7 organizational principles for creating a culture of performance management

Imagine that a bank’s board sets a growth course for the coming year, and the CEO eagerly complies, requiring all employees to increase income from 10 percent to 50 percent by December 31. But if that CEO doesn’t listen to employees and communicate with them regularly, giving them tools for success, these performance levels will be all but impossible to attain.

Even so, in one form or another, scenarios like this play out at banks every day—with predictable results.

Management experts are responding to this leadership lapse by laying out a formula for creating a culture in which even the most ambitious performance goals are likely to be achieved. By following specific organizational principles, bankers can lay the groundwork for operating in bolder ways with a greater future probability of success.

This performance management approach is a systematic way of viewing how an organization is run, making sure that clear goals are set and that the achievement of these goals is measured according to well-communicated benchmarks.  

The principles themselves are straightforward. In a nutshell, high-performance organizations create an environment of open communication, formally stated expectations, and transparency.

Typically, the CEO assumes responsibility for establishing the culture within a bank, but transforming a culture is simply too large and too important an undertaking to rest with a single individual. That’s why the CEO and CFO generally work in tandem, with the CFO creating a set of metrics and mechanisms for tracking performance against the overarching goals established at the top.

In future blog posts, some of the following leadership principles will be explored in greater depth. For now, here is an overview of the seven principles necessary to guide banks contemplating a culture change:

1. Foster a growth mindset 

Too often, bankers are complacent and accept that growth will come from “the market” without really understanding how “the market” is growing. Bankers must ask themselves hard questions, including: Will the market support the growth we desire? And what resources will it take for us to achieve our goals?

A culture of performance management begins with a desire to best the competition. Are your lenders working to increase yield? Your new account executives finding ways to pay less for new deposits? And is your marketing officer dreaming up appealing new products?

What’s more, it’s important to push employees to challenge themselves to identify and act on nuggets of opportunity, wherever they’re found. 

2. Encourage open communication and solicit feedback

Creating and realizing a compelling vision for your bank’s future rests on regular communication. Savvy bankers know that an achievable vision cannot be created without input from those in the organization who spend their days carrying out leaders’ goals and objectives.

Communication not only means that the C-suite regularly addresses employees; it also means that employees have ample opportunity to convey what they see and learn to management, as well. With this type of two-way communication, all employees can row in the same direction.

Not only is it necessary to have consistent, current, ongoing, and continuous communications, but the communicating must take place even in trying times. During the Great Recession of 2008-2010, for instance, bankers had to share the good, bad and ugly of what was happening in the markets and in their own organizations. Just over a decade ago, the overarching goal for many banks was keeping the doors open and the FDIC at bay. Even clearing this seemingly low bar required candid conversations.

3. Make sure employees feel empowered

High-performance managers empower employees to act independently. One important ingredient to empowerment is making sure that employees have whatever data they need to make informed decisions.

Fortunately, there are a wealth of new tools—such as Banker’s Dashboard—that can help employees gauge how they’re performing against goals.  

4. Establish clear performance expectations and communicate progress

If only leadership knows how an organization is performing against its goals, then it is very difficult for employees to succeed.

Simply put, individuals need to know whether or not they are performing as expected. Withholding this type of data is the equivalent of a teacher adding grades into a gradebook without ever sharing a report card with the students themselves.

5. Be agile

In the spring of 2020, bankers all became more agile as they dealt with the rapidly changing pandemic landscape. At that time, banks had no choice but to evolve. Even when change is not thrust upon an organization, employees should strive for greater flexibility and more rapid responses.

6. Hold everyone accountable for performance

When managers set targets, these targets should not only be measurable, but there should be mechanisms in place to assess and discuss progress made. Too often, managers set annual goals that are not revisited until the end of the year, when it’s too late to adjust course.

Managers therefore should plan to meet with employees regularly (ideally, on a quarterly or monthly basis.) When employees are falling short of targets, managers need to ask what obstacles might be standing in their way. In other words, leaders need to constantly manage and coach to the goals they themselves set.

7. Welcome new perspectives

Millennials and members of the Gen X, Y and Z generations bring enormous problem-solving capabilities to the table, skills they may have learned from Googling solutions to everyday hassles or even from gaming. Instead of meeting behind closed doors, these younger employees often turn to crowdsourcing to generate new ideas.

As banks face down the challenges of the future, some of the most innovative answers may come from new talent that views situations with fresh eyes. Creating a true culture of performance management will rest on developing the unique capabilities of a bank’s entire workforce.