Case study about organisation – you need to discuss their performance management system how they deal with under performance what are issue that that they are facing what are recommendation to improve their system in dealing with under performance based on literature , empirical studies and theories related to under performance and linked to the case study attached
Performance Management Case Study: Finsoc


Established over 150 years ago, Finsoc is a large UK financial services organisation and provides a broad range of retail financial products and services to over 13 million members including mortgages, savings, current accounts, personal loans, and insurance. Finsoc employs around 15,000 staff in the UK, the bulk of whom are employed in the branch network across the country. There are around UK 600 branches.

In recent years Finsoc has become well known for its commitment to mutuality and as more and more building societies convert to Plc status this characteristic of ownership has come to distinguish them in the market place and been used to their advantage – enabling the organisation to perform strongly despite an increasingly competitive environment. As a mutual, the organisation is owned by its members and is run day to day by an executive management team overseen by an elected Board of Directors, which includes the Chief Executive.


Finsoc’s stance on mutuality began back in 1995, and resulted in the development of a new business strategy to improve customer services and streamline operations. This has enabled the society to develop a unique position in the financial services market place, delivering member value through its mutual strategy and providing a real alternative to the banks. By putting the customer first, rather than the shareholder the society is able to operate on narrower margins (compared to the converted building societies), and reduced planned profit so that customers receive long term benefits in terms of improved rates and better services. This pro-mutual message has become more important in recent years as Finsoc has strived to stave off attempts at de-mutualisation. As a consequence a number of high profile member focussed initiatives have been launched to emphasise the difference between Finsoc and the banks, and, in particular, to promote its image as champion of the consumer in the personal financial market.

Key performance measures

Part of the new business strategy in 1995 included the establishment of new performance measures based around three key criteria: the customer, the business and employees. In 2007 these were expressed as:

• ‘Finsoc is my first choice’
• ‘Finsoc has the best ratings’
• ‘Finsoc is where I want to work’

Key performance indicators – or KPIs – which are set annually, initially at corporate level, are used to measure performance against these criteria. So, for example, employee satisfaction and competence are used as indicators of ‘Finsoc is where I want to work’; mortgage share and complaints are included in measures of ‘Finsoc is my first choice’; capital ratios, costs and controls reflect the statement ‘Finsoc has the best ratings’. These measures are not weighted and all have equal value. KPIs are also set at divisional and departmental/branch level, which cascade down into team and occasionally individual plans.


The HR function is highly centralised and responsible for the design and delivery of appropriate HR strategies. The function is split into ‘HR retail’ which deals with everything that interfaces with the customer (i.e. the branches, sales force, call centre and internet banking) and ‘HR operations’ which includes finance, technology, commercial, marketing, planning and communications and the subsidiary companies. The employee handbook and all personnel policies and procedures can be freely accessed through the extensive Intranet system. The Intranet also provides briefing notes and guidelines for line managers on a range of HR issues, such as employee development and performance management.

HR advisors are responsible for providing advice and guidance to business areas on a range of HR issues. Typically this would include absenteeism, turnover, performance management, remuneration, employment law and employee relations (e.g. discipline).

The majority of staff are represented by the Finsoc Group Staff Union which retains negotiating rights for changes to all terms and conditions of employment. However, the union rarely ballots the membership on issues preferring to canvass members views via focus groups or through area representatives.

Business Environment

The financial services industry is characterised by intense competition and increased regulation. Banks and building societies are constantly trying to maintain and improve their customer base by advertising and improving customer service. This places great emphasis on selling and customer service skills. Most staff in Finsoc work in the branches which is made up of customer advisors, senior customer advisers and the branch manager. They carry out a wide range of tasks, including generating sales leads, dealing with customer queries, handling deposits and withdrawals, and routine administrative work. The work includes dealing directly with the customer as well as liaising between head office and customers. Much of the work is laid down in detail by company procedures, and most branch staff are required to have specialist product knowledge (eg handling mortgage enquiries). The work environment is clearly highly regulated and also governed by the Financial Services Act (FSA).

Mortgages remain the ‘bread and butter’ of the society and are sold by senior customer advisors (SCAs) or managers in the branches. The organisations financial product mix is considered limited compared to many other financial institutions but fits with Finsoc’s philosophy of keeping things simple for the customer. It is acknowledged that the selling environment is perhaps not as tough as in other financial institutions, with a lot of custom coming to Finsoc because of their mutual status.

The organisation’s aim is to retain staff loyalty but also encourage them to show initiative and flexibility. Annual turnover is generally low which partly reflects the recruitment and selection procedures which were revised some years ago to place more emphasis on internal recruitment. This was partly for cultural reasons, as one senior manager explained

‘Culture is very important… we want people to behave in the right way. There tends to be a higher turnover in externally recruited staff partly because their ethics don’t fit or they are not good at relationship building and not part of the Finsoc culture’.

When recruiting externally for advisers in the branches Finsoc prefers inexperienced people, rather than experienced staff. Their view is that experienced staff, particularly those working in sales are often highly motivated by money rather than customer service. As one manager remarked ‘we don’t want people to be motivated purely by pay.’

Performance Management

At the operational level line managers are responsible for a raft of performance management activities including induction, performance review/appraisal, informal coaching and mentoring, identifying, agreeing and planning personnel development plans, return to work interviews and managing poor performance.

The performance appraisal scheme was introduced in 1995 by the HR Director (who subsequently left) who implemented a scheme which had been used by his previous employer – a large UK retail bank. All staff are appraised by their immediate line manager (in a Branch this would be the Branch Manager). Appraisals take place once a year, towards the end of each financial year, although regular informal face to face meetings are encouraged. Line managers rate their staff based on performance objectives (see below) and agree a personal development plan (PDP). In a typical branch a manager supervises 10 – 12 staff. Some of the larger branches have assistant managers who can also undertake performance reviews. The ratings given at the end of the year drive employees pay.

There is also a moderating process to help build common standards of performance across the Finsoc branch network. Each year the business area (determined by geographical regions) holds performance ranking meetings before the end of year review to check ratings for consistency and fairness.

A recent employee attitude survey has highlighted a number of issues of concern about the performance management process. Firstly, it is clear that some managers are more diligent than others in carrying out appraisals. There are some branches, for example, where appraisals have not been done at all and many forms are incompletely filled out. Secondly, where appraisals are done the quality of the review appears to vary. In some branches appraisal reviews are seen to be something of a ritual form filling exercise, and some staff report being called in at very short notice for their review. Discussions are sometimes reported to be one sided and staff appear reluctant to make suggestions for their own improvement particularly where this might be interpreted as a criticism of their manager. Thirdly, there is a strong view that poor performance is tolerated and not addressed in the organisation. In addition the ratings suggest that most managers find it difficult to differentiate between the various levels of performance, with most giving a C rating (average) or above (see below).

Informal discussions with managers suggest that many cannot see the point of doing appraisals and feel they manage their staff perfectly well on a day to day basis without the need for an annual meeting. The form filling associated with the appraisal is considered a bureaucratic burden which has to be complete at the most busy time of the year, and most complain of excessive work overload and competing work priorities. Furthermore, some managers seem unsure about the purpose of the appraisal and have not been appraised themselves. Managers themselves are encouraged to undertake 360 degree appraisal although this is voluntary and in practice few managers choose this as an option.

Setting objectives

Setting objectives for staff in the branches was more challenging than other areas such as the call centre which has readily available metrics on performance such as the number of calls taken and the length of calls. Nevertheless a range of factors are used to judge performance of staff in the branches as follows:

• Accuracy of figure work
• Customer service
• Sales targets, including new accounts

Branch managers are rated on additional measures which link to the KPIs such as cost control and employee satisfaction (measured in the annual employee survey).

Link to reward

Individual performance is linked to reward with a system of ‘merit pay’ for all branch staff, replacing the previous system of service increments and general cost of living pay awards. Staff are awarded pay increases in line with their appraisals rating, which are based on the above objectives. In 2007 this was as follows:

Performance Rating Pay increase
A Outstanding Cost of living + between 4 -10%
B Highly effective Cost of living + between 2 – 4%
C Effective Cost of living + between 0 – 2%
D Less than effective Between 0 and cost of living

The process is tightly controlled and branch managers are allocated a budget to determine pay increases. Initially this system of merit pay appeared to be welcomed by staff and managers. However, the recent economic recession and financial crisis has led to an increased focus on sales and new accounts which has added pressure to branch managers and their staff. As one person said:

’ it’s frowned upon if we chat to customers about holidays unless we sell then travel insurance’.

There have also been much tighter controls on the budget given to branch managers which has inevitably meant that, regardless of the ratings given, few managers have been able to award any increases other than the cost of living.

Other benefits

Finsoc considers it is a good employer and offers a wide range of benefits under the organisation’s flexible ‘choices’ policy, whereby staff choose from options including holidays, healthcare plan, RAC breakdown cover, cash card discounts, dental plan cover, additional pensions, childcare vouchers and other discount opportunities. Sick pay is paid from day one of any illness.

Support materials

Guidance on the performance management process is available on the Intranet and managers and staff can access a wide range of on line learning materials. Managers can also receive training on managing performance, but attendance is discretionary.

Branch Performance

To encourage high performance, league based competitions are run which rewards top performing branches and individuals on a monthly and annual basis. Branch winners, for example, receive a visit from the Executive or Divisional Director who presents a team plaque or individual award certificate and pin badge. The annual award winning team/s also receive some money to pay for a team event of their choosing whilst individual winners receive a small prize such as a weekend theatre break.

Absence and under performance

Finsoc’s disciplinary and grievance procedures follow the ACS Code of Practice. Finsoc believe that encouraging line managers to take ownership for absence, capability and conduct issues at local level is the key building block of an effective strategy to tackle absence and under performance. Line managers are encouraged to address capability and conduct issues at an informal level in the first instance. However, as previously mentioned there is a view that poor performance is tolerated in the organisation which is largely attributed to line managers not effectively managing performance. It is well known that managers dislike having ‘difficult conversations’ with their staff and would rather promote a poor performer out of their branch rather than deal with an under-performer. Some managers who have been promoted from within (largely on the basis of their technical competencies) feel like ‘piggy in the middle’ and are uncomfortable addressing performance issues of former work colleagues.

Line managers are expected to conduct return to work interviews (although in practice many only hold these return to work interviews if they don’t know why an individual is absent), and monitor absence levels for their own area. Finsoc do not have any fixed ‘triggers’ to define when action should be taken for persistent absence and prefer managers to treat each case on its own merit. However, its general guidelines suggest that if an employee has more than five absences in less than six months their attendance record should be reviewed and a member of the HR team will contact line mangers when one of their employees reaches this threshold, just to ensure they are aware of this. Disciplinary action for misconduct may be considered where a manger reasonable believes that an absence is not due to genuine illness. Until recently absence levels have been good at around 2.8-3% a year. However over the last 12 months it has crept up to 6%, well above the target of 2.9%.

Guidance on managing absence (short and long term absence) and underperformance is available on the intranet although some managers complain that these are difficult to find, lack clarity and overly bureaucratic. Formal in house training is also available but only 40% of managers have attended these courses in the last 2 years.

Staff Survey

The latest staff survey conducted showed a worsening of staff (including managers), attitudes, particularly in the branches. The most notable changes were increased levels of stress and worry, and a decline in overall levels of job satisfaction.

© Sue Hutchinson, University of West of England

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