CHAPTER 4

CASE SUMMARIES AND ANALYSES

4.1 INTRODUCTION

Chapter 3 outlined the objectives of the case studies, viz.

1. To gain an understanding of the Branch Performance Measurement Systems in

the six selected banks.

2. To gain an understanding of the Performance Appraisal of Branch Managers in

these banks.

3. To identify any linkages between bank priorities, the branch performance

measurement system and the Branch Manager's performance appraisal

4. To recognize any similarities in procedures and practices (in the context of

performance management) in the three 'strong' banks that set them apart from

the three 'weak' ones.

The within-case and across-case analyses were carried out against the backdrop of

these objectives. Subsequent sections present these case analyses, while the cases

themselves can be seen in Appendices A.1 to A.6.

4.2 WITHIN-CASE ANALYSES

4.2.1 Case 1: Premier Bank

4.2.1.1 Summary

Premier Bank (the name of this bank has been changed in keeping with the Bank's

explicit instructions) has established itself as one of the best banks in the country. On

every aspect of performance, the Bank benchmarks itself against the best in the

industry, and its targets reflect this competitive spirit. There is a strong bottom-to-top

orientation to the Bank's annual budgets, with branches first tentatively fixing their

46
own targets, which are then modified by the Planning Department in the light of

Bank-level targets. Premier Bank has generally been able to meet and even surpass

its targets in respect of all business parameters.

At Premier Bank, the Inspection and Audit Department reviews the BPMS every two

years as a matter of policy, and makes changes to suit the circumstances. The

Department plays a proactive role in making adjustments to the Bank's BPMS. It

keeps track of the Bank's changing thrust areas and, by suitably modifying the

BPMS, ensures that branches reorient themselves accordingly. Since the last

decade, the Bank has altered its BPMS in 1993, 1995, 1999 and 2003. In 1995 the

Bank pioneered the adoption of a system where the qualitative components of all

parameters were filtered out, and performance on both, qualitative and quantitative

components, was recorded separately. This system was introduced in response to

the Department's observation that although branches were doing well in respect of

achievement of all targets, many of them suffered from several systemic

shortcomings. Since then, the basic segregation of items into quantitative and

qualitative parameters has continued, but the relative importance of parameters has

changed in tandem with the Bank's shifting focus. The Bank believes that changes in

the BPMS have been successful in bringing about the desired changes in branch and

Bank performance.

In cases where performance is below par and the branch receives an 'Unsatisfactory'

rating, the Inspection & Audit Department scrutinizes the report and forwards it to the

concerned functional department(s) at the Head Office for further analysis.

Suggestions for improvement are sent to the branch as well as to the Zonal Office.

The Zonal Manager is expected to visit low-rated branches once every quarter and

submit a detailed report on their progress. These visits continue until all the

suggestions have been implemented or until the branch is upgraded at its next

inspection. Such branches are inspected after 9 months, as against the norm of 15

47
months for other branches. Clearly Premier Bank takes quite a serious view of poor

performance by its branches.

The Performance Appraisal format in use at Premier Bank is the one that has been

designed by the Indian Banks' Association (IBA) and recommended to all Public

Sector Banks by the Government of India. Although it has retained the basic format,

Premier Bank has made some significant changes. First, it has dropped one head of

assessment, viz. 'Outstanding Achievements'. Second, it has drastically changed the

relative weights to be assigned to the remaining dimensions. Its allocation of weights

is as follows:

Business Dimensions

Quantitative Aspects 60 per cent

Qualitative Aspects 20 per cent

Managerial Attributes 20 per cent

This distribution differs markedly from the IBA allocation of 30, 20 and 40 per cent

respectively. The much higher weight assigned to Business Dimensions has allowed

Premier Bank to make a more objective assessment of its managers. Third, the Bank

has regularly extended the scope of the Business Dimensions component to include

all new areas of business.

The importance accorded to the APA in a manager's professional progress is less at

higher scales than at Scales 1 to 3. As in most other banks, ratings are kept

confidential and only Branch Managers who are 'Below Average' are informed of

their rating. At Premier Bank managers do not delay submission of their APAs, since

they are aware that if APAs are not received on time, appraisal will be carried out

unilaterally, without any input from them.

48
4.2.1.2 Analysis

a. Premier Bank believes in being proactive. Once the Bank's top management

determines its priorities, the Planning Department is quick to incorporate these

new priorities into the medium-term plans and annual budgets.

b. 'Ownership' of goals and objectives is known to be a powerful motivator and the

bottom-to-top approach to planning at Premier Bank possibly encourages

managers at the operational level to strive towards achievement of targets.

c. The Inspection Department reviews the BPMS every two years, altering it in

accordance with changes in the environment and its own goals, and RBI

directives. The Human Resources Development Department also reviews the

APA every two years, and ensures that all new business parameters from the

BPMS are included in the APA. Suggestions and feedback from managers are

also considered while revamping the APA format.

d. Of the six banks studied, viz. Premier Bank, Canara Bank, Vijaya Bank, Indian

Bank, Indian Overseas Bank and Dena Bank, only Premier Bank is ready with the

format for the Risk-Based Internal Audit that the RBI has recommended for

implementation from 2003. This again points to the readiness of the Bank to

accept change and be prepared for it.

e. The most important change in the Bank's BPMS has been the segregation of the

quantitative content of parameters from their procedural, qualitative component.

The rationale for the change was the need to ensure stronger adherence to

systems and procedures. The success of the move has prompted the Bank to

persist with this format. Other changes have involved introduction of new

parameters, a redefinition of parameters for greater clarity and a reallocation of

weights between existing parameters. All these alterations were successful in

achieving the desired results.

49
f. As a result of periodic review and revision, the APA at Premier Bank differs from

that at other banks. Although it adopted the format recommended by the

Government of India, it has improved upon it, making it more comprehensive in

its coverage and ensuring that assessment of managers is quite objective.

g. The HR Department has also endeavored to link branch performance

measurement with the measurement of the Branch Manager's performance. The

APA format contains the rating of the Branch Manager's branch on every

parameter, and also its overall rating for the current and the previous year. This

overt link between the two performance measurement systems must certainly

motivate a Branch Manager to ensure that his/her branch does well on all fronts.

Further, the fact that the weight of Business Dimensions in overall assessment is

very high (80 per cent) will strengthen this motivation.

h. However, there are some shortcomings in the appraisal system. First, the

contribution of each parameter to the total for Business Dimensions is not

specified. This is very different from the BPMS, where weights are clearly

specified and occasionally changed in order to fine-tune branch performance.

Second, the qualitative aspects of business carry a much lower weight in the

Branch Manager's Performance Appraisal as compared to their weight in branch

performance measurement and evaluation.

i. Despite the drawbacks of the performance appraisal system, Premier Bank has

been able to ensure that Branch Managers and branches perform in accordance

with Bank goals and objectives. This may be attributed to

I. the sensitivity of the BPMS to changing Bank goals,

ii. the fairly clear link between the BPMS and the APA,

Hi. the periodic revision of the APA so as to secure the inclusion of all branch

business parameters,

50
 iv. the predominance of business parameters in the APA, and

v. the importance of the APA in deciding promotions at lower scales.

4.2.1.3 Conclusion

1. Premier Bank takes a proactive stance towards branch performance

measurement, making suitable modifications and alterations in response to

changes in its environmental conditions, goals and RBI directives. Consequently,

the Bank has made four changes in its BPMS since the introduction of financial

sector reforms in 1993.

2. In respect of the APA, although the Bank, like all others, adopted the IBA format

on the Government of India's recommendation, it retained some flexibility and has

periodically revised the format to suit its changing focus.

3. Premier Bank regularly reviews and revises both its performance measurement

systems.

4. At Premier Bank, there is a clear, strong link between Bank goals, the BPMS and

the APA.

4.2.2 Case 2: Canara Bank

4.2.2.1 Summary

India's largest nationalized bank, Canara Bank is also one of the better performers in

the banking sector. While setting benchmarks for itself, Canara Bank focuses on the

performance of its peers in the banking industry, which are banks that can match it

for size, scale and spread. The planning process at the Bank has a strong top-to-

bottom orientation, and branches are given the targets they are expected to achieve

during the year. Targets are almost always achieved, with roughly 60 per cent

branches reaching all their targets.

The responsibility for designing and implementing the BPMS rests fully with the

51
Inspection & Audit Department, which seeks inputs from other concerned

departments in order to ensure that branch performance is correctly and adequately

measured and evaluated. The follow-up procedure for low-rated branches is fairly

strong, with Regional Managers and Circle Office Heads making periodic visits to the

branches and ensuring that performance improves. Such branches also undergo

inspections more frequently (every 12 months) vis-à-vis branches that have attained

at least a 'Satisfactory' rating (every 18 months).

Although the Bank has no established policy with respect to changes in the BPMS,

changes are made roughly once in about 3 years. After the introduction of financial

reforms, the BPMS has been changed four times — in 1995, 1997, 2000 and 2003.

Alterations are made in consonance with changing corporate objectives and shifting

thrust areas. Two of the revisions have been fundamental, involving a radical change

in design and content. The other two are more in the nature of a switch in the

relative importance of the parameters that make up the BPMS.

Canara Bank was the first to introduce the Annual Performance Appraisal (APA) in

1986, after which other banks followed suit. In the second half of the 1990s, the Bank

adopted the APA format designed by the Indian Banks' Association and

recommended by the Government of India. One modification it has made to this

system is that it has imposed a maximum limit of 90 per cent for the marks to be

awarded for each of the three components, in order to ensure that marks are not

awarded indiscriminately.

A unique feature of Canara Bank's APA is the inclusion of a 'Potential Review'

component, where the appraising authority records his opinion of the appraisee's

strengths and weaknesses, training requirements, special skills and his ability to

shoulder greater responsibilities. There are no marks awarded to this section, but it is

critical at the time of deciding promotions of the managers, particularly from Scale 3

upwards, i.e. from the junior to middle management level, and from middle to senior

52
management level. The APA is significant in deciding promotions of managers, but

its relative importance declines at the higher scales.

The appraisal system is characterized by considerable subjectivity, since the weights

assigned to the parameters making up the 'Business Dimensions' component are not

clearly specified. Further, assessment of 'Managerial Traits' involves considerable

discretionary judgment on the part of the Regional Manager. Canara Bank claims to

be the only bank with an open appraisal system, where managers are informed of

their ratings, although the marks are kept confidential.

Canara Bank is keen on enhancing the objectivity and accuracy of the system, so

that the Bank benefits from "having the right person in the right job". Besides

improving the system, top management is also of the view that increasing the

confidentiality of the process would reduce the tendency of appraising authorities to

over-rate subordinates, making the APA more accurate and reliable.

4.2.2.2 Analysis

a. Canara Bank benchmarks itself against its peer banks, which are banks of similar

size and spread. Target-setting originates at the top and the Bank ensures that

targets are achieved.

b. At Canara Bank, the Bank's priorities, its plans and its BPMS are all linked to one

another. A change in the first triggers changes in the goals and objectives set out

in the medium-term plans. These changes are then incorporated in the bank's

BPMS by means of altered weights to existing parameters, changes in the

parameters themselves, or modifications to the entire system. For example, post-

reform, the Bank has shifted its focus away from deposit mobilization and

expansion towards productivity, profitability and a healthy balance sheet. The

plans and the BPMS have both reflected these changed priorities.

53
c. The BPMS has been changed four times in the ten years since financial sector

reforms were initiated. All the changes have been driven by the need to ensure

that branches function in a manner that will enable the Bank to achieve its goals.

Thus the importance of Deposit Growth in measuring a Bank's performance was

scaled down from 18 per cent in 1995 to 10 per cent in 2000. Recovery

Management was accorded increased importance in 2000, but as the Bank's

NPA position improved, its weight in the BPMS has declined slightly in the 2003

format.

d. The regular changes in the BPMS reflect the Bank's commitment to its new

priorities, and its belief that changes in the BPMS will send out the correct signals

to Branch Managers, ensure appropriate changes in their efforts and thus bring

about the desired results.

e. Other than Deposits, the changes in the BPMS have resulted in changes in Bank

performance in the desired direction. Adherence to systems and procedures has

improved after the segregation of all parameters into the quantitative and systems

components. The Bank has been able to clean up its balance sheet considerably,

although it is aiming for still further improvement. In the case of Deposits, despite

the reduced emphasis, growth has not eased up, a fact that the Bank attributes to

its reputation among the general public.

f. Performance Appraisal is an area to which the Bank has not paid any attention.

The Bank has stayed with the IBA format, where the only quantitative parameters

included in Business Dimensions are Deposits, Advances and Profits. Although

NPA control is recorded separately, it is not clear whether performance here is

included in the Business Dimensions. The qualitative parameters are not clearly

defined in the APA, and the numeric weights to be assigned to the different

parameters is not specified. This is in complete contrast to the BPMS, where

parameters are clearly defined and their weights specified. The inclusion of the

54
 Potential Review section and the maximum limit of 90 per cent marks to be

allotted on each dimension, are the only two modifications made by the Bank.

g. If managers do not submit their APAs on time, the appraisal is conducted

unilaterally and managers are informed of their rating.

h. Just as the BPMS is changed in line with the Bank's shifting focus, it is important

that the APA be changed as well. Changes in the APA are necessary, since it is

the APA that drives Branch Managers' efforts. The fact that Canara Bank has

made no changes in its APA since it was adopted may explain why Deposit

growth has not been affected by the reduced emphasis accorded to this

parameter in the BPMS. It continues to be assigned the same emphasis in the

Branch Manager's Appraisal in 2003 as it was in 1995.

i. At Canara Bank, the importance of the APA in deciding promotions is not as high

as in some other banks. This might be the reason why the Bank has been able to

achieve its objectives despite its neglect of performance measurement and

evaluation of its functionaries. The Potential Review section, unique to Canara

Bank, includes branch rating as one of the entries, which might also be a

contributory factor.

4.2.2.3 Conclusion

1. While Canara Bank does not have an established policy of periodic review of its

BPMS, it does revise the BPMS quite frequently, as and when dictated by

changes in Bank priorities, plans, business environment conditions and RBI

policies. Accordingly, it has altered its BPMS four times in the post-reform

decade. The Bank is convinced that these changes have resulted in changes in

Bank performance in the desired direction.

2. Performance Appraisal is an area to which the Bank has not paid any attention.

The Bank has stayed with the IBA format, which measures a Branch Manager's

55
 performance on only a few quantitative parameters. The qualitative parameters

are also not clearly defined in the APA. This is in sharp contrast to the BPMS

where measurement is comprehensive, parameters are clearly defined and

weights specified.

3. The Bank is quite serious about the appraisal process and if managers do not

submit their APAs on time, the appraisal is conducted unilaterally.

4. At Canara Bank, the link between priorities, plans, and the BPMS is strong, with

changes in the first triggering of changes in plans as well as the BPMS. Ideally,

the link should proceed to the managers' performance appraisal as well, but this

does not happen at Canara Bank.

4.2.3 Case 3: Vijaya Bank

4.2.3.1 Summary

Between 1996 and 2001, Vijaya Bank recorded a strong improvement on all

performance measures, which facilitated its movement from the category of 'Weak

Banks' to that of the 'Strongest Banks'.

Vijaya Bank chooses the best growth rates in the industry as its benchmarks while

finalizing annual targets. Targets are set at very high levels and many are achieved.

The Bank believes that such stretch targets have motivated Regional and Branch

Managers to give of their best.

Vijaya Bank has no established policy on modifying or changing the BPMS; changes

are made as and when the situation warrants. In the post-reform period, the Bank

has made four alterations to the BPMS, either as a result of RBI directives or in

response to changing economic conditions. As an indicator of its willingness to learn

from the experiences of other banks, in 2002 Vijaya Bank adopted a BPMS, which is

along the lines of that pioneered by Premier Bank. The qualitative aspects of all

parameters were culled out, and branches are now assessed separately on their

56
performance on both, the qualitative and quantitative aspects of their functioning.

Changes in the BPMS have largely been effective in bringing about the desired

results.

After branch performance has been measured, the Department of Inspection

scrutinizes the branch inspection reports and decides upon the final rating to be

assigned to the different branches. If the variance between targeted figures and

actuals is too large, and the Department believes that the discrepancy is because of

unrealistic targets, the report is sent to the Planning Department for follow-up. If the

shortfall can be attributed to poor branch performance, the branch is rated

accordingly and the Department initiates the follow-up procedure.

The Performance Appraisal format for Branch Managers at Vijaya Bank is the one

designed by the Indian Banks' Association and recommended to all Public Sector

Banks by the Government of India. The HR Department at Vijaya Bank is fully aware

of the inadequacies of the appraisal system, such as the fact that the Branch

Managers performance is measured along only four parameters (Deposits,

Advances, Priority Sector Advances and Profits), weights of individual parameters

are not specified, and so on. The Department has put up a proposal before the

General Managers' Committee for a revamped APA system.

The APA is a confidential exercise and only Branch Managers who are awarded an

'Unsatisfactory' rating are informed. Unofficially though, most Regional Managers do

tell Branch Managers their ratings. The APA plays an important role in deciding the

career advancement of managers.

4.2.3.2 Analysis

a. As a matter of policy, Vijaya Bank sets targets for itself that are exceptionally high

and well above the industry average. Consequently, it falls short of some targets.

Although the Bank believes that such goals inspire managers to try harder, it is

57
 entirely possible that it encourages managers to 'game the system'. Managers

will obviously have realized that the Bank sets unreachable targets and is tolerant

of non-achievement. They may then try to determine exactly what level of

achievement is acceptable and aim only for that level. There is also the possibility

of politicization — allowing greater latitude to selected managers. The Bank could

achieve the same results by setting reasonable targets and insisting that they be

met, a practice that would instill discipline and then a sense of fulfillment among

Branch and Regional Managers.

b. Although Vijaya Bank does not have a determinate policy as regards alterations

to its BPMS, it frequently reviews the BPMS and makes changes as warranted by

changing circumstances and its own shifting priorities. In the past ten years, the

Bank has altered its BPMS four times. The purpose of each change was to

influence branch performance so as to enable the Bank to reach its goals. The

changes have involved a complete overhaul of the system, a redefinition of

parameters and a reallocation of weights among parameters. Whatever the

change, it has usually (save for one instance of Social Banking, where an

increase in importance had no noticeable effect) brought about the desired result.

c. The frequent changes in the BPMS are a pointer to the Bank's faith in its control

systems.

d. As priorities change, the Planning Department restates the Bank's goals and

targets. The Inspection Department follows this up with alterations to its branch

control mechanism. There is evidently a clear, strong link between the Bank's

goals, its plans and its performance management system.

e. This link does not, however, extend to the performance measurement of

managers. The Bank has continued with the same performance appraisal for

close to ten years, making no modifications of any sort. Thus although the Bank

58
 could see the need to adjust the BPMS to reflect changes in goals and

objectives, it did not perceive the necessity of making simultaneous changes in

the APA system.

f. At Vijaya Bank, the BPMS measures branch performance clearly and

unambiguously on a complete range of parameters, quantitative as well as

procedural. By contrast, the Branch Manager's APA measures his/her

performance only on the traditional banking business parameters, viz. deposits,

advances, priority sector advances and profits. Although branch performance in

respect of NPAs is recorded in the APA, it is not clear whether the Branch

Manager is assessed on this important parameter. In addition, the relative

importance of the quantitative and qualitative components of business differ

across the two systems, the former being more heavily emphasized in the Branch

Manager's APA (60 per cent) than in the BPMS (47 per cent). Thus despite the

Bank's desire to ensure systemic strength, the Branch Manager may continue to

favor target achievement over everything else.

The HR Department at Vijaya Bank is aware of the shortcomings in the

performance appraisal system and in early 2003 it put up a proposal for a new

system before the General Managers' Committee (this system was made

operational in early 2004). In the proposed system, all parameters of the APA are

clearly defined and the weights specified. It is therefore, far more objective than

the existing system. Further, realizing the desirability of linking the two

performance measurement systems, the HR Department and the Inspection

Department worked together on the proposal to ensure that all business

parameters were included in the new APA. However, the two departments

overlooked the necessity of aligning the relative weights assigned to parameters

in the two systems.

59
4.2.3.3 Conclusion

1. Vijaya Bank is a bank with a clear desire to continuously improve its performance

on all fronts. In keeping with this aim, it has regularly reviewed and rpodifed its

BPMS, making four changes since 1994. While one change was occasioned by

the RBI directive on NPAs, the others have been initiated by the Bank itself, to

reflect its changing concerns and priorities.

2. The Bank believes that changes in the BPMS are fruitful and branches do

respond to modifications, ensuring thereby that the Bank also achieves its

desired objectives.

3. Although Vijaya Bank persisted with the IBA's APA format for more than ten

years, the HR Department at the Bank was fully aware of its inadequacies. Now,

in the relatively deregulated environment, where banks have more operational

freedom than they did in the past, the Bank has designed a new appraisal system

that is more objective and transparent than the IBA one that it followed for so

long.

4. By leaving the performance appraisal system unaltered for so long, the Bank

neglected to ensure that the performance appraisal of the Branch Manager was

closely aligned with the performance measurement of his branch. The result was

a mismatch between the parameters on which the two were assessed and the

weights assigned to these parameters. Furthermore, the changes made in one

system were not matched by corresponding changes in the other.

4.2.4 Case 4: Indian Bank

4.2.4.1 Summary

Indian Bank has been plagued by losses and a dismal record on all performance

measures ever since financial sector reforms were initiated in 1993. After a

prolonged period of poor performance, the Bank was finally able to turn the corner in

60
2002, largely as a result of massive recapitalisation by the Government of India,

major organizational changes and a reorientation of business.

At Indian Bank, long-term plans (seven to ten years) are statements of the Bank's

vision; medium-term plans lay out goals to be achieved within three to four years,

and short-term plans are annual, elaborate plans. The Bank does not use best bank

performance, industry performance or even peer performance as a benchmark while

planning for the immediate future. The approach to planning seems to be both, top-

to-bottom as well as bottom-to-top. Deposit targets are always achieved, while

targets for advances (especially in the post-reform period), have rarely been met.

The Bank does not have any established policy regarding changes in the BPMS and

officials say that alterations are made in response to circumstances. Decisions to

modify the BPMS are made in isolation, with no input from other Departments of the

Bank. At Indian Bank, the BPMS has been changed only twice since 1993, and these

changes have involved a redefinition of selected parameters and/or a reassignment

of weights between parameters. Indian Bank does, however have a follow-up policy

in place, with poorly rated branches being inspected more frequently within a period

of 9 to 12 months, while others are inspected after 15 to 18 months.

At Indian Bank too, the APA format is that recommended by the Government of India.

Indian Bank has left the Quantitative and Qualitative Aspects of Business

unchanged. But it has made two changes: first, Outstanding Achievements are

clearly defined as are the marks allotted for these achievements, and second, for

managers in Scale 4, it has introduced a Confidential Report section, recording the

appraising officer's views about the manager's integrity, leadership abilities,

interpersonal relations, etc.

The procedure of appraisal is confidential, and only Branch Managers who receive

an 'Unsatisfactory' rating are informed. The APA assumes importance at the time of

61
promotions, but its relative importance in the promotion decision decreases as the

manager moves up to higher scales.

4.2.4.2 Analysis

a. When Indian Bank was going through a prolonged period of poor performance, it

was able to achieve Deposit but not Advances targets. While the Bank attributes

this fact to public confidence and trust, another explanation for this might be that

between 1995 and 2001, Deposits carried a much greater weight than Advances

in the Bank's BPMS (20 per cent and 5 per cent respectively). The message was

very clear. Indian Bank valued Deposits more than Advances. Even after 2001,

when the weights were finally altered, the Bank continued to lay relatively greater

emphasis on Deposits.

b. The BPMS at Indian Bank has been altered only twice in the last ten years. To

quote an official, the 1990s were so bad that "only the most pressing matters

were attended to". Evidently the Bank's control systems were not considered

important enough to merit attention at a time when better control would most

certainly have been beneficial.

c. Indian Bank has no definite policy regarding periodic review and revision of its

BPMS. Changes in the BPMS come too late (i.e. after the situation has

deteriorated) and are quite superficial in nature. For instance, although banking

was changing so rapidly in the nineties, the Bank revised its BPMS in 1995 and

then, only in 2001. Further, it has retained the same basic BPMS and only made

some alterations in the weights attached to the parameters; the parameters

themselves have remained the same. Even this small effort did produce results in

the form of higher earnings, improved asset quality and better returns. A major

overhaul might have been even more effective. More importantly, prompt action

might have prevented such a relentless decline in performance.

62
d. The APA at Indian Bank is a slightly modified version of that designed by the IBA

and recommended by the Government of India. One modification is the

introduction of the Confidential Record section. This section does not include any

characteristics that are not already a part of the Managerial Dimensions

component in the APA, and its introduction does not add anything to the

appraisal. Also, the maintenance of Confidential Records is seen as a retrograde

practice, and progressive organizations the world over have moved to a system

of participatory, open appraisal.

e. The other modification has the merit of injecting a little objectivity into the

appraisal. The interests of objectivity might have been better served if the Bank

had tried to define the Business Dimension (which accounts for 50 per cent of the

total marks) more clearly. Instead the Bank has chosen to specify what is meant

by Outstanding Achievements, and how the 10 per cent marks are to be allotted.

f. Indian Bank has never explored the possibility of linking its BPMS to the APA of

its Branch Managers. Consequently there are important areas of branch

performance evaluation that are missing from the APA. An example is Asset

Management, which refers largely to credit sanction and disbursal procedures

and carries a weight of 13.5 per cent in the BPMS, but does not figure in the

APA. Similarly, Social banking is subsumed under Advances, but quite heavily

emphasized in the APA of Branch Managers, which might help explain why the

Bank has consistently overachieved the priority sector target of 40 per cent, even

when it was unable to achieve its targets for Advances in general.

g. The Performance Appraisal System lacks transparency and is characterized by a

substantial amount of ambiguity, with the appraisers being given considerable

leeway in deciding the allotment of weights to individual components of the major

heads of assessment.

63
4.2.4.3 Conclusion

1. Indian Bank does not consider performance measurement to be in wdent

enough to merit periodic review. The BPMS has been altered only twice since

1993. One change was in 1995, when all banks introduced NPA Management as

a performance measure in keeping with RBI prudential norms and balance-sheet

transparency requirements. The next change came only in 2001, although the

intervening years were the worst years for the Bank, when it made continuous

losses, was below the industry standard on every conceivable parameter, and

could not meet RBI norms in important areas such as capital adequacy.

2. Indian Bank has made some changes to the APA format, but these have been

minor and not had any significant impact. The introduction of the Confidential

Record section, while not adding anything new to the appraisal, has also the

demerit of being a regressive procedure. The other modification has made

objective assessment possible on one head of assessment, viz. 'Outstanding

Achievement', but this carries a weight of just 10 per cent in the APA. The Bank

would have been able to achieve far greater objectivity if it had defined the

Quantitative and Qualitative Aspects of Business, since together they account for

50 per cent of the APA marks.

3. The links between the two performance measurement systems at Indian Bank

are extremely weak. Not all the parameters used to measure branch performance

find a place in the Branch Manager's performance appraisal, and the weights

assigned to parameters also differ considerably. Lastly, the changes made in the

BPMS have not been followed by changes in the APA.

4.2.5 Case 5: Indian Overseas Bank

4.2.5.1 Summary

Indian Overseas Bank is a medium-sized Public Sector Bank, which performed below

64
the industry average on all earnings, cost, profitability and productivity measures

between 1996 and 2001. This is in spite of the fact that the Bank strives to be at least

as good as the industry average on all parameters. At Indian Overseas Bank,

planning is relatively more of a top-to-bottom exercise, although Regional Managers

are consulted about the capabilities and constraints of their regions, and their

opinions are given 'due consideration' while finalizing the Annual Plan.

Indian Overseas Bank does not have a laid-down policy with regard to changes in the

BPMS. Rather, alterations of any kind are made whenever the need arises or on the

basis of feedback from Regional Managers and Branch Managers. Any changes that

are proposed are first vetted by the General Managers' Committee and then by the

Audit Committee of the Board. Since 1993, the Bank has made three changes in its

BPMS. However, the actual changes are fewer, since the change in 2002 was a

reversion to the system that existed before it was altered in 2001.

The branch rating recommended by the team of inspectors is reviewed at the Head

Office. In the case of branches for which the inspectors have recommended a 'C' or

'D' rating, the General Managers review the reports and decide upon the final rating.

Regional Managers have frequent meetings with the Branch Managers of low-rated

branches, provide guidance for improvement and submit bimonthly reports to the

Head Office until the branches have been upgraded to a 'B' or 'A' rating. Such

branches are inspected once in 12 months, whereas for other branches, the

periodicity is 18 months.

Indian Overseas Bank adopted the IBA-designed APA format in 1995. Since then it

has made no changes or modifications in the format. The performance appraisal is

not a transparent procedure, and Branch Managers are informed of their rating only if

it is Unsatisfactory. The APA is important at the time of a Branch Manager's

promotion, although the significance varies at different stages. A striking feature at

Indian Overseas Bank is that the weightage assigned to the APA for deciding

65
promotions, actually increases at higher scales.

4.2.5.2 Analysis

a. Indian Overseas Bank has only annual plans, making it difficult for managers at

the operational level to work towards some long-term goals and commitments.

The Bank has no serious benchmarks, merely desiring to be `as good as the

industry'. This non-competitive, mediocre attitude might be partly responsible for

the Bank's lackluster, sub-standard performance.

b. In the ten years since 1993, Indian Overseas Bank changed its BPMS thrice, but

effectively there was only one change. The BPMS was changed in 1995, when all

banks made similar changes to incorporate NPA Control and Management as an

additional performance measure. This BPMS was altered quite significantly in

2001, when Profitability became the most important parameter. Branches could

get an overall 'A' rating only if they were successful in getting an 'A' on this

parameter. Although Bank profitability did improve, in 2002 the Bank reverted to

the older system (with some minor changes) after discovering that the profitability

condition was too harsh on some branches that were otherwise good performers.

This reversal suggests that the change had been pushed through without

adequate thought and preparation.

c. Furthermore, despite the fact that Profitability had improved, there was no

attempt to retain the importance of this parameter, while at the same time, toning

down the stringency of the 2001 system. The Bank simply went back to its earlier

system, with only some cosmetic changes.

d. Whereas the Bank did make an attempt to alter the BPMS to reflect changes in

its priorities, it has made no such effort in case of the performance measurement

of managers. The system is exactly as it was when it was introduced in 1995, in

spite of the radical changes that have taken place in banking in the interim

66
 period.

e. The APA system as recommended by the IBA, is very subjective and ambiguous,

and lacks transparency. Unlike the three 'strong' banks, Indian Overseas Bank

has not made any attempts to improve the format. It has not specified the weights

to be attached to the different quantitative and qualitative aspects of business,

nor has it expanded the scope of the business dimension to include new areas of

business. Thus the Branch Manager is only assessed for his achievement of

targets in respect of Deposits, Advances, Priority Sector Advances and Profits.

f. Branch rating also does not find any mention in the Branch Manager's APA. It

seems that there is only a very tenuous link between the two performance

measurement systems at Indian Overseas Bank.

4.2.5.3 Conclusion

1. Indian Overseas Bank's policy with respect to the BPMS is not clear. The change

in 1995 was the outcome of the RBI's insistence on banks declaring their NPAs

and making provisions for them. After that the next change came only in 2001,

but was revoked within a year, when it was seen to be unfair to a fairly large

number of branches. Thus the proactive change made in the system was rolled

back although it did produce the desired result of improving Bank profitability.

2. The Bank has stayed with the IBA's APA format, making no attempt to enhance

or redefine the scope of the business parameters on which the Branch Manager's

performance is evaluated. The Bank has also taken no steps to make the

appraisal exercise more objective and transparent.

3. The linkages between the performance measurement of the branches and that of

Branch Managers are extremely limited. Branch Managers are assessed on only

a few facets of branch performance, the weights assigned to comparable

parameters in the two systems do not match, and the changes that the Bank

67
 made to its BPMS were not followed by similar changes in the APA.

4.2.6 Case 6: Dena Bank

4.2.6.1 Summary

Dena Bank is a bank that experienced a steady decline in its fortunes between 1996

and 2001. The Bank plans only on an annual basis, setting out detailed monthly

targets for all regions and for the Bank as a whole. While fixing targets, the best

performance over the preceding four to five years is taken as the basis upon which

improvement/growth is projected. However, the overriding consideration is that at no

point must the Bank's market share fall below 1.5 per cent, which has been its

average share for a fairly long time now. This is the Bank's most basic benchmark.

Planning is more of a top-to-bottom exercise, with the Bank setting regional targets,

and the Regional Offices distributing these targets between branches under their

control. It rarely happens that all targets are met, but this does not trouble decision-

makers, since targets are set at unattainably high levels.

The Bank has no established policy as regards changes in the BPMS: changes are

made by the Inspection Department either in response to RBI or Government

directives, or in response to feedback from Branch and Regional Managers. Since

1993 the BPMS has been modified only twice, in 1996 and 2001.

The Branch Performance Measurement System (BPMS) at Dena Bank is extremely

cumbersome and complex. In the first place, inspectors have to fill in a report running

into almost 180 pages. Further, the marks received for each parameter depend upon

answers to a series of questions, but it is not at all clear as to how these marks are

given. Thus the process of performance measurement is very obscure.

A branch that receives an 'Unsatisfactory' or 'Below Average' rating is inspected

again after 9 months, while a branch that has been assigned an 'Excellent' rating is

inspected after an interval of 18 months. 'Good' and 'Very Good' branches are

68
assessed once in 12 and 15 months respectively. Regional Managers are expected

to visit 'Unsatisfactory' and `Below Average' branches at least once every quarter,

and file monthly reports about the progress made towards correcting procedures and

performance as recommended by the team of inspectors.

The Annual Performance Appraisal (APA) format at Dena Bank is the one designed

by the Indian Banks' Association and recommended by the Government of India. The

format has been accepted as suggested, with absolutely no changes. Appraisal is

confidential, the appraisee being informed only if the rating is 'Below Average' i.e.

less than 40 per cent. However, most managers are unofficially informed of their

ratings, especially if they receive 'Outstanding' ratings. The APA is critical in deciding

promotions, more so at lower hierarchical levels than at higher ones.

Some managers allow their APAs to remain pending for three to four years and

submit all of them together at the time of consideration for promotions. The Bank has

no system of ensuring timely submission of APAs, indicating a lack of seriousness

about the appraisal procedure, and raising doubts about the accuracy of the

appraisal of these managers.

4.2.6.2 Analysis

a. Since Dena Bank plans only on an annual basis, and since these plans are not

ready until April/May, Branch Managers will not be able to determine tentative

targets towards which they should aspire. Medium-term Plans might help,

allowing the Bank to work towards certain pre-determined goals, even without the

assistance of specific targets. After its first-ever losses in 2000-01, the Bank for

the first time, formulated a five-year medium-term Strategic Revival Plan for

effecting a quick turnaround. The Plan was put into operation and monitored

rigorously, consequent upon which the Bank came out of the red within one year,

i.e. by 2001-02. This can be cited as another argument for a medium-term plan

69
 that will guide the Bank towards achievement of broader, longer-term goals.

b. Deliberately setting unrealistically high targets can have a negative impact upon

the way in which Regional and Branch Managers function. Aware that the Bank

does not expect targets to be met, managers might have worked out a minimum

achievement level that they think higher authorities are willing to accept, and

might in fact be working only towards those levels. Further, since targets are

negotiable, there is also the possibility that some managers may be treated more

leniently than others.

c. The last decade has seen major changes in banking technology, priorities and

practices. Bank and branch automation, customer service, productivity and

profitability, optimal resource utilization, improved recovery and retail banking are

areas that are now at the forefront of all banking business. Despite this, Dena

Bank has not seen fit to alter its BPMS regularly and incorporate these changes

as they occurred. It made some changes in 1996, and NPA control was brought

in as a new parameter. The next change was made only in 2001, after the Bank

made losses the previous year. Appropriate and timely changes in the

intermediate period might have guided branches in the right direction and

prevented the slide.

d. The BPMS at Dena Bank is complex and confusing, and involves lengthy

procedures. The changes in 2001 made the system more objective, but did not

substantially reduce its complexity or improve its clarity. One important feature of

a performance measurement report is that it should be easy to understand, and

the manager should be able to see where performance has dipped and needs

attention. This feature is completely missing in the Dena Bank inspection report.

Although the Branch Manager would be able to see on which sub-parameter the

branch has not done well, determining exactly how and why this happened would

be a very tedious job, given the format of the Bank's Internal Inspection Report.

70
e. The indifference of the Bank is even more pronounced in the case of the

measurement of managers' performance. For over a decade now, the Bank has

persisted with the original format proposed almost fifteen years ago. There has

been absolutely no attempt to expand the scope of the business parameters on

which the managers performance is measured or define the relative importance

of the parameters in the final assessment.

f. The Bank has no policy to ensure timely submission of APAs, although roughly

one-third of their managers do not submit their APAs at the end of the year.

There are even instances of managers handing in the APAs of three or four years

at one time, in time for consideration for promotions. It is obvious, even to Bank

officials, that assessment in such cases is bound to be inaccurate and generally

favor the appraisee. Yet there has been no corrective or disciplinary action,

although the Bank is now considering a few options such as withholding

increments or asking for APAs to be submitted along with branch year-end

returns.

g. Measurement of branch and Branch Manager performance proceed

independently of each other, with no efforts made to align the two. The Inspection

Department has recently put forth a proposal to this effect before the Human

Resources Department and a decision is pending.

4.2.6.3 Conclusion

1. Dena Bank has no determinate policy regarding review and revision of any of its

performance measurement systems. The BPMS has been changed only twice in

the decade since the initiation of financial sector reforms. The first change was in

1996, when all banks changed their BPMS to incorporate the RBI's directive on

recognizing and declaring NPAs. The next, most recent change was in 2001,

after the Bank made its first-ever losses. Thus Dena Bank appears to have a

71
 reactive, rather than proactive approach to the performance measurement and

evaluation of its branches.

2. In respect of the other performance measurement system, i.e. the performance

appraisal of managers, the Bank has continued to use the IBA format for almost

fifteen years. There have been no alterations at all, although the banking sector

has undergone significant changes over the said period. Dena Bank does not

have any policy at all with respect to this aspect of performance measurement.

3. Furthermore, despite the fact that approximately one-third of the Bank's

managers do not submit their APAs on time, the Bank has yet to initiate any

corrective measures. The present situation indicates indifference towards the

APA on the part of the Bank as well as its managerial level employees.

4. It is quite clear that the Bank's performance measurement systems are not linked

to one another. The Branch Manager's performance is measured on only a few

aspects of branch performance (which have not changed for almost fifteen

years), and the rating of the branch, which reflects its overall performance, finds

no mention in the APA.

4.3 ACROSS CASE ANALYSIS

-

A comparative analysis of the six case studies reveals certain features that set the

stronger banks apart from the weaker ones. These differences relate to

1. Target-setting and target-enforcement,

2. The role of the BPMS in helping the bank achieve its goals,

3. The importance assigned to the APA in helping the bank achieve its goals, and

4. The strength of the connection between a bank's priorities, its plans, its BPMS

and the APA of its managers.

72
4.3.1 Target-setting and Enforcement of Targets

1. The 'strong' banks in the study have clear standards against which they

benchmark themselves. For Premier Bank, the benchmark for every parameter is

the industry-best figure; Canara Bank tries to ensure that it is better than its peer

banks, which match it for size and spread; Vijaya Bank wishes to perform better

than the industry average on all parameters. By contrast, Indian Bank has no

stated benchmarks, Indian Overseas Bank wants to be as good as the average

bank and Dena Bank's desire is to ensure a continued market share of 1.5 per

cent. The 'strong' banks are evidently driven by the desire to be the best, or at

least better than most other banks, a drive that is lacking in the 'weak' banks.

2. The two 'strong' banks, Premier Bank and Canara Bank, set achievable targets

and make sure they are met. Vijaya Bank and Dena Bank set extremely high

targets, some of which are practically unattainable. Vijaya Bank believes that

these are in the nature of stretch goals, spurring managers on to better

performances, but it is possible that in both banks, managers have determined

exactly what level of achievement is acceptable to top management, and strive

only to attain those targets. Indian Bank finds that Deposits targets are easily

achieved, but regularly experiences shortfalls in the case of Advances.

3. Premier Bank is the only bank in the study where target-setting has a pronounced

bottom-to-top orientation. Branch Managers estimate the potential of their

branches in various business areas and the Head Office uses these as the

starting point for determining targets for zones. This 'ownership' of targets may be

a contributory factor to the Bank's record on target achievement. In all the other

banks studied, target-setting starts at the top, although the views of Regional

Managers are considered before targets are finalized. Like Premier Bank, Canara

Bank able to ensure achievement of targets in spite of its top-to-bottom target-

setting procedure.

73
We can therefore observe that

a. In comparison to 'weak' banks, 'strong' banks seek clear and ambitious

benchmarks for performance.

b. 'Strong' banks set achievable, non-negotiable targets and ensure that they are

met, while 'weak' banks are not as fastidious about target-achievement.

4.3.2 Branch Performance Measurement System

1. The differences between the two groups of banks are pronounced in respect of

the BPMS in their banks. Premier Bank is the only bank in the study that reviews

its BPMS every two years as a matter of policy. The other banks have no

established policy as regards review of the BPMS. Canara Bank and Vijaya Bank

make revisions as and when plans and priorities change, or when there are RBI

directives necessitating change. In the other three banks, changes are mostly in

response to RBI directives.

2. Premier Bank, Canara Bank and Vijaya Bank have all changed their BPMS four

times in the past decade. All three have made one major change, separating out

the qualitative components of all parameters and assessing branch performance

separately on both, qualitative and quantitative aspects of their functioning. The

other changes have involved inclusion of new areas of assessment, redefinition

of existing parameters and a reallocation of weights between existing parameters.

All the changes have been triggered by shifts in the banks' priorities and goals.

By contrast, in the last decade, the three weaker banks have each made only two

changes in their BPMS. One of these changes was common to all banks, and

took place around 1995/1996, when the RBI introduced the NPA recognition and

provisioning norms. Other changes have involved a redefinition of parameters

(mainly to take cognizance of new areas of business such as retail lending) and a

reallocation of weights among existing parameters. Indian Overseas Bank did try

74
 to introduce a major change in its BPMS but had to retract after it found that

several 'good' branches were adversely affected by the stringency of the new

condition imposed on them. Thus, these banks have not altered or modified their

performance management systems to keep pace with the major changes (driven

by technology, competition, government policy, etc.) that the banking sector has

experienced over the last decade.

3. The branch performance measurement systems at the three 'strong' banks are

clear and concise. The parameters are well defined, as is their relative

importance. While this is also true for Indian Bank and Indian Overseas Bank, it

does not hold good for Dena Bank, which has an extremely complicated branch

performance measurement system.

4. All the banks in the study have a similar follow-up system for poorly rated

branches, wherein these branches are inspected more frequently than others.

The Regional Managers who are responsible for the control of these branches

are required to visit them at prescribed intervals, provide guidance, make

suggestions for improving performance and submit regular reports about their

progress. This is supposed to continue until the branch is upgraded.

We can therefore observe that

a. In contrast to 'weak' banks, 'strong' banks have an established policy regarding

periodic review of their branch performance measurement systems.

b. 'Strong' banks make more frequent changes in their BPMS, as compared to

'weak' banks. While some changes are in response to RBI or Government of

India directives and are therefore common to all banks, the 'strong' banks also

initiate changes in response to changes in their environment or shifts in their

priorities. Thus the 'strong' banks have a proactive approach to performance

measurement and evaluation of their responsibility centers.

75
c. In the 'weak' banks, the changes in the BPMS involve a reallocation of weights

among existing parameters, a redefinition of parameters to take cognizance of

new areas of business, or the introduction of a new parameter in response to

RBI/Govemment of India directives. While 'strong' banks make similar changes,

they also make some radical changes in their BPMS. One such change in the

'strong' banks studied, was the drawing out of the qualitative content of all

parameters. The purpose of this change was to make qualitative performance

conspicuous, so that Branch Managers pay adequate attention to this critical

aspect of branch functioning. In short, 'strong' banks are more likely to make

major changes in their BPMS than are weak banks.

d. All banks believe that Branch Managers will respond even to minor alterations in

the BPMS such as adjustments of weights within and between parameters.

'Strong' banks believe that changes in the BPMS are very effective, influencing

branch performance in the desired manner, and helping the bank achieve its

goals and objectives. Hence we may observe that vis-a-vis 'weak' banks, 'strong

banks make more frequent changes in their BPMS, and these changes have

more far-reaching effects.

e. In comparison to 'weak' banks, 'strong' banks exhibit a healthy concern for the

qualitative aspects of branch functioning. All the 'strong' banks in the study have

altered their BPMS so that Branch Managers are made aware of this concern,

and guide branch performance accordingly. BPMS formats in the 'strong' banks

clearly indicate the qualitative and quantitative aspects of all parameters, and the

relative importance of each. Such concentrated focus on quality is essential for

organizational success in the service sector.

76
4.3.3 Annual Performance Appraisal of Branch Managers

1. All the banks studied have the same basic format, which was designed by the

Indian Banks' Association and recommended to all banks by the Government of

India. Premier Bank is the only bank to have made some major changes in this

system, by eliminating one head of assessment (Outstanding Achievements) and

radically altering the weights assigned to the remaining. In the process, it has

made its APA more objective and comprehensive than in the other banks. Dena

Bank and Vijaya Bank have persisted with the format as it was recommended,

making absolutely no modifications. As a result, the Branch Manager is assessed

only on a few aspects of branch business and the level of objectivity in

assessment is extremely low. Canara Bank, Indian Bank and Indian Overseas

Bank have made some changes in the basic format, adding sections and/or

defining heads of assessment more clearly. The impacts on objectivity and scope

of assessment have been marginal.

2. In all six banks, the APA has an important role to play at the time of promotions.

While considering managers for promotions, banks consider the manager's APA

rating and marks, his/her performance at an interview and (at Scales 1 to 3)

his/her educational qualifications. All these components have a fixed weightage

in deciding which managers are to be promoted. Except in the case of Indian

Overseas Bank, the APA is assigned greater importance at the lower scales

(Scales 1 to 3), while the interview component carries more weightage at higher

scales (Scales 4 to 7). At Premier Bank, Canara Bank and Indian Bank, the

weight assigned to the APA declines markedly from over 50 per cent at the lower

end, to 20 per cent or less at the higher scales. At Vijaya Bank, Dena Bank and

Indian Overseas Bank, the APA carries a weight of 50 per cent or more at the

higher scales.

77
3. In line with Government of India recommendations, the appraisal procedure in all

the six banks is confidential. Managers are unaware of both, the marks awarded

to them as well as their rating. The only exception is Canara Bank, mere

managers are informed of their rating although the marks are not disclosed.

4. Premier Bank and Canara Bank insist upon timely submission of APAs, failing

which the HR Department carries out a unilateral appraisal of the manager

concerned. This practice in the two banks acts as a strong deterrent to late

submission. By contrast, all the 'weak' banks in the study face the problem of

managers submitting their APAs after the stipulated date, with some managers

submitting the APAs of three or four years together, at the time of consideration

for promotions.

We can therefore observe that

a. All banks have adopted the format designed by the IBA, since it was

recommended to them by the Government of India. This recommendation is,

therefore, a constraint within which PSBs in India have to necessarily operate.

b. 'Strong' banks ensure that APAs are submitted on time by conducting unilateral

appraisals in the case of erring managers. 'Weak' banks take no steps to

discourage late submission, and consequently a sizeable number of managers in

these banks do not turn in their APAs on time. Thus, 'strong' banks exhibit a

greater degree of strictness about the APA of their managers than the 'weak'

banks do.

4.3.4 The Link between Priorities, Plans, the BPMS and the APA

Premier Bank is the only bank where the goals, plans, management control system

and performance appraisal system are closely enmeshed with one another. A

restatement of long-term goals is immediately followed by adjustments to plans and

targets. The branch performance management system is the next to initiate

78
appropriate changes, followed by the performance appraisal system. The Bank's

excellent performance and attainment of goals can be attributed, at least in part, to

this dovetailing of all systems. At Canara Bank and Vijaya Bank, the linkage stops at

the BPMS; there is no further extension to the performance appraisal system. At the

three relatively 'weak' banks there are no linkages at all. Plans, the BPMS and the

APA system are all independent of one another. Seemingly therefore, strong

interconnections between all these systems make for better performance and the

stronger the connection the better the performance.

We can therefore observe that

'Strong' banks have more pervasive and potent links leading from the banks' goals all

the way to the measurement and evaluation of performance of branches and their

managers. In less strong banks, the links stop along the way, while in the 'weak'

banks, there are no links at all.

4.4 SUMMARY AND CONCLUSIONS

Using the M. S. Verma Working Group criteria for evaluation and categorization of

public sector banks, six banks were selected for carrying out case studies. The

objectives of the qualitative analysis were mainly to gain an overall understanding of

the branch performance measurement system and the performance appraisal system

in these banks so as to be able to distinguish between these systems and their

related practices in the two sets of banks — 'strong' and 'weak'.

The within case analyses of the six banks provided us with rich insights into the
-

performance measurement systems, procedures and practices in the six banks.

Listed below are some observations that emerged after the across case analysis.
-

■ In comparison to 'weak' banks, 'strong' banks seek clear and ambitious

benchmarks for performance.

79
■ `Strong' banks set achievable, non-negotiable targets and ensure that they are

met, while `weak' banks are not as fastidious about target-achievement.

■ In contrast to `weak' banks, `strong' banks have an established policy regarding

periodic review of their branch performance measurement systems.

■ The `strong' banks have adopted a proactive approach to performance

measurement and evaluation of their responsibility centers.

■ Vis-à-vis `weak' banks, `strong' banks make more frequent changes in their

BPMS, and these changes have more far-reaching effects.

■ In comparison to `weak' banks, `strong' banks exhibit a healthy concern for the

qualitative aspects of branch functioning, which is reflected in their BPMS. Such

concentrated focus on quality is essential for organizational success in the

service sector.

■ `Strong' banks exhibit a greater degree of strictness about the APA of their

managers than the 'weak' banks do.

■ `Strong' banks have more pervasive and potent links leading from the banks'

goals all the way to the measurement and evaluation of performance of branches

and their managers. In less `strong' banks, the links stop along the way, while in

the `weak' banks, there are no links at all.

80