is only the customer service where he has been rated below par. Now as per the new parameters he cannot be rated above par overall. But the question is whether it is rational to not rate him above par. Now if we closely analyze the bank headed by James it is clearly visible that it is one of the most demanding banks in the region not only among Citibank branches but also among rivals.
The no. of employees at the bank are just sixteen while the clientele of the bank ranges from Households on one end to sophisticated Business customers on the other and Mom and pop store to the sophisticated retail store on the other. Now this diverse clientele has equally diverse customer service requirements. Customer service requirements of one are different from those of the others. So with a employee bas of just sixteen employees it was practically impossible for the branch to provide a very high level of customer service to the clientele.
What made things worse for James was that his branch was to bear the blame for the lack of customer services for services such as ATM for which branch was not responsible but the Citibank as a whole was responsible. To add to the woes of James, one of the employee was absent for the third quarter. So very little was in the hands of the James to improve the services of the branch. The huge size of clientele was also causing problem for the branch of James as the no of branches of Citibank were significantly lower than the rivals, so the no. f clients per employee were very large and hence customer service for his branch was very bad. The biggest hurdle in the promotion of James was that other managers were looking at James. If Seeger gave any benefit to James then the other managers would also demand the same benefits and as such the entire performance evaluation system may fail. Also there was a fear that other managers may not take the new performance evaluation system seriously and the sole objective of the bank may to provide relationship banking may fail.
But Seeger also knows that the performance of James was remarkable and that he should be awarded for it but at the same time he was not meeting the criterion. Also Seeger had a fear that if James is not awarded than he may be demoralised to excel at the bank and bring those above expectation financial results. Now analyzing, the new scheme proposed by Seeger to evaluate the performance of the managers. The new Scheme fails to count various factors. The new scheme has various pros and cons. Analyzing these pros and cons it is very clear that the scheme is falling short of perfectly evaluating the performance of the managers.
As the scheme says that out of six parameters if the manager performs below par in even only one parameter his overall rating cannot be above par. The scheme takes an account on the downside of the performance but does not account for the excellent performance on the other fronts. Let us take the case of James, he was rated excellent in five out of six parameters but still he was not rated above par because his performance in one parameter was below par. The scheme concentrated on the downside of the performance but not on the upside.
In fact the scheme became a tool to punish the managers rather than rewarding them. In place of this the bank should have weighted all the six parameters with a minimum performance limit in all. In this case one could compensate the lack of performance in one parameter by excelling in other parameters. The other major shortcoming of the policy was that the policy talked of minimum performance levels. But it failed to talk about exceptional performances. As financial performance of James branch was higher than what was expected of the branch. The bank was failing to reward this exceptional performance.
This was highly demoralising for James as he is not rewarded for his financial performances as that was improving the bottom-line of the company. Also one of the problems that was there with customer satisfaction was that the branch was not responsible for all the services as some services like ATM were provided centrally by the Citibank. And so the branch was not responsible for any lack of service but it was held accountable for that. Also another serious issue was that the bank targeted relationship banking but the number of clients per employee were very large as compared to the rivals.
The situation was worse in the case of James as he had a very diverse clientele and only sixteen employees so it was very difficult for him to perform above par in the Customer service parameter. On analyzing it is very clear that the bank’s performance evaluation scheme has many shortcomings which have to be taken care of else the deserving manger would rather be punished than getting rewarded. And if this policy implemented as it is, it may lead to demoralization of employees and fall in overall performance of the company. Recommendations
Since five of the six performance measures in James’ year-end evaluation were “above par”, the customer satisfaction rating was the only one that caused a significant challenge and had substantial financial repercussions for James’ year-end bonus, which was a significant part of his base salary. Based on his customer satisfaction scores, which was “below par” according to the banks written guidelines, his total evaluation could be only “on par” in spite of the fact that he excelled in five other performance areas. In this backdrop two alternatives exist for the company: Implement Lisa’s decision:
According to Lisa the evaluation could cause James to consider leaving the company, not even so much because of the reduced bonus, but also because of the feeling of being treated unfairly or not being valued by the company. She recognized that losing James would be a significant loss for the bank, notwithstanding the fact that it would be hard to find as qualified and dedicated manager as James for the particular branch wherein he brought about a dramatic improvement in customer satisfaction score in the fourth quarter from 54 to 72 and took personal pride in successfully running the hardest branch in the division.
Not only would it be a substantial financial shortfall in total annual compensation for James, but it would also deal a blow to his self-esteem. She was in favor of providing the due to James even though the branch couldn’t perform under customer service parameter. The outcome of the decision would have been: a. Awarding of ‘above par’ rating to James b. Overriding the system and provide James with a bonus of 30% The decision will reward James’s hard work and commitment towards the organization and will provide him the boost and motivation to perform better. However, there are cons to the decision which are much critical than the gains: a.
Resentment among other 30 Branch Managers will develop and they will also demand the compensation even though they weren’t able to achieve all the parameters. Thus achievement in any five parameters of the six will led them to demand the same level of compensation even though the efforts and results are not in commensuration with James one. This is attributable because of the range provided in the Performance evaluation sheet. b. Undue favor or biased decision will harm company’s management team reputation and will act as a precedent for deviating from defined standards. c. The very motive of the bank to improve upon the customer atisfaction level in the branches will be defeated as there wouldn’t be an incentive or motivation for James to achieve the parameters as laid down in the performance scorecard. Follow standard norms and communicate openly detailing company’s objective and concern: This alternative also serves as our recommendation for the company to adopt in this particular case. As James is not only ambitious, highly qualified employee but also a mature person. He should be briefed by both the officials in a special meeting to explain company’s position and adopting a decision to remain consistent across the bank.
Even though he delivered an exceptional performance, the customer survey was the sole reason to give him an overall par rating which led to lowering of his bonus. He should be recognized and rewarded suitably for his overall excellent performance and management should express concern of their inability and problem to reward his actual contribution by rating him above par. All the reasons cited above should be duly explained to him and also future steps to be taken by the management for the improvement of the performance scorecard should also be mentioned accordingly so that his future results are not jeopardized.
He should be assured of the best possible addressing of his requests and branch issues by providing him the highest priority in the issues concerned. Implementation This is the first year the balanced scorecard was implemented. Thus, the shortcoming of the scorecard is to be addressed so that all the areas are measured appropriately. Management should review the survey and get some input from Branch Managers on what indicators are more suited towards customer satisfaction which are totally under the control of th branch and not externally linked.
As a token of valuing James performance highest priority is to be assigned to his requests and he should be guided properly in the area of customer satisfaction There may be possibility of balancing other exceptional achievements with other areas and keeping rewards for some of the essential parameters separately. This will act as an additional incentive for people to always perform to the best of their capabilities. References * http://hbr. org/product/citibank-performance-evaluation/an/198048-PDF-ENG * Dr. Payal Mehra (2012), Business Communication for Managers, Pearson Education
