Performance Measurement: An Application

In this blog, I wish to apply the Performance Measurement I had discussed in previous blog using the aid of a case. I have applied it in my daily area of operations and found it beneficial in understanding performance


Background

A broking firm has a tie-up with two banks a public sector and private sector bank (let’s call them bank A and Bank B) for sales of their trading account. The banks Savings and demat account is linked with the trading account of the broking firm. This linked accounts enables the bank customers to do seamless share trading i.e. On Buying Shares the shares will come directly into their demat without the need for delivery instruction slip. On selling shares money will come directly into their savings account.

Business Models

In Bank A (public sector bank), the client can trade in two forms,
1) Online with usage of his net banking id and password to transfer funds
2) Offline by calling a dedicated Dealer for these bank clients. Here he need not use his net banking id and funds will be automatically debited (in case of share purchase) from his savings account. The dealer even does outbound calling

In Bank B (Private sector) the client can again trade in two forms
1) Online with usage of his net banking id and password to transfer funds
2) Offline by calling a toll free number, but using his net banking to transfer funds before he calls these numbers, without which he will not be able to place his trades. This is only an inbound calling number

In Bank A’s case, there is a possibility of trading without resorting to net banking or need for internet; Bank B clients have no choice of auto debits

Metrics

I am going to use only one metric here to propound on the application of Performance measurement standards.

Activity ratio is one way of evaluating steady revenues.
Activity ratio is defined as no: of customers traded in a month/total number of customers in the channel*100

Performance measurement(PM)

I am going to measure performance using terms used in the previous blog- actuality, capability and potentiality and apply the same framework to one task at hand(please refer to these terms explained in the previous blog)

Bank A- On an average, the Activity ratio hovers around 45%

Bank B -On an average, the Activity ratio hovers around 10%




My analysis for the difference in activity ratio amongst both bank is due to ease of transferring funds and a dedicated dealer for bank A accounting for these figures

Here the figures 10% and 45% stands for actuality

Applying the framework

I am going to use the PM framework on Bank B

My understanding is that capability for bank B is around 15% (based on activities that can be carried out without any disruption of other metrics)

Suppose the management decides that we need to increase the activity ratio. Then I believe the course of discussion would be as follows

Step 1- the productivity ratio should be increased

Productivity ratio (actuality/capability) for Bank B is 0.66


To increase the productivity ratio, a series of activities that can be carried out without hampering other function. These activities could be as follows
1) Telecalling exercise asking clients to trade, by the sales personnel without affecting his sales calls. Say around One hour a day.
2) Demos to inactive clients by sales personnel’s. (Again without dropping sales calls). Within the given constraints of personnel this cannot be a full time activity in the channel and has to be carried out alongside sales calls.
3) Engaging client by sending trade reports. This can be sent from time to time by sales force to keep the client interested
4) A one time activity involving customer care department to carry a telecalling activity finding out reasons for inactiveness and resolving technical issues etc if any. E.g. client must have lost his trading password, net banking not enabled for shopping mall transactions, not having net banking password etc.

.This would definitely increase the productivity ratio up a few points.

The second course of discussion would be what the extent of Latecy is and how it can be eliminated.

My assumption is that Potentiality would be around 55% active ratio( we already see it at 45% in Bank A) Hence to increase and measure performance of activity ratio without disruption on other metrics the management will have to change its model.



Latency (capability/potentiality) currently is around 0.27
Performance (latency*productivity) is around 0.1782

Now I propose the following steps that can be used to decrease latency

1) Bank B also having the option of trading without resorting to net banking. This can be done changing the product in such manner where customers can block fund instead of transferring fund using netbanking. This is already present in the market.
2) A dedicated dealer who not only can place trades on behalf of client but also block funds in his savings account as soon as a trade is placed.
3) Dealer involved in outbound calling and maintaining relationship

There will be an additional cost of dealer and product upgradation but the benefit will far outweigh the cost.

Conclusion

What I have just proposed is framework that helps in not only measuring performance but the direction one can take with these aids. Also the discussion on numbers is far more solid with these tools.

Definitely there are a lot more factors that can affect activity ratio such as market conditions, but the factors apply to everyone uniformly. Also in such a case, the potentiality itself will change without change in performance numbers. Hence absoluteness on measurement would not be valid.