Bank of the Desert

Case Summary:

The case describes a performance evaluation setting that is close to being as complex as that which managers face in real world settings.When managers decide to use a multi-measure approach in a results control system, how can they judge whether any particular combination of measures (and their weighting) is good or bad?

This case was also designed to illustrate an "opportunity metrics" approach to judging branch performance. This approach is a sophisticated application of relative performance evaluation (RPE). Instead of merely judging each branch's performance against itspre-set goals (e.g., budgets), the opportunity metrics approach involves comparing each business entity's (retail branch) actual performance with its potential. 'Potential' is assessed by observing the actual performance of like units. Since not all branches are alike, a clustering procedure must be used to identify like units and to group branches into relatively homogeneous subpopulations. The final step in the opportunity metrics approach involves quantifying the shortfall between each branch's performance and its potential. This quantification reveals the performance improvement that is possible if the branches can realize their potential. In other words, it is an indication of how much money the branches are "leaving on the table."

Case Questions:

1. If you were the president of the Branch Network (Annette Lo), where would you focus your attention? Which branches need the most help?
2. Using the bank's system for evaluating branch performances for the purpose of assigning bonuses, evaluate the performances of the same five branches as listed in question 1.

Would the employees of any of these branches be given zero bonuses because their branch failed to achieve its performance targets?

In which of these branches would employees earn particularly large bonuses because actual performance exceeded targets by 30% or more?