PERFORMANCE APPRAISAL AND

MANAGEMENT (PMA)

G20053 – Amit Kumar Singh, G20056 – Arijit Dey, G20061 – Digvijay

Bhandari, G20077 – Priyanka Biswas, G20093 – Vivek
Contents
Q1. What is the strategy of Citibank California and how performance evaluation criteria are aligned with
firm strategy? Please specify show the alignment indicator wise and give the rationale behind using these
performance indicators..................................................................................................................................... 2
Q2: Discuss the pros and cons of using subjective performance measures, especially in the context of
Citibank? Give theoretical explanation or logic of using subjective measures in the performance
management system (refer class discussion).................................................................................................... 2
Q3. Do you think rewards are correctly aligned with the performance evaluation of branch managers?
Please provide support for your answer........................................................................................................... 3
Q4. What rating should be given to James? Provide a rationale for your rating (you can do calculations to
arrive at your decision and explain the impact of your final rating on James, peers, and Citibank)................4
Q5. Why Citibank uses a three-point rating scale? Justify usage of short scale in the context of Citibank......7
Q6. Can you suggest changes in Citibank's performance evaluation system (focus on customer feedback
methodology, group vs individual KRAs and bonus distribution between branch manager and branch
members)? Please provide a rationale for the same........................................................................................ 7

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Q1. What is the strategy of Citibank California and how performance evaluation criteria
are aligned with firm strategy? Please specify show the alignment indicator wise and give
the rationale behind using these performance indicators.

Citibank with 80 branches was a niche player in the California market. Its strategy was to build a profitable
franchise by providing relationship banking combined with its customers' high service level. The firm goal was
to provide a high level of services with financial products, and careful personal attention, increasing
customer's net worth and business.
Financial measures had dominated performance evaluation in the past. However, to create a PMS in sync
with the firm strategy, the performance scorecard included non-financial measures like customer satisfaction
to forecast its long-term association with its customers.
The scorecard indicators used for performance evaluation are below, along with their alignment with firm
strategy and rationale behind their use:
 Financial measures- To succeed financially, how we should appear to our strategic partners. These
measures reflect the strong current and ongoing market share. Through discussion with Area
Managers and Regional Managers, targets are set which align with firm strategy.
 Strategy implementation- Segregating the strategy per customer segment; the Bank provides insights
for banks' journeys in different market segments. Tracks revenue from a particular segment relevant
to the Bank's strategy.
 Customer satisfaction- To achieve our strategy, how should we appear to our customers. Given the
current strategy of the Bank that focused on customer service as a key differentiation, the Bank
considered the customer satisfaction measure as critical to the long-term success and a leading
indicator of future financial performance. If customer satisfaction deteriorated, it was only a matter
of time before it showed in the financials.
 Control measures- Through internal audits, firms would be aware of the internal processes of
efficiency and compliance in banks' operations. If the rating was below 4, the branch's business was
considered at risk and did not meet adequate control requirements. Measuring a branch manager in
avoiding fraud and operating losses is an essential element in the firm strategy.
 People and standards- To achieve our strategy, how will we sustain our ability to change and
improve? It is a non-quantifiable rating determined subjectively by the branch manager's boss. The
"people" measure focused on the manager's proactive efforts to develop and communicate with
subordinates, encourage area training programs, and be a role model to more juniors. Standards
included assessing a manager's involvement in community groups, trade associations, and business
ethics.

Q2: Discuss the pros and cons of using subjective performance measures, especially in the
context of Citibank? Give theoretical explanation or logic of using subjective measures in
the performance management system (refer class discussion)

Before answering the question, we need to discuss Citibank's new performance evaluation and clarify the
purpose of its introduction of the new performance process.

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The new performance scorecard emphasizes the importance of a diverse set of measures instead of the
single financial performance in achieving the division's strategic goals. Specifically, the high service quality
strategy and other dimensions were critical to the franchisees' long-term success. Thus, customer satisfaction
and strategy implementation indicators were introduced into the new performance scorecard.

Hence the new scorecard was created to determine what needs to be done to meet the measurement
perspectives from a balanced view. And consists of six dimensions: Financial, Strategy Implementation,
Customer Satisfaction, Control, People and Standards. Then the targets for each perspective were also
established.

Below are the pros of the new evaluation system:

 It included customer satisfaction as a measure of performance management, making PMA business
strategy oriented.
 It improved proactive communication between manager and subordinate.
 It ensured personal development by conducting training and encouraging the concept of role model.
 It can also increase the overall ratio when the objective rating is "par" or "below par."

 However, we can find out several issues in the new system:

 There are two ratings related to people and standards that lack an appropriate objective indicator
and are determined mainly by the branch manager's superior. This leak leaves a big room in the
evaluation system for causing unfair results according to the personal relationship between branch
managers and their superiors and other drivers instead of real performance. However, from the
case, we could hardly know what James did on these two perspectives because his high ratings on
these two factors were significant due to Lisa Johnson's one-sided praise.
 Depending on the quarter evaluations combine into the annual evaluation, the supervisor has way
too much power to change the annual.
 Until now, the financial role was crucial. No time was given for reinforcement of the new strategy.
 Customer satisfaction is included as an essential measure in the new evaluation system. But it should
have been a subjective methodological measure. Also, the customer's size was considered to verify
the performance.

A performance scorecard's metrics deal with actionable and negligible measurements that help achieve an
organization's objectives. First targets are set, and then these are set against the strategic goals as
expectations that need to be fulfilled during the progress. Customer's satisfaction has profound effects on
revenues. A delighted customer's revenue can be 2. 6 times than a satisfied customer and about 17 times
than a dissatisfied customer.

Especially in the banking industry where competition is high, any organization can differentiate only in
customer satisfaction and technology. In the case of City bank as well, customer satisfaction is one of the
strategic goals. For the above reason, the subjective measure was introduced in the new performance
evaluation system.

Q3. Do you think rewards are correctly aligned with the performance evaluation of branch
managers? Please provide support for your answer.

Though there may be some confusion overrating James McGaran between 'Par' and 'Above Par', due to the
criteria that specifies that 'for a person to be measured 'Above Par' in Yearly Performance Appraisal, he must

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not have had any rating of less than 'Par' in all the preceding Quarters, the benefit side of them seems to be
fair.
Below is the table representing the Bonus payment for Branch Managers in the upper bracket of their salary.

We can see that if a person does reasonably well in all the six criteria with an exception 'Below Par' in any, he
would still be able to get at least a 15-20% bonus payment. The only catch here being, he/she will not be
eligible for 'Above Par' rating. And high performers like James McGaran would be a tricky proposition to deal
with (and rightly so) as they expect a higher rating and reward for their efforts. Considering the task difficulty
and interpersonal issues that vary in the business they operate in were the detrimental factors for low
customer satisfaction.
All in all, it is a reasonably good performance evaluation and reward practice which needs a minor tweak.
And it will be discussed and dealt over within question 6 below.

Q4. What rating should be given to James? Provide a rationale for your rating (you can do
calculations to arrive at your decision and explain the impact of your final rating on James,
peers, and Citibank)

Based on the scorecard, all the six areas are evaluated on the performance of James McGahan. We took
James's rating of all the four quarters in each of the measures and calculated the average and evaluated
James based on the same.

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Rating_Calculation.xls
x

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Financial Measures:
Above Par

James' branch's financial performance has consistently exceeded management expectations for the last four
years. This year, James exceeded financial goals by 20%, thus ranking branch #1 in the marketplace.

Strategy Implementation:
Above Par

James received a rating of Above Par in quarters 2, 3, and 4. James's branch met its goals in the growth of
business, professional, and retail segments.

Customer Satisfaction:
Below Par

Customer satisfaction is considered of high priority in the new strategy of CitiBank. However, James got
mixed results and received Par, Below Par, Below Par and Par in the four quarters assessed. However, it is
mentioned in the year-end review that he identified the improvement opportunities and substantially
improved service scores by the end of the year. Still, there is significant focus and work to be done to
streamline and improve customer satisfaction.

Control Measures:
Par

Control Measures were assessed in 3 quarters, and in all 3 quarters, the branch scored above par. Even
though James worked hard to make sure his branch operates in compliance, James can implement a few
measures to lower the losses sustained by his branch.

People:
Above Par

James is considered an excellent people manager and has consistently been rated Above par in this area.

Standards:
Above Par

James has high standards for himself and his team, and he has again received Above Par rating consistently in
this area.

Overall - Above Par

According to the new policy, we understand that James should not get an 'Above Par' overall rating due to a
below-par score on the customer satisfaction measure. However, we disregard the policy in this case due to
the below reasons:

 This is the first year the balanced scorecard is implemented. It would take some time to ensure that
all the areas are measured appropriately, and organization-wide outcomes are starting to show
results as expected out of the new strategy.

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  James' concerns about the survey's adequacy to measure customer satisfaction could be valid.
Management should review the survey and get other branch managers' input on what indicators
should measure customer satisfaction.
 The review process is also not full proof that the branch manager's supervisor subjectively assesses
performance in the non-quantifiable areas. The process can be improved by allowing the manager to
self-assess his performance and discuss it with his superior. This will allow the process to be less
subjective.

The impact of the final rating on James and Citibank:

 If we give James an overall rating of par, disregarding his hard work, it will lower the morale of one of
Citibank's' most successful managers. It will possibly result in lower performance in the future,
jeopardizing the #1 branch's performance in the critical marketplace.
 If James is given an above par score on his year-end evaluation, employees might think that the
management disregards non-financial measures during the review. Management should
communicate the importance of qualitative standards in the balanced scorecard and showcase that
it would be taken into full consideration during the performance review once they validate the
survey's effectiveness in measuring customer satisfaction.

Q5. Why Citibank uses a three-point rating scale? Justify usage of short scale in the
context of Citibank.

A short rating scale is more suitable for organizations with a lesser number of employees and also with well-
defined KRAs.
Considering Area Manager Lisa McGaran, who spends most of her time visiting the branches and providing
assistance and evaluation of managers, it becomes clear that the performance management systems at Citi
Bank are in the right space. Because, without the support of the President of Citibank California, Frits
Seegers, and HR policies, it wouldn't have been possible to evaluate and spend so much time investing in
interactions.
Due to these, the Area Managers, particularly Lisa here, know the ins and outs of their Branch Managers,
which would enable them to separate the Good from Average and Poor. The six indicators (Financial,
Strategic, Customer Satisfaction, Control Measures, People and Standards) used to validate the subordinates'
competencies are exhaustive. Correct correlation of 'Below Par', 'Par' and 'Sub Par" rating (which is highly
likely considering the Area Managers' efforts) for each of these six would eventually lead to a rating scale that
can be justifiable.
Hence the necessity for a broader 5 point or 10 point rating scale which often results in too much ambiguity
and confusion is avoided.

Q6. Can you suggest changes in Citibank's performance evaluation system (focus on
customer feedback methodology, group vs individual KRAs and bonus distribution
between branch manager and branch members)? Please provide a rationale for the same.
Identified changes in the Performance evaluation system of CitiBank:

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 1. The criteria for generating customer satisfaction methodology should be changed. Some of the
below questions related to generating customer satisfaction need to be considered for
evaluation.
 Can this customer satisfaction be a leading indicator of financial performance?
 Can 25 surveys be representative of the customer population?
 Services like ATM's and 24-hour phone banking can be included in the survey.

The company should add more methods to generate customer satisfaction scores such as face-to-face
interviews among branch's customers or use an independent research firm for the survey.

2. The survey should separate the branch services' performance from out of the branch services
like ATM, providing the score to the branch's core services.

3. Assign weights to each of the performance measures in the scorecard, such as:

Strategy Customer
Financial Implementation Satisfaction Control People Standards

30% 20% 10% 10% 15% 15%

4. The Company should specify the weights for the different performance dimensions of individuals
and groups. For example, McGaran branch has achieved the financial target and other aspects of
the evaluation; they can limit his bonus 20% (instead of 30%) not his entire bonus for the year.

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