Frank Buytendijk Blog

I realize, a provocative statement, but think about it. Many commentators have highlighted that bankers were given large bonuses based on the revenue they brought in by taking big risks (and no disincentive for risk management). Linking incentives to performance is a form of performance management, in this case an example of how not to do it. The same commentators have pointed out that financial institutions usually didn’t really understand the risk profile of the subprime mortgage packaged that they bought, reshuffled in different packages and sold. The risk calculations were based on very complex and advanced analytics. Analytics are a part of performance management. Oh, and lastly, many organizations felt safe because they were ‘compliant with regulations’ and did all the necessary reporting. Obviously, ‘accountability’ (a large driver of performance management), was not enough.

Therefore my harsh statement: performance management caused the current crisis. That’s the bad news. The good news? I think performance management plays a leading role in weathering and solving the crisis too.

In this series of blogs I will explore various angles to improve performance management, in order to weather the crisis and make sure this doesn’t happen again (something else will happen at one point again, but at least hopefully not because of the same reasons).
- Better performance indicators, earlier in the blg I introduced a KPI called ‘true value index’
- Better systems and management processes, everyone using spreadsheets to support strategic management processes really has a problem now
- Better integration between performance and risk
- A focus on trust

Can’t wait to hear your reaction!

frank