Key Performance Indicators – relevance in T&C schemes


All firms T&C Schemes uses Key Performance Indicators to measure how its employees are performing against set business objectives. In the Financial Services industry that also includes measuring compliance with set regulatory requirements as well. But ask yourself this: How relevant are these Key Performance Indicators for the firm today? How relevant would they be if they were set against the firms’ business plan for the next year, two years, or five years?

We live and work in an environment of constant change and, whether this is regulatory changes, internal structure changes, or even through just the passage of time itself. All or any of these could have an impact on the metrics we use measure our people’s compliance or performance. Yet rarely do we review and amend these measurements to fit the inevitable changes.

Any event could trigger a review. Perhaps the internal structure of a firm has changed, for example, if there have been some joiners or leavers to the advisory team. Joiners mean that the induction criteria must be up to date and relevant to both experienced and inexperienced individuals who join the firm. What about the existing team? There will be changes for the advisers, whether this is by more time in the role, size of their client bank, or split of business, and each of these have their own measurements and associated Key Performance Indicators. Perhaps there is a Key Performance Indicator for client servicing. An adviser may have had changes to their existing client bank, maybe by an increase of number of clients, a wider geography of client locations, different demographics, or perhaps the spread of type of business transacted may have changed according to the needs of the clients. Maybe to meet demand the firm has perhaps moved to a new back office system. Any of these could mean that the metrics to meet the Key Performance Indicators could need amending.

Key Performance Indicators should always be set up to not just to measure performance but also to promote good behaviours

What if regulatory requirements change, such as the recent changes to data protection and the increases in transparency to improve investor protection? The firm may well have created new or revised processes and procedures. However the chances are that the way the firm measures the performance of individuals hasn’t changed. The Key Performance Indicators within your T&C Schemes could well be exactly the same as they have been for several years, and the impact of not reflecting these changes is likely to add further to the very risks that the Key Performance Indicators could be designed to help prevent.

For those Key Performance Indicators that have an emphasis on a risk-based approach, and in todays’ climate they should, these should certainly be regularly reviewed regularly, especially if these include any activity that if not carried out correctly could lead to some financial penalty, either to the firm or to the adviser, like the servicing requirements for existing clients to ensure that the clients are receiving the service that they are paying ongoing fees for, or any process that could lead to a customer complaint.

The starting point for setting up Key Performance Indicators is deciding what needs to be measured and why. The first question that should be asked is whether the Key Performance Indicators are measuring the right things, and how they’re being measured. Take a good look at the processes that the Key Performance Indicators are linked to. Are these processes set up so that the individuals using them are can achieve the Key Performance Indicators, or are there barriers within a process that could lead to failure to meet the Key Performance Indicator?

Key Performance Indicators should always be set up to not just to measure performance but also to promote good behaviours. Some can also be linked to a reward or penalty system if the firms feels inclined, although it could be challenged whether this approach will really deliver what it’s intended to do. Do they promote good behaviours, or do they drive bad behaviours? How about a Key Performance Indicator set up to measure quality with a benchmark at a set percentage, with a reward for those individuals exceeding the benchmark, and a penalty for those individuals falling below the benchmark. An individual working the process may continually fail to make the benchmark for any numbers of reason; time constraints, lack of understanding of the process, or perhaps lack of attention to detail, and therefore incur a penalty which could be a financial one, in which case the penalty might be appropriate. But what if, on investigation, it turns out that the process itself is the barrier? That Key Performance Indicator has failed its intended purpose it’s designed for because the process is preventing this and therefore there is no real benefit from that Key Performance Indicator in its current form unless the process is corrected.

When did you last review the Key Performance Indicators in your T&C scheme? Take a look. You might be surprised what you find!


About Author

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I am a highly-versatile and forward thinking management professional with a history of successful delivery across more than thirty years’ in the Financial Services Industry. Core skills include assessing, training, coaching, process design and implementation, specialising in people, processes, and procedures within a Training & Competence or Learning & Development framework. Periodic writer for T-C

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