Performance Management in Chinese Commercial Banks

This dissertation aims to design and implement a tailored performance management framework for Chinese commercial banks in order to deal with some of the bank problems. Chinese commercial banks are experiencing rapid development from both internal management and external environments. With increasingly fierce competition, more strict risk management requirements and ongoing reform of process-oriented bank, many issues emerged regarding to the banks management and operations. Performance management is believed to be an effective tool to deal with some of the bank problems. However, the current performance management frameworks used in Chinese commercial banks are mostly designed for general organizations.There is lack of a systematic performance management framework specially designed for Chinese commercial banks considering features of banking operations and their current situations. Thus in this study, the main features of Chinese commercial banks are firstly discussed, which include risk management and external supervisory institutions. Then a performance management review is carried out including key definitions and current developments of performance management theories as well as some performance management methods. The commonly applied six steps performance management framework is adopted in this research since it is consistent with the research purpose. After that, the current performance management studies and practices in Chinese commercial banks are reviewed and discussed. Meanwhile, recent studies show that suitable performance management models are closely related to organizational structure. Therefore a review of organizational structure theories, especially the Minzberg's configuration theory, is carried out. The configuration theory suggests applying different management approaches for different parts of an organization, which assists to identify different structures in Chinese commercial banks and then design proper performance management activities. Based on the above review, a performance management framework for Chinese commercial bank is developed. This framework initially follows the six steps framework and integrates the bank features in management and operations into the performance management activities. The configuration theory is also applied in this framework in order to identify performance management targets as well as design proper performance management approaches. The main contingency factors related to this framework are discussed, especially the factor of stable organizational structure, since a rapid changing organizational structure requires further adjustments of the framework. This framework is applied in a case study which is carried out in a Chinese commercial bank located in Henan province. A performance management system is designed and implemented according to the framework based on the banks current situation. Feedback is collected after the implementation, and generally is positive. The framework is then adjusted by introducing performance tree method in order to deal with rapidly changing organizational structure. Compared with other methods, Performance tree method does not rely on the current organizational structure (e.g. Department structure) to carry out the strategy decomposition and deployment. It is also powerful in looking for innovative improvements in operations. The adjusted framework is applied in another case study carried out in a commercial bank located in Zhejiang province. This bank is experiencing rapid change in both management and operations due to process-oriented banking reform. Traditional performance management approach is found failed to deal with their current situation. A performance management system is designed for this bank based on the adjusted framework. Moreover, we also assist to develop a digital mission monitoring system to track and carry out their daily performance management activities. The feedback is positive after the implementation, and the bank is praised for good progress in building of process-oriented bank. The main contribution of this dissertation is the design and implementation of the tailored performance management framework for Chinese commercial banks, especially the adjustments in framework by introducing the performance tree method. It enriches theories and practices of performance management system in a rapid changing organizational structure. Further studies are suggested to look for more applications of performance tree method in different type of organizations.