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PROFESSIONAL PRACTICE Holistic

performance
Holistic performance management
management: an integrated
61
framework
Bjørn Andersen
Department of Production and Quality Engineering,
Norwegian University of Science and Technology, Trondheim, Norway, and
Bjørnar Henriksen and Wenche Aarseth
SINTEF Industrial Management, Trondheim, Norway

Abstract
Purpose – The work presented aimed at developing an integrated framework for holistic
performance management.
Design/methodology/approach – The research was carried out using an action research approach.
A case study was used as the basis for developing a pilot framework for performance management,
involving both employees in the case organization and researchers. The research is based on
theoretical contributions within performance management, total quality management, and trend
analysis.
Findings – A generic holistic performance management framework is outlined, encompassing
diverse areas that need to play together and reinforce each other to give full effect to an organization.
The main focus is a case study of a bank office, where a tailored version of the performance
management framework was developed to give a setting where all these elements now are harmonized
and work together.
Research limitations/implications – The framework must be viewed as a pilot that should be
further tested in other types of industries/organizations to verify its validity on a broader basis.
Originality/value – The generic framework for integrated performance management is novel and
seems suitable for adaptation to many different industries and types of organization and can function
as a guideline to avoiding launching concepts and programs that ultimately do not cancel each other
out as their inter-linkages have not been understood.
Keywords Performance management, Action research, Total quality management
Paper type Case study

Introduction
It has been said and documented so many times, it hardly requires repeating that the
competitive setting enterprises find themselves in becomes gradually tougher and
tougher. There are more and fiercer competitors, customers grow ever more
demanding and are used to having suppliers at their beck and call, while society at International Journal of Productivity
large expects higher standards pertaining to the environment and ethical issues. The and Performance Management
Vol. 55 No. 1, 2006
response from enterprises, supported by research, has been to come up with a pp. 61-78
continuous string of new ways to create a competitive advantage, resulting in an q Emerald Group Publishing Limited
1741-0401
extreme proliferation of new management concepts and tools, e.g. customer DOI 10.1108/17410400610635507
IJPPM relationship management, balanced scorecard, e-business, supply chain management,
55,1 knowledge management, and so on.
Each of these concepts and tools is in its own right a reasonable and sound
contribution to some aspects of the pressures and challenges faced by enterprises.
Eminent business managers, researchers, and consultants have pushed the various
concepts and tools far, often to a point where many of them have reached a status as
62 academic fields of their own, promoted by specialist experts and die-hard
“missionaries”. By implementing them, many enterprises have achieved tremendous
results, no doubt. However, there are probably equally many that have pursued a
certain concept, found that it did not quite suit the organization, and moved on to
another one, often to find the same thing happening yet again. This is a fairly accurate
depiction of the phenomenon first observed by Pascale (1990). He systematically
mapped launches of management concepts and found that the number of new concepts
increased dramatically, most of them ending up as “business fads” tempting
enterprises to move from one concept to another without staying the course and seeing
implementations through.
Pascale’s mapping covered the period from 1950 to 1990, but there is no reason
to doubt that the same trend has continued right up to the present day. One
observation, admittedly speculation on our part, is that the truly overarching,
cover-it-all management approaches are fewer and farther between lately. Instead,
concepts and tools seem to a larger extent to target certain areas of an enterprise’s
life and operations. Coupled with what seems to be an unquenchable thirst for
new tools, we see that enterprises now more often take on board several concepts
simultaneously, in some cases concepts that complement each others, in others
they contradict one another. Ultimately, what frustrates us in our observations of
companies is that they allow such a fragmented approach to business management
to endure, seemingly unaware of the problems this causes or the potential not
fulfilled.
Being as fascinated by new management concepts as the rest of the research
community, we clearly see that each new concept brings something new to the table (as
documented by Pascale and his illustration of the residual impact of the business fads,
see Figure 1). As such, we do not believe the answer is to abandon existing concepts
and convince researchers and practitioners alike to stop the invention of new ones.
Rather, we believe the answer lies in taking a more holistic position when deciding on
an enterprise’s responses to external and internal challenges. Not in any way
attempting to create a new buzzword, we think the answer is holistic performance
management, meaning simply that instead of allowing various concepts and tools to
develop haphazardly throughout the organization, they must be harnessed and put into
an overall framework where their inter-linkages are understood. This way, concepts
and tools can be selected based on their fit into the overall model and designed to
support each other.
This paper uses a case study from a bank to illustrate how holistic performance
management can be brought to life in an industrial setting. The industry branch and
specific enterprise selected as a case was, however, chosen more out of convenience
than specific characteristics of the organization. We believe that the approach taken in
the case study is highly generic and applicable to most organizations. Thus, we have
used the case example to develop a general holistic performance management
 Holistic
performance
management

63

Figure 1.
Impact of business fads

framework that we think can be used in any business setting to create structure and
coherence among management concepts and tools pursued by a company.

Theoretical background
Although we have been active within the fields of business strategy development,
performance measurement, business process orientation, and so on for several years,
we do not know of any generally agreed-upon definition of “performance
management”. In researching this paper, we have looked for one, but found that
very few have attempted defining the term. Extending the search beyond academic
literature and to more general web sites yields more results, but typically of a less
useful nature; “Performance management is actively monitoring the organization’s
performance levels to continuously improve” and the likes appear. Most of these “light
weight” definitions link performance management to some sort of continuous
performance measurement, which is indeed part of the package, but far from the only
important aspect. From this, we simply conclude that performance management as a
term has not yet been well defined. As our work and this paper are not about defining
terms, this is not a major disappointment to us.
Let us move on to see both whether any existing management concepts come close
to qualifying as “holistic” and which of these typically belong to a holistic framework.
In his mapping of business fads, to use Pascale’s term, he listed concepts ranging from
more limited ones such as “experience curve”, “quality circles”, and “matrix” to much
wider ones, e.g. “value chain”, “just in time”, and “globalization”. Except for the fact
that all of these to some extent have been popular buzzwords during the last decades, it
is obvious that they are quite different, both in numbers of “followers” and the breadth
and depth of the concepts. Having witnessed first-hand how “just in time” grew, from a
first few rumors about how Toyota manufactured their cars to a massive concept of
thousands of academic and practice-focused volumes, we know that some of these
concepts probably come quite close to being “holistic” on their own.
IJPPM “Just in time”, although mainly relevant for manufacturing industries, is one of
55,1 these, often referred to as Toyota Production System, as described in Ohno (1988), and
developed initially much in cooperation with Shingo (see for example Shingo (1992)).
As many other concepts, it started out with a rather narrow focus, in this case the
elimination of waste in manufacturing processes. However, as the basic concept truly
worked, Toyota and other actors saw a need to extend it to cover other aspects of
64 manufacturing operations, particularly to ensure that these aspects supported the
basic philosophy of “just in time”. As a result, “just in time” was expanded to cover a
number of sub-approaches that eventually turned the concept into something close to
an organization-wide movement. Important sub-approaches included:
.
“Just in time”, the original core concept, i.e. components and products were to
arrive at the moment they were needed, not before and not after.
.
Elimination of waste, often called Muda, which supported the “just in time”
principle.
.
Balanced manufacturing, through several levels of planning and small batch
sizes, in Japanese called Heijunka.
.
Small batch sizes required short setup times, achieved through the SMED
technique; Single Minute exchange of die.
.
Automatic and operator-controlled quality interventions, necessary when batch
sizes and lead times were reduced to prevent large quantities of defective
products to be shipped out. Known as poka yoke or jidoka in Japan.
.
Standard work descriptions, to allow job rotation, improved work methods, and
more flexibility.
.
Suggestion and reward system, to motivate employees to develop improvements
within their work area and allow them a share in savings.

There are even more elements within “just in time”, but these should suffice to
demonstrate that the concept more and more viewed the organization holistically and
took into account employee welfare, quality aspects, and so on. On the other hand, “just
in time” has always been a concept for manufacturing industries and with little
relevance for other types of organizations. Another concept that started with a
narrower focus and has grown is the Balanced Scorecard approach, as described in
Kaplan and Norton (1996). Originally a tool for linking balanced performance measures
in an organization to its strategy, especially for private sector companies, it has been
expanded to other types of organizations, including the public sector. It has also taken
on board other aspects, e.g.:
.
an alternative approach to strategic planning and alignment of an organization;
.
new ways of appraising a company’s assets;
.
linking performance measures to reward systems;
. focusing stronger on human capital and development of this asset; and
.
strong customer satisfaction focus.

Still, perhaps the strongest trait of Balanced Scorecard is its intrinsic simplicity,
making it easy to grasp and fairly easy to implement in an organization. We could also
mention Mintzberg and an approach to holistic performance management based on Holistic
organizational theory. In the book Structure in Fives: Designing Effective performance
Organizations, Mintzberg (1983) outlines three basic coordination mechanisms that
can be viewed as structural elements that form the glue of the organization (see management
Figure 2):
(1) Mutual adjustment: coordination is achieved through two-way communication,
discussion, and clarification among the actors. 65
(2) Direct Supervision: one person takes charge of coordination tasks by telling
others what to do and keeping track of their performance.
(3) Standardization of:
.
Employee skills: allowing the organization to develop competencies and
skills in certain directions.
.
Work processes: coordination through pre-defined tasks that require little
communication among the employees, as each knows what others will do
and what self to do.
.
Outputs: standardizing the results of work tasks, as a means for
coordination along value chains.

Simple tasks are coordinated through mutual adjustment. As the organization becomes
more complex, direct supervision typically becomes the most important means of
coordination. Standardization, of work processes, skills, and outputs, will in
combination with the former two become more important as tasks grow even more
complex.
A more general concept, independent of industry and organization types, is Total
Quality Management, TQM (as treated in numerous sources, e.g. Crosby (1979)). As
with “just in time”, TQM has gradually grown to include more and more aspects and
sub-areas, most importantly:
.
customer focus;
.
employee involvement;
.
continuous improvement;
.
quality standards and excellence; and
.
business process orientation.

Figure 2.
Mintzberg’s coordination
mechanisms
IJPPM At some point, TQM seems to have grown so big that any new approach or tool
55,1 emerging was included under the TQM umbrella. As such, although TQM is a very
broad approach to managing an enterprise, it hardly qualifies as an integrated
framework where the different pieces truly fit together. Ultimately, TQM, to the extent
that this term is still in use, has fallen into the same trap as the constant business fad
observed by Pascale, i.e. becoming flavor-of-the-month-oriented and ending up with
66 numerous initiatives and tools that really don’t fit together coherently. Despite these
examples, our conclusion is still that there seems to be no convincing “super-concepts”
or frameworks available that achieve this holistic integration that we argue is needed.
How can one judge whether a concept or framework has this capability? We have come
to view the following as a fairly accurate “litmus test”:
If an organization succeeds in performing well in all prioritized programs/areas and scores
well on its key performance indicators, will it reach its strategic objectives?
Sadly, it is a fact that organizations have so many programs going and initiate so many
different projects that it is to lose sight of the overall objectives as well as how these
initiatives are linked, positively or negatively. In many cases, the result is that even if
all these projects and priorities succeed, key long-term objectives will still not be
attained. In some extreme cases, the enterprise can even go bankrupt while still scoring
highly on its defined performance indicators and evaluating its approaches to
performance management positively!

Research approach
The case study work followed a typical action research approach, where three
researchers were actively involved in bringing about changes in the bank, while the
change process was used to collect experiences and develop new insight. It was an
expressed goal that employees from the bank should be active participants in all
phases of the project, and collaboration was a key element.
In the first phase of the case, a general status overview of the bank office and its
performance was developed. This was followed by a second phase where shortcomings
identified were addressed by developing improvements, for the purpose of improving
the performance of the business processes (as described in Winter (1989)). It was also
an objective that the learning processes should continue in the bank also after the
researchers had left the field, in line with action research recommendations (Elden and
Chisholm, 1993). To undertake these tasks, the following methodological elements
were employed:
.
interviews with all employees in the bank;
. observation of employees’ interaction with customers in customer meetings and
other situations;
.
interviews with customers, both with customers that had been observed in
interactions with service personnel and customers who had not been in contact
with the bank in a while;
.
performance measurement of some key factors, e.g. customer flow in the bank
office;
.
group work among the bank employees to analyze problem areas and develop
improvements; and
 .
the use of tools like business process analysis, root cause analysis, and similar Holistic
techniques to shed light on problem areas. performance
Industry and case company introduction
management
On a corporate level, the case company is a financial services group, covering among
others banking, insurance, and real estate. It is one of the key actors in the country,
with offices across the entire nation. While the case study has been linked to the 67
corporate level of the group, it has mainly taken place in one of the local branches of the
bank. This is a fairly average type of local bank office, with about 15 employees in the
private banking section, but the office also covers limited banking services for
enterprises and real estate. Even though this particular office has proven to be among
the best in the entire corporation, last by coming out number one in the annual regional
competition for the most profitable office, several issues rendered a change necessary:
(1) The entire banking market is changing, with customers increasingly going
from almost viewing themselves as lucky a bank that wants them as customers
and giving them loans to realizing they are attractive customers with much
bargaining power.
(2) There has been a continuous process toward “deregulation” and openness in the
bank market. This has resulted in much more media attention and focus on
prices and terms, banks moving across national borders, and more
standardization in terms of products and services.
(3) This is intensified by the barriers for changing bank constantly being lowered,
both because this is becoming practically speaking easier, with less cost
involved, but also because people realize benefits can be achieved by actively
using their bargaining power and looking for the best deal. The times of the
life-long bank customer are long gone.
(4) From an internal perspective, many bank employees have seen the changes
happening and realized that the banks must change. From being administrative
case workers approving or denying loans, bank employees have become service
personnel just like other service providers, a new role that requires new skills,
new work processes, and new support systems.
(5) Finally, the financial group in question is in the middle of a merger with another
large group, with all the implications such a move has. For the local bank office
in the case, it will be merged with the partner’s equivalent office in the same
location, different organizational cultures, work processes, support systems,
and so on must be adapted to each other, and the physical facilities must be
rebuilt.

The macro perspective of these forces, i.e. the changes taking place in the banking
sector, is important to understand the effects on the case company. The products
offered by banks to the personal banking market are very similar. Customers can
choose among a large number of competing banks, which all seem quite similar to
them. As a result, people switch bank more often – on the average, one out of five US
bank customers change bank during a year. For many banks, the local bank offices are
viewed as one key tool in countering this trend, through building stronger
relationships with their customers. More demanding customers, new technology in
IJPPM banks, and increased knowledge and skills requirements to act as “customer-keepers”
55,1 have all changed the role of the service personnel in banks (Farmen and Hol, 2003).
Automated service solutions mean customers handle much of the transactions
themselves, through Internet banking, ATMs, automated loan applications, etc. This
leaves the service personnel with less routine work and much more focus on advising
customers and developing personal relationships with them.
68 Keeping in mind that “our” bank office is among the best in the group, it is not
surprising that many areas turned out to perform very well. Most importantly, we
deemed the following to be the best assets of the bank:
.
Sales focus: cross-selling and maximizing the sales volume per customer is an
important key to profitability for any bank. A very clear focus on product sales
permeated the entire office.
. The office management role: for small, autonomous offices like this one, the local
manager plays a vital role in setting goals, training people, following up
performance, and so on. This function was very well taken care of.
.
Front-end competence: in most bank offices, there is an implicit hierarchy where
credit handlers and investment advisors rank at the top and front-end counter
personnel at the bottom, both in terms of prestige and pay level. At the same
time, we often see that the first point of contact for the customer, i.e. the service
counter, determines much of the effectiveness of the entire office through
handling customers right away at the counter, channeling customers onwards to
the service personnel, and scheduling appointments for others. At this office, the
most senior person in the entire organization manned the front-end counter,
clearly a right decision.
.
Team spirit: the employees of the office are clearly a tight group that cares for
one another and are genuinely concerned with the overall performance of the
entire office.

Most of these elements would naturally have to be retained, but reinforced by

strengthening other areas of lower performance. On a strategic level, we suspected that
the bank had a somewhat ambiguous competitive approach. Classic competition theory
says that an enterprise can choose between cost leadership or differentiation (Porter,
1985), where differentiation can be any factor, other than the price of products or
services, that allows it to charge a price premium over competitors focusing on cost
leadership. The bank of the case study was not clear on this. On one hand, it had
decided not to compete on price and not profile itself as the most inexpensive bank. On
the other hand, there is no clear differentiation strategy either – it is at best unclear and
not perceived to give any extra value from a customer perspective. This is illustrated by
the factors employed when appraising the service personnel; the number of products
sold and sales quotas reached, not at all focused on value added seen from the customer.
In this case, it seemed clear that a relational approach to customer care could be the
clear differentiating element that was needed. This was not in the least supported by
selected customers that were interviewed, stating they were somewhat annoyed by the
product focus of the bank and would appreciate a more advisory and caring bank.
Jackson (1985a) separates between “always-a-share” customers and “lost-for-good”
customers. The former buy standardized products, with little customization, and are
price conscious and prone to switching supplier frequently. The latter are focused on Holistic
differentiating factors and will often remain loyal, long-term customers willing to pay performance
for the extra value offered by the supplier. If such customers decide to switch supplier,
they are often very hard to regain. One way of differentiating the bank from its management
competitors could thus be a clearer relational strategy.
Together with the following areas found to have an improvement potential, these
elements form the overall performance management framework for the bank: 69
.
Getting the right customers “in the chair”. There was no clear strategy regarding
which customers should be prioritized. Those who were targeted for cross-selling
were those that simply turned up, either physically at the office or after having
called to make an appointment themselves. In addition, a rather innovative IT
system would show a flag when events in a customer’s financial situation would
make this person likely to be in need of or open for advice, a so-called lead. The
overall customer group had not been segmented into groups of customers with
higher potential for broad portfolios and thus better profitability, and little was
done to proactively get these into the bank for customer meetings.
.
More deliberate use of time. Related to the previous point, the use of time by the
service personnel was somewhat arbitrary. Time is probably the most important
resource they have, and spending it on customers with low potential is a waste.
Thus, both talking to the right customers and being prepared when talking to
them is crucial.
.
Reduce the product focus. Most banks today have large portfolios of various
services, termed products, ranging from savings to insurance to credit cards and
so on. From corporate levels, product campaigns are frequently launched where
the bank offices are rewarded for selling certain quotas of products. These
quotas are divided further among the individual employees, and follow-up and
even bonuses are linked to such product sales. The sales training is
correspondingly focused on developing argumentation for certain products
and overcoming doubt and resistance on the part of the customer. By many
customers, the resulting customer meetings are construed as almost offensive
product pushing not grounded in real customer needs and with the customer’s
best interests in mind.
.
Better advice. The answer to this challenge seems to be improving the service
personnel’s skills in assessing the true needs of the customer and providing
advice that is seen as having the customer, not the bank, in mind.
.
“The Relationship Bank”. Ultimately, the relationship and trust between the
bank and customer will be the most powerful competitive advantage for the
banks. Instead of knowing the bank simply through the Internet bank web site,
customers will know the bank through personal interaction with an advisor that
has proven her or his ability to give truly useful advice. Changing bank means
losing this relationship as opposed to simply seeing a different logo on a web site.
This is a transition from transaction-based banking to relational banking (as
described for many different industries as relationship management, for example
Morgan and Hunt (1994) and depicted in Figure 3), where relational marketing
can be defined as “all marketing activities aimed at establishing, developing, and
maintaining successful relationships” (Jackson, 1985b). However, several studies
IJPPM
55,1

70

Figure 3.
Relationship marketing

show that enterprises attempting to the behavior of transaction-oriented

customers through relational marketing risk increasing their costs without
generating equal benefits (Anderson and Narus, 1995). To achieve monetary
benefits, the added value must be acknowledged by the customer and the
customer must be willing to pay for it. Added value in a customer relationship is
not a result of one person’s effort (Nes and Biong, 2003), but of a long-term
differentiation strategy.

The next section will describe how improvements in these areas of weakness,
combined with other related elements, were combined to create a holistic performance
management framework for the bank office.

The holistic performance management framework (HPMF)

Figure 4 gives an example of such a holistic performance management framework at
an overall level. The logic, in line with our reasoning previously in this paper, is that
each of the elements included form part of a whole. Each element is a “science” in its
own right, but also interacts with the other pieces of the puzzle. The business processes
in an organization, not in the least the performance of them, is highly dependent on
both the physical layout of the facilities, the competence of its employees, customer
expectations, and so on. Arguably, in some cases certain elements can play a more
important part than others, in rare cases some of these elements may even be
irrelevant. The point still remains; you cannot leave the design of each element to
specialists who dig deeply into their own area – before deciding on the details, the
whole must be understood and designed to allow each part to support the others.
Obviously, the framework portrayed here is merely an example, probably inspired
by the case company, albeit with many of the elements that typically will belong to an
actual model. More generically, we find that the following are elements that have a
natural place when viewing business performance management more holistically,
although this list is not exhaustive.
 Holistic
performance
management

71

Figure 4.
A generic performance
management framework

Stakeholder understanding and strategic planning are key elements, to develop insight
into enterprise’s main stakeholders, their requirements and expectations, and chart the
course of the organization. Strategic planning is a topic that has been extensively
covered in literature. We see no need to voice any personal beliefs regarding how such
planning should be undertaken, but it is a fact that many strategic plans are not
grounded in neither the external stakeholder environment nor internal resources and
capabilities and are never implemented due to a lack of action plans.
Related to this are market research and segmentation, which might be perceived as
sub-activities of strategic planning. However, we often find that enterprises are either
too concerned with their products or services or with mergers and acquisitions in their
strategic planning to devote sufficient attention to these aspects. As a result, all
customers are treated the same way, regardless of their importance in terms of
profitability or public image for the enterprise.
This again is linked to a relational customer approach, which, like in banking, in
most sectors is becoming a crucial differentiating factor when products and services
are continuously becoming more standardized. For enterprises selling physical
products, an approach is to include value-adding services in the augmented product. In
IJPPM service sectors like banking, developing trust-based personal relationships with the
55,1 customer is a key mechanism.
From an internal perspective, it is vital to develop business processes that allow
an optimal use of time and create value, as opposed to processes where time and
resources are wasted and the value for both customer and enterprise is far from
maximized. Organizing based on business processes is gradually becoming a
72 common approach (see for example McCormack (2001)). Along with this
transformation normally comes a stronger focus on the processes and their
performance, created through simplicity, clear interfaces, avoidance of duplication
and rework, and so on. This is closely linked to the physical layout and design of
the facilities, which sounds intrinsically boring. Nevertheless, this aspect has a
large impact on the effectiveness of the operations being performed in a location.
This is true irrespective of whether these operations are physical manufacturing
(in which case the layout has an immense impact on the material flow, see for
instance Burbidge (1989)). Or as in the bank, service delivery (and thus affects
both the customer and the enterprise), or more knowledge-oriented work (where it
has been proven that the design of the work place significantly influences the level
of creativity and quality of work performed).
To function inside the physical infrastructure, roles, competence, and capacity of the
organization must match it. This translates into the design of the organization, beyond
mere “boxology” in organizational charts. This is about defining roles and
responsibilities across and inside business processes, determining the amount of
resources required in each position, and not in the least which types of competence.
Ultimately, this is knowledge management in practice, utilizing the available resources
in the organization and ensuring that they are equipped to perform their tasks. In
addition, the organizational values and culture must be developed, which represent the
rooted core attitudes held by the organization and its members and which can be seen
in the way people relate to each other, customers, and other stakeholders. When acting
on reflex, we are guided by our values, and these need to be in line with the strategic
goals defined and our business processes. If proper behavior toward customers is
merely a varnish covering the true values, the organization will never succeed in a
relational approach to customer management.
Incentives and performance management, which are closely linked to values and
culture, must also be in place. Just like core values held by people, the factors
management measure and focus on when following up employees dictate behavior. If
these coincide, they will reinforce each other, but if they conflict, they will create
ambiguity and uncertainty in people and the organization. Incentives can be defined as
“something that influences people to act in certain ways” (Kemmerer and Thiagarajan,
1992). If the pronounced strategy of the enterprise is to be a one-stop supplier of
logistics services, but each customer representative is awarded a bonus based on sales
of single services, guess which behavior will prevail?
Leadership style and management approach are still important factors in
determining the success of an enterprise, even in this age of empowered knowledge
workers. Management at all levels in an organization impact it through their example,
attitudes, handling of people, and so on. And a leadership style that works in one
particular setting might be disastrous in another, thus we do not advocate any
“philosophy” but simply include this as one element in the overall framework.
 There are probably more elements that qualify for inclusion in this list, most likely Holistic
depending on the background and position of the reader. We readily accept this, performance
especially since our main point is not to develop a fixed framework ready for adoption.
We aim to illustrate how such a holistic framework can be composed and trust that an management
enterprise looking to adopt it can tailor one to its specific needs.

Application of the HPMF in the case company

73
In the case bank office, a performance management framework along these lines was
developed through working groups consisting of employees and researcher support.
The framework is shown in Figure 5, and has been included as a specific example of
how such a framework can be constructed. As is apparent, some elements are more
important than others in the bank case, and some elements from the generic framework
have not been included.
In more detail, each element of the framework plays an integral and important role
in the overall picture.
Customer segmentation lays the foundation for ensuring that the bank spends its
time and energy on the right customers. This is a common marketing approach and
usually not very complicated, unless more advanced criteria are used. In this case, the
purpose of market segmentation was mainly to create an awareness of the different
customer groups, the products and services typically are most relevant for each of
them, and thus understand which types of customers are most profitable for the bank.
The bank customers were eventually divided into the quite traditional groups of:
.
children and teenagers;
.
young adults in the establishment phase;

Figure 5.
The performance
management framework
for the bank
IJPPM .
established adults; and
55,1 .
elders.

These categories were then correlated with the different bank products in a
customer/product matrix, including an indication of the relative profitability of each
product. At a quick glance, such a matrix tells the bank’s service personnel which
74 products are most relevant for a certain customer, and which of these will be most
profitable for the bank. One key warning, however, is not to use this matrix for the
same type of “product pushing” that had been the old customer approach!
Customer flow is the “physical” movement of customers through various stages of
the bank, both when contacting the bank through phone, internet bank, or appearing
physically in the bank office. By mapping current flow patterns, bottlenecks, and
illogical flows, a more ideal customer flow could be devised. Most importantly, a best
possible sorting of requests can be made as early as possible in the customer contact
process. This ensures that requests that can be dealt with there and then are taken care
of immediately. Further, that requests that need preparation on the part of the service
personnel are deferred to a booked meeting later on, and that only the suitable requests
are transferred deeper into the bank on unannounced arrival.
This is again very closely linked to the physical layout of the bank office, which is
a dimension of banking that has undergone much development the last years. From
multiple transaction-oriented counters, with all the other functions hidden in the back,
bank service automation under which the customer itself does most of money
transactions through ATMs, internet bank services, and so on, these counters have
been built significantly down. Lately, there has been a tendency to have only a very
minimum of front-end “counters”, in our case just one general information counter
and one cash/transaction-oriented one. At the same time, service personnel for loans,
savings, etc. have been made much more accessible to the customers, in many cases
in open cubicles right behind the front-end counters and physically open to
customers. The result has been that very few customers could be dealt with to
completion at the front, transferring most of them deeper into the bank for even the
smallest of requests. In our case, the solution is to almost re-build the front-end
counter, but in the form of a customer-oriented starting point for any customer
entering the bank. The bank will still be relatively open backwards, with easy access
for customers to more dedicated service personnel, but routed forward by the
front-end personnel. There will also be a more pleasant waiting and information zone
and a zone where customers can access automated services (as shown in the
framework figure).
To support this new layout and the resulting customer flow patterns, new business
processes had to be developed. The main objective of these new processes is to ensure
that the people in the bank meant to be those who sell new, profitable products to the
right customers have time to do so. This means allowing them to spend as much as
possible of their time on planned, effective customer activities for which they are well
prepared. This means business processes that:
.
Route customers correctly regarding which customers are dealt with to
completion at the front-end, which are to be let through directly, and which are to
be booked for future appointments.
 .
Respect the threshold for letting customers through from the front-end, thus Holistic
giving them time of the service personnel in the back. performance
.
Handle customer contacts made through phone, e-mail, and web. management
To make this system work, the roles of the various service personnel in the bank, as
well as the competence of these, must be changed accordingly. Most significantly, this
means upgrading the status of the front-end position in the bank. Traditionally, credit 75
handling and savings advice have been the coveted positions in a bank, carrying the
highest pay and prestige levels. Under the new system, the front-end position will be
the most crucial one, the one that effectively dictates both how proactively the
back-office personnel can spend their time and the extent to which customers feel their
needs have been taken care of. From being a low-prestige position often manned by
part-time or even temporary personnel in many banks, it will require people with long
experience and good insight into most other functions in the bank as well as a capacity
for making almost split-second decisions about a customer’s needs and further
progress through the bank. To motivate this type of competence at the front-end,
means such as pay or other benefits must probably be put to use.
Some of these elements of the framework might sound as if customers are simply to
be labeled and treated as homogenous members of a broad customer segment as
opposed to individual customers with personal needs. This is indeed not the case! A
relational-based customer approach is at the heart of the holistic framework. Moving
away from the product-focused sales approach aimed at convincing customers of
buying products they often have little need for is the main weapon in the battle to keep
customers on a long-term basis. Understanding true customer needs and aiding them
in selecting services and financial solutions that truly meet their needs is essential
under such an approach. Three of the changes necessary to make this approach
credible are:
(1) A new “sales” process focused on needs understanding and offering products
that will benefit the customer, not only the bank. In this case, it seems a
two-stage process will be used; the first meeting with the customer will focus
solely on identifying customer needs, as opposed to current practice where the
same meeting is used also for sales pitches, thus often antagonizing the
customer. The new approach will give the customer representative time to both
figure out what the customer truly needs and prepare a package of products
that fit these needs, to be presented in the second meeting.
(2) A relation-building “program”, not so much the type of customer loyalty
programs that many banks already have and typically give customers slightly
better conditions, but a program aiming at developing closer and more
trust-based relationships with customers. This can include regular personal
follow-up talks with customers, events targeted at certain customer groups,
seminars in the bank after closing time, and so on.
(3) Training in relational marketing/customer care. Up to now, the training of the
bank’s service personnel has very much focused on general area knowledge, e.g.
about credit systems, trends in personal savings, or stock market behavior, or
specific products and services offered by the bank, especially how to market
and argue the value of these to customers. Customer care based on trust and the
IJPPM development of relationships is a completely different way of thinking, and the
55,1 employees in the bank must be trained in this approach.

Equally important is making fundamental changes to organizational values and

culture of the bank. As was mentioned earlier, the values and attitudes held by people
in an organization can most clearly be seen in the ways they deal with customers and
76 other stakeholders, especially in situations where they act out of “gut feeling” or old
habit. In a culture that has nurtured the “clever salesman” concept, this culture of
product sales has become deeply embedded. This is of course not the same as saying
that the bank has not cared about its customers – it would never be among the best in
the country if it did not. But is does mean that there is an even greater potential if the
intrinsic first concern that came to mind were the best interests of the customer, not the
bank. Changing core values in an organization is a slow process that requires much
deliberate work and effort. However, in this case, two conditions might make this
easier; First, the employees have been heavily involved in both seeing the need for this
change and devising the approach to changing it. Second, as the two old banks
physically move into joint premises in a few months, thus merging the two existing
cultures, there is a unique opportunity for making such changes when the organization
is in a state of transition anyway.
As research has demonstrated clearly (see for example Sink and Tuttle (1989)), the
performance indicators used to follow up employee and organizational performance
strongly impacts the behavior of the organization and its members. In this case, there is
an urgent need to change the way performance is assessed and followed up. So far, this
has been mostly linked to product sales, per product type and per employee, both
generally and connected to frequent product campaigns initiated centrally and
focusing on selling credit cards, travel insurance, internet banking accounts, or the
likes. Clearly, this has been counter-productive in terms of the bank’s ability to come
across as a trusted source of advice, as many customers explicitly say they feel victims
to product sales that do not consider their true needs. This is of course a result of
management focus on product quotas and an indirect link between product sales
success and individual pay levels. Instead, the service personnel should be measured
on aspects like the number of customers lost to other banks during a year, the average
number of years customers have been customers of this bank, average customer
satisfaction in the customer portfolio, the portion of “broad customers” in the portfolio,
etc. Similarly, the front-end personnel should be measured on aspects that enhance
their function in the bank, e.g. the number of customer requests completed at the
front-end or the number of “correct referrals” to back-office functions made. As these
new performance indicators settle in the organization, both with the manager and the
employees, they should further reinforce the changes made to business processes and
the customer approach.
In the end, all of these changes that belong to the holistic performance management
framework for the bank office of the case study should lead to a significant further
improvement of performance. Through broad discussions with both employees and
customers of the bank, we feel confident this new approach will lead to a better and
more comfortable work situation for the service personnel and a more rewarding bank
connection for the customers. They will no longer feel like “pushy salesmen” who try to
get one foot in the door to sell another product, but can devote their energy to
disclosing the true needs of the customers and satisfying these. For the bank, this will Holistic
be more profitable as well. It should reduce the number of customers switching bank, performance
and long-term customers are always more profitable than having to constantly acquire
new ones. The customers should feel the change through the relational approach and management
be more likely to stay with the bank.
The big question is; does this framework stand the ultimate test? Can the bank
office implement these changes, score well on the new performance measures, and still 77
not achieve its goals of being the best bank in the area? We believe so. All of these
positive effects are due to the fact that all the elements match and support each other,
they will not contradict and cancel one another out. As such, the framework matches
the main criterion defined to be a truly holistic performance management framework.

Discussion and conclusions

Following the presentation of the case study from the bank office, the first logical
question is of course how generic an example performance management framework for
the bank really is. There is no way of accurately answering this question, and more
work is required where similar frameworks are developed for other industries and in
other settings to conclude whether the generic framework presented at the outset can
indeed be used as a basis for the tailoring of specific ones to certain situations.
Arguably, the bank case is a service industry, in a very small outfit even though the
local bank office is part of a very large corporation, and with a highly motivated group
of employees taking active part in the development of the framework. Still, we do not
think these are fundamental reasons why we were able to develop what seems to be a
very powerful and wholly integrated performance management framework. From our
extensive experience with other types of organizations, we truly believe a similar
exercise would succeed in significantly different types of companies.
As such, through this paper, we hope to have demonstrated how an integrated
approach to performance management is much more powerful than the traditional
approach of isolated changes and improvements that often end up countering each
other. We also believe we have portrayed a generic framework for holistic performance
management that can be used as a platform for organizations developing their own
specific version of it. On our part, we will focus on implementing the framework in
other settings to be able to confirm the framework generic applicability and learn more
about possible other elements to include in it.

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Corresponding author
Bjorn Andersen is the corresponding author.

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