From the great resignation to the advent of Environmental, Social, and Governance (ESG), the conversation about the future of international finance now focuses on competitive advantages of attracting, retaining, and motivating employees and measuring responsible and ethical value creation.

However, it’s hard to move forward while focused on the past.

The Payments Protection Insurance (PPI) scandal was the most expensive in British banking history and took a decade to resolve. The consequence is not only heightened regulatory scrutiny, but more conservative incentive-compensation programmes in the industry. Many banks voluntarily moved away from incentives entirely or moved to team-based incentivisation to prevent bad behaviours. While this is an approach that enables greater ethical accountability, it also contributes to challenges retaining the best individual talent.

McKinsey research based on multiple interviews with leaders around the world published in January 2022 revealed what is not news to UK bankers:

“[G]enerous and specific financial incentives are one of the most effective tools available for executives to motivate employees. In fact, companies that implemented financial incentives tied directly to transformational outcomes achieved almost a fivefold increase in total shareholder returns (TSR) compared with companies without similar programs.”

Whether a bank experiences “a great attrition” or “a great attraction” can come down to performance management and incentive programs.

While total compensation, including incentivisation, can contribute to why people switch jobs, or do not, it can also “increase accountability and the perceived fairness of differences in compensation,” according to McKinsey.

Performance management software, too, can support increased accountability, governance, and the perception of fairness, internally and externally — addressing issues critical to PPI miss-selling and to ethical innovation in the banking industry.

These tools, augmented by artificial intelligence (AI), can accurately and efficiently provide unbiased data on the performance—and behaviours—of individuals and teams with modern, up-to-date dashboards. It can also provide monitoring and enable coaching to support good behaviours and improved performance.

With performance management tools, UK banks can have access to revenue performance data that allows them to shape the internationally competitive, compensation packages and programmes that attract and retain exceptional talent.

Agile by nature, performance management software can help financial institutions to adapt — and adopt — compensation models, while maintaining controls, governance, and regulatory compliance. When corporate strategies shift, this software offers the agility to adapt compensation models and ensure operational resilience.

The software also caters to the changing expectations of digital natives — the emerging workforce wants modern tools, including features like mobile access and data visualisation.

Performance management tools can help banks focus on the future.

Visit Varicent here or contact Anshul Bongirwar at abongirwar@varicent.com