Key Performance Indicators
- 1. Profit generation to create a sustainable model
- 2. Market leading colleague satisfaction
- 3. Market leading customer satisfaction
- 4. Market leading social responsibility approach
- 5. Membership growth
The Group's key performance indicators are derived from the success measures on our journey towards our aspirational vision 'to be the UK's most admired financial services business' and the performance criteria in staff and executive incentive schemes.
1. Profit generation to create a sustainable model
The three key financial performance measures are:
- Shareholder profitability;
- Life and Savings new business profit; and
- Life and Savings maintenance expenses.
Profitability is defined as profit before significant items and tax, primarily for the Banking and General Insurance businesses, and is the key financial performance measure in the Group.
In arriving at our profit for incentive purposes of £150.8m, the reported result pre investment fluctuations of £155.4m is adjusted primarily for profits of the Bank subsidiary, Unity Trust Bank.
This was marginally below our target levels of £153.6m primarily because of improvements in the claims area of the General Insurance business being more than offset by investment write downs in the Banking business.
New business profit is the value of new Life and Savings business written during the year, allowing for the cost of capital. Our Life and Savings business is written solely for the benefit of our Life and Savings customers. Our aim, therefore, is to provide products and services at a price which passes the benefits of writing the business back to customers. In these circumstances, our target for 2007 was broadly to break even. Our 2007 performance was slightly adverse to our plans due to the number of financial advisers being below planned levels.
Maintenance expenses are the costs of servicing activities for the in-force Life and Savings business. In 2007, our costs of £77.2m were substantially better than our target of £86.3m.
Market leading customer satisfaction and social responsibility are two of the performance indicators that are key to our business.
2. Market leading colleague satisfaction
We measure Colleague Satisfaction using a core set of questions via our annual survey of all colleagues, called the ECHO survey (Every Colleague Has Opinions).
These questions measure three key elements of colleague opinion:
- Emotional attachment to the organisation
- Willingness to stay with the organisation
- Discretionary effort – how much colleagues are
motivated to go beyond their normal duties to help
the organisation achieve its aims.
Sometimes known as ‘Say, Stay and Strive’, these are standard measures used across many businesses and organisations to measure engagement. They have two clear advantages as key people measures. Firstly, because they are used generally across many other organisations, we can easily benchmark our organisation’s performance in engaging colleagues against others. Secondly, they measure outcomes within an organisational culture, such as pride and advocacy. They are, therefore, very difficult to influence by specific or short-term activities – for example, if response rates were used, this could be incentivised in some areas, skewing the figures.
The score for Colleague Engagement is determined by reviewing the responses to the engagement questions asked in the ECHO survey. The average proportion of favourable responses (eg ‘Agree’ or ‘Strongly Agree’) across the whole of the organisation provides our Engagement Index, which was 52% in 2007. Our strategic target is to improve this figure year on year until we reach the High Performance Norm level of 73% by 2010/11.
3. Market leading customer satisfaction
Our current measurement of overall customer satisfaction is derived from GFK NOP’s syndicated Financial Research Survey (FRS). The FRS is the
largest survey in the marketplace (with 60,000 financial services customers interviewed each year).
Customers register their satisfaction levels with their providers at product level on a seven point scale - extremely, very, fairly, neither/nor, fairly dissatisfied, very dissatisfied, extremely dissatisfied. Product level scores (based on extremely and very satisfied responses) are then weighted by customer numbers to produce Business Unit level scores and an overall measure for CFS. To ensure a statistically robust sample per CFS product area and to even out any seasonal variations in scores a rolling 12 month’s worth of data is used.
A target measure of 60.5% was set at the start of 2007 against which CFS has performed well with an outturn of 62.5% at the end of December.
The trend of improvement in the overall CFS satisfaction score has been reflected in the General Insurance and Retail Bank product categories, although there has been a trend of decline for our Life and Savings products.
Our General Insurance and Retail Bank Business Units maintain a gap ahead of the market (Top five by market share for General Insurance and Retail Bank) while our Life and Savings Business Unit has dropped below the score achieve for the ‘Rest of Market’.
Our ultimate aim is to have the UK’s most satisfied customers.
| CFS December 07 Satisfied/very satisfied |
Market (*top 5 by market share, **Rest of Market) |
|
|---|---|---|
| General Insurance* | 75.4% | 70.7% |
| Retail Bank* | 79.4% | 65.3% |
| Life and savings** | 40.3% | 42.9% |
4. Market leading social responsibility approach
In 2007, CFS measured its progress towards its goal of a market leading social responsibility approach using the following three indicators. Two of the three targets set for attainment in 2007 have been achieved, and one has been partially achieved.
The first indicator looks at unprompted public awareness of the Bank and Co-operative Insurance as financial services businesses that take social responsibility into account. This measure derives from an independent survey of 1,000 members of the general public, which, in 2007, was undertaken in February. Targets set for 2007 sought a number one ranking for the Bank and number two ranking for Co-operative Insurance. Against these, the Bank retained the number one ranking, with a score of 11% (2006: 12%), and Co-operative Insurance fell to number three, recording unprompted awareness of 3% (2006: 6%). In 2008, the Bank is seeking to maintain its position, whilst Co-operative Insurance is seeking to regain its number two positioning.
The second and third indicators look at performance in Business in the Community’s Corporate Responsibility Index and Environment Index. The indexes are voluntary self-assessment surveys that benchmark Corporate Responsibility and Environmental strategy
(and their integration), management, reporting and performance across a range of issues. The 2007 targets were to seek a Platinum (leading group) ranking for Co-operative Financial Services by achieving a score of 95% or more in both indexes. In the Corporate Responsibility Index 2006, which was published in May 2007, Co-operative Financial Services achieved a Platinum Group ranking, attaining a score of 98% and emerging as a sector leader. In the Environment Index, Co-operative Financial Services achieved a Platinum ranking, attaining a score of 99.79%. In 2008, CFS will be seeking to maintain its Platinum rankings in both indexes by achieving a score of 95% or above.
5. Membership growth
CFS, as part of The Co-operative Group, is ultimately jointly owned and democratically controlled by its members. Members of The Co-operative enjoy a share in the profits and can exercise their democratic control, with equal rights and benefits. The importance of growing a strong and committed membership base is integral to our vision and beliefs and is an integral part of our brand. Growing engagement with our customers via membership is a key element in delivering Competitive Advantage and Social Goals.
Whilst we are committed to growing our membership base, we recognise the importance of ensuring that our members are engaged with The Co-operative. True engagement will be reflected in both transactional and democratic participation. The focus for 2008 is therefore to drive active engagement from our members. This will be demonstrated by increasing participation rates across the diverse range of businesses offered by The Co-operative Group, so that individual members transact with multiple businesses. Inevitably, this type of activity will also attract new members.
