Consequently operations were not managed with the same discipline and rigor as

Consequently operations were not managed with the

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Consequently, operations were not managed with the same discipline and rigor as front-office functions. In our experience, the reasons for this phenomenon are simple: Links to strategy. Strategy was tied to front-office functions, with operations simply providing the requisite services. Any linkage between operations’ performance and strategic objectives were ad hoc at best or considered unimportant at worst. Availability of data. Performance metrics came from accounting departments, which sourced the information from the profit centers and operations in their general ledger. Individual operations areas, on the other hand, made limited efforts to develop strategic performance measures. Familiarity with data. Senior managers focusing on financial results were typically interested in metrics they could easily relate to the bottom line. Managers were unwilling to step outside their comfort zone and work with data related to operational drivers, such as FTP rates, transaction costs, percentage of transactions processed manually versus electronically, and error rates.
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6 Strategy& Driving change While some financial services companies continue to “manage by gut” when it comes to operations, industry changes demand a more comprehensive way of understanding and reporting performance. Over the past several years, it has become increasingly important for financial services companies to use a balanced set of measures focusing on both value and cost to understand the performance of operations. Two important levers contribute to this change: Shared services and outsourcing. Shared services and outsourcing arrangements have moved operations away from the direct management of individual business lines. Because these new arrangements require operations to meet the needs of multiple business partners, it is increasingly important that operations managers understand and demonstrate the value of the services their functions provide. On the other side of the equation, business line managers now have less direct control over these support functions and consequently require new ways to ensure that their needs are being met. Performance measurement as a differentiator. As top-line growth becomes more difficult, effective operations management through performance measurement is emerging as a competitive differentiator. For example, The Bank of America Corporation 1 underwent an effort in 2001 to implement a performance measurement system that linked key metrics with high-level strategy. By 2003, the effort resulted in a 9 percent increase in customer “delight,” a 100 percent increase in the number of checking accounts, 640,000 net new savings accounts, and growth of 16 percent in earnings per share. A performance measurement program that is comprehensive and metrics-driven can help financial services companies meet these challenges ( see Exhibit 2, next page ). Such a program features scorecards for each operations division and includes key financial and non- financial performance metrics, targets, and a driver map that links
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