Case Study - 

Citibank Performance Evaluation

Joe Barfield

Jack Welch Management Institute

Dr. Deloris Willis

JWI520

July 31, 2016

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Read the “Citibank: Performance Evaluation” case. Assume that you are Lisa Johnson. Write a

4-6 page paper in which you:

1. Complete Exhibit One to evaluate James McGaran’s performance.

2. Describe the approach you would take in your performance feedback session with James.

What would you say, in what sequence would you say it, and what information would

you reference to back up what you are saying?

3. Assume that as a result of your extraordinary performance in this course, Citibank

California has employed you as a consultant to improve its performance evaluation

system. Discuss what changes in their processes and procedures you would recommend.
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Relationship Banking

“ Is financial services in which a bank attempts to meet a customer's needs with a complete

package of facilities” The package may include but not limited to most or all of services such as

cash management, credit cards, deposits, loans, money market investments, etc., that may be

summarized on a single bank statement.

What is the new Performance Scorecard? While financial measures typically were the way

Citibank measured success in the past, they recognized a need to measure customer service as

well, and thus developed a Performance Scorecard. The six different types of measures the

Performance Scorecard evaluated were:

 Financial

 Strategy Implementation

 Customer Satisfaction

 Control

 People standards

Citibank felt the need due to the shifting in the markets and stiffer competition it was

necessary to update the previous evaluations to include non-financial measures because they

recognized that these measures may in fact be more critical to the long term success of the

franchise. As a result, by adding the non-financial measures to the current measures, Citibank

was able to reflect competitive dimensions in the bank's strategy.

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KPI Customer Satisfaction

Customer satisfaction indicator was important not only for meeting ever-increasing

expectations of highly-sophisticated clients, but also for achieving strategic goals of the division,

and staying competitive. Citibank’s current strategy focused on customer service as a key

differentiator. Hence, Customer Satisfaction measure is considered as critical to the long term

success of the bank, as well as a leading indicator of future financial performance. If customer

satisfaction were to deteriorate, it was only a matter of time before it showed in the financials.

There are some gaping holes in the process used to determine the Customer Satisfaction Score

and in the way the scores are being used Customer ratings for the branch include centralized

services such as 24 hour banking, home banking and ATM machines. These services are not a

part of the branch, and therefore should not have been included in the survey Customer survey

conducted among a sample size of 25 customers is very small. There is a strong possibility that it

may lead to biased results.

The implementation of Customer Satisfaction metric is generic for the California Division.

But the Financial District Branch in Los Angeles is unique and has a very specific set of clients.

Because these clients demand careful personal attention, the normal rules of the performance

scorecard do not apply to this branch the use of telephone for surveys may not be the best idea.

Generally limited to a maximum of about 15 minutes, the longer a phone survey continues, the

more people will "drop out" and not fully answer all the questions. Questions must be simply and

clearly stated. Since those responding cannot see or read the questions, complicated or long

questions are not appropriate for telephone surveys. So we will not get a comprehensive

overview of customer satisfaction.

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After joining Citibank James McGaran went through a series of quick promotions to become

Manager of largest and toughest branch in the division within seven years. Despite a highly

diverse demanding customer base and stiff competition in face of two competitors, James

delivered outstanding financial records for four straight years in a row. Even with limited staff of

(15) staff members branch revenues and profit margins were high. He successfully operated the

most important, challenging branch among the 31 branches in the division and enjoyed a sense of

accomplishment in his job. Because James was operating in the financial district, a large

percentage of his clientele consisted of business and professionals who demanded very high

service quality. Citibank was a niche player in California and its strategy was to build a

profitable franchise by providing relationship banking combined with excellent customer service.

In 1996, the growth in balances from business and professional customers increased $34.8

million. In fact, James’ financial performance had exceeded expectations year after year since

1992. All this would not have been possible if the customers did not receive satisfactory service

at this branch. James faced competition from Bank of America and Wells Fargo, who also

provided relationship banking services. If the customers were unhappy with the services at

Citibank, they would have switched to these competitors. But their continued business and a

year-upon-year addition of new business proves that the customers were more satisfied than the

scores indicate.
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President of Citibank Frits Seegers saw customer satisfaction as a leading indicator of future

financial performance, and if this metric were to deteriorate, it was only a matter of time before it

showed in the financials. But according to the financials, the monetary performance of the bank

kept on growing. Had the customers not been satisfied, this would not be the case. Moreover,

James laid a lot of emphasis on his ratings. It was a matter of pride for him to be the best. He

worked very hard to improve his customer satisfaction ratings during the last quarter. James was

extremely committed to the goals of the bank. It is highly unlikely that he may have overlooked

something as crucial as customer satisfaction.

All companies claim that their strategies are customer driven. But when “customer” means

any number of entities in a company’s value chain—consumers, suppliers, retailers, even internal

units like R&D—managers tend to lose focus, and their firms become vulnerable to competitors

who have clearly defined who they serve and how. Customer satisfaction aside, all the metrics of

the performance scorecard are quantifiable. They can be categorized as objective measures. But

customer satisfaction is a subjective measure. One may argue that customer satisfaction is an

objective measure because it is derived from the survey administered by the Relationship

Satisfaction department, but Lisa Johnson’s remarks lay more weight compared to them, which

make this metric subjective. Trust is high in this case, which makes this metric a strong

motivator for James and compels him to take immediate action for a better score. The measure is

incomplete because it does not provide a comprehensive overview of the achievements of James’

branch. But at the same time, it is highly responsive. We can see from the third quarter results

where customer satisfaction sees a jump of 18 points. This gives an idea as to how the metric is

so responsive to any manipulation on the part of the manager. However this survey contained
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external factors such as ATM and 24-hour banking, which also affect the score, but are not in

control of the manager.

Through my analysis of the reading the case, I do not believe that James was involved in any

dysfunctional behavior. He worked in my opinion tireless, against more odds then his

competition and counterparts to improve customer satisfaction to the best of his abilities. There

was no foul play where he engaged in behavior that would inflate his scores temporarily, just to

get the year-end benefits. The pathway that I think describes the customer satisfaction metric

does not follow the framework of “Simon’s Nature of Measures.” The pathway is subjective, but

incomplete. But at the same time it is responsive in the upper tier, which makes it ideal and not

dysfunctional.

A branch or division of a company that is accounted for on a standalone basis for the purposes

of profit calculation. A profit center is responsible for generating its own results and earnings,

and as such, its managers generally have decision-making authority related to product pricing

and operating expenses. Profit centers are crucial in determining which units are the most and

least profitable within an organization. The concept of profit centers enables a company's

executives and management to determine how best to focus its resources to maximize

profitability. In order to optimize profits, management may decide to allocate more resources to

highly profitable areas, while reducing allocations to less profitable or loss-making units.
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A profit center is a section of a company treated as a separate business. Thus profits or losses for

a profit center are calculated separately a profit center manager is held accountable for both

revenues, and costs (expenses), and therefore, profits. What does all this mean in terms of

managerial responsibilities? The manager has to drive the sales revenue generating activities

which leads to cash inflows and at the same time control the cost (cash outflows) causing

activities. This makes the profit center management more challenging. Profit center management

is equivalent to running an independent business because a profit center business unit or

department is treated as a distinct entity enabling revenues and expenses to be determined and its

profitability to be measured. In Citibank’s case they employ a similar approach and treats each

branch as a profit center. This approach gives managers the authority to go above and beyond in

pursuit of the best financial results. The benefits associated with good financials are an added

stimulus for managers to perform well. But as we can see in the case, Citibank is putting more

and more emphasis on factors other than simply the finances of the branch, resulting in a holistic

development of the bank as a whole. With the implementation of new performance scorecards,

Citibank is able to assess strong and weak areas in every department of its branch. As an

example, it was made clear that a drop in customer satisfaction in the third quarter was due to

lack of manpower in James McGaran’s branch.

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Because James heads the largest most diverse, and competitive financial district branch under

Ctit’s umbrella, he has to make crucial decisions about the specific services he can provide to his

customers. If Citibank did not treat its branch as a profit center and if James had to follow the

general directives of the headquarters, he would certainly not be able to give these tremendous

results. As the manager of a profit center, it is James’ responsibility to keep a check on his

revenue as well as expense. Seeing a continuous regression in customer satisfaction ratings, he

took the necessary steps to try and rectify it. He portrayed the qualities of a leader which can

only be brought about in an organization which believes in delegating authority. Therefore, it is

appropriate for Citibank to treat its branches as profit centers.

The new performance scorecard at Citibank was implemented in 1996. Although the concepts

applied in this scorecard are still in use today, almost two decades later, the process is very

different. The primary purpose of the balanced scorecard is to set goals and allow managers to

complete well-rounded performance reviews using both quantitative and qualitative measures.

While financial measures are important in analyzing performance of the bank, they do not

provide any insight into non-quantifiable measures that can be equally important in performance

assessment. The inclusion of customer satisfaction metric in 1996 was a great leap. In the service

industry, customer satisfaction is a particularly important measure in determining how the

company is doing. A high level of customer service is a significant component of Citibank’s

strategy in California.
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Recommendations

If I were in charge of creating a scorecard to measure customer satisfaction today, it would

employ some distinct tactics. In 1996, the time period given to each branch to get accustomed to

the scorecard was less than a year. Example today, there would be at least a 2-3 year

development, testing, field test, and implementation phase where the initial version of the

scorecard before it goes live. The scores in the pre-testing phase will not be tied to benefits, but

will only be used to identify areas of improvement in all branches. This will give managers some

time to cope with their problems and to come up with innovative counter strategies. In 1996,

James’ concerns about adequacy of the survey used to measure customer satisfaction might be

valid. Management should review the survey and get some input from the branch managers on

what indicators should be used to measure customer satisfaction. The current review process

raises some concerns as well. Presently, a branch manager’s supervisor subjectively assesses

performance in the non-quantifiable areas. I would improve this process by allowing the manager

to self-asses his/her own performance and discuss it with his/her superior prior to any official

review. This will allow the process to be less subjective. The manager will get an opportunity to

defend his/her performance if he/she does not agree with the assessment of his/her superior. As

much time and effort it takes to develop one I think it’s fiscally and customer retention key to

alter the balanced scorecard to each unique needs of other regions at Citibank. The survey can be

revised in order to better meet the performance evaluation needs. It is possible that several

surveys will need to be developed in order to better assess the different branches based on

different types of customers served by them. This will result in increased costs but will allow for

closer gauging of the performance of the bank and setting more defined performance goals for

the branches. A sample size of 25 to determine the performance of a bank is laughable. The
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factors to be considered for determining a sample size are analytical plan, population variability,

confidence interval, margin of error, cost, etc. The sample should do justice to all areas business,

professional, household and retail. James raised some concerns about the adequacy of the survey.

Conclusion

James’s main concern is that the survey measures not only branch services but also

centralized services such as ATMs that are out of the control of a branch manager. The scorecard

I would create will measure only those aspects of customer satisfaction that are directly

associated with the foot traffic in a branch. The technology used for surveys will be a mix of

online and face-to-face rather than paper or phone call. There will be a financial incentive of $25

dollars added to your account along with the survey. Since it was created internally it will be

administered internally. The division’s Relationship Satisfaction department will conduct

customized surveys with an emphasis on reaching-out to customers and following up on their

responses. After which those responses will be put into a data warehouse and be available to

analyze the good, bad, and the ugly and find opportunities for improvement on existing service

offerings and possible new product creations. These new methods will boost customer

confidence and give Citibank an edge over its competitors.

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References:

Week 4 Lecture One “The Essential Art (and Science) of Performance Evaluations

Week 5 Lecture Two “How to Give Constructive, Candid Performance Feedback

Simons, R. 1995. Levers of Control: How Managers Use Innovative Control Systems to

Drive Strategic Renewal. Boston: Harvard Business School Press. Also see Simons, R. 1995.

Control in an age of empowerment. Harvard Business Review (March-April): 80-88. 

http://maaw.info/ArticleSummaries/ArtSumSimon'sLeversofControl.htm

Langfield-Smith, K. 1997. Management control systems and strategy: A critical

review. Accounting, Organizations and Society 22(2): 207-232

https://www.shrm.org/ResourcesAndTools/tools-and-samples/hr-

qa/Pages/whattodowhendevelopingperfratescales.aspx

Paladino, B. 2007. 5 key principles of corporate performance management: How do

Balanced Scorecard Hall of Fame, Malcolm Baldrige, Sterling, Fortune 100, APQC, and

Forbes award winners drive value? Strategic Finance (June): 39-45