The main aim of performance management is to ensure that an organization functions in a way that helps it achieve its goals and objectives. The financial sector is very competitive as institutions are constantly competing for new customers and seeking better business opportunities from existing customers. These institutions also face considerable demands from shareholders who require improved profitability and superior levels of performance. Managers in the financial sector apply performance management strategies to answer critical questions such as how the organization is doing; why it is doing this way; what should be done to improve performance.
In spite of its importance, it poses various challenges for the financial sector manager.
Managers have the task of ensuring that branches are working in tandem with the overall strategic goals of the main institution. In managing the branches’ performance, managers often take a top-down approach. This approach may impose performance targets upon branch networks; the branch networks may then lack ownership of these targets. Managers can develop management systems that allow network branches to contribute to their own operations and to collaborate freely with the main branch. Collaboration is a management tool that offers the managers clearer information on which branches are profitable, what is making them profitable and actions to take to improve the performance of branches.
Engagement ensures that managers identify talented employees, keep them and get the most out of them. This involves mapping out a clear career path for these employees and communicating to them how important they are to the organization. Managers face the main challenge of identifying the most valuable employees and retaining them. Managers can overcome this by using management tools which are designed to identify an organization’s core objectives. These core objectives are then tied in to measurable results of how individual employees are meeting these organizational objectives.
Managers face the challenge of ensuring that communication channels are clear, to improve employee and organizational performance. This requires that systems adopt advanced technology based systems. Technology based performance systems ensure that employees access information conveniently. Also when managers adopt technology based performance system, they will promote the exchange of feedback between managers and their employees. This approach not only saves money but ensures that financial sector managers keep up with changing objectives of the company.
Managers face the task of ensuring employees stay productive for the profitability of the institutions. A large majority of the current workforce in the financial sector is young, dynamic and in need of new knowledge. This type of workforce is most productive in an organization which values technology and collaboration, to ease the exchange of knowledge. The challenge for managers is to find new ways of increasing opportunities for employees to network effectively and to explore emerging technologies, which make work in the financial industry much easier. Managers can encourage the use of tools such as instant messaging and portals not just for communication between employees; but also to track employee concerns and find ways to address these concerns.
A considerable challenge facing financial sector managers is the issue of compensation. In the past, it was assumed that performance based pay improves employee performance. But changes in the financial sector indicate that there is little evidence that this assumption is applicable. Performance based compensation does not necessarily retain the best employees nor does it improve employee performance. Managers are, now, increasingly under pressure to adopt other methods of motivating and retaining employees other than differentiated pay for employees.
Although compensation is important, managers need to focus more on performance tools such as clear goal setting, peer feedback, and fair performance metrics. These tools give employees a clear map of how they are doing and what they should be doing to optimize their performance.