Performance Measurement in the United Kingdom (UK) retail banking industry

Abstract

The assets size of the UK commercial banking industry accounts for a significant proportion of the European commercial banking total assets. Given the developed nature of the UK country and its attendant economic transitioning; the significant growth in the financial service industry; the divergence of banks’ ownership structures; recurring incidence of business combinations; proliferation of financial institutions; strategic cost management; and lax regulation in the UK banking industry, it is considered important to examine the Performance Measurement Systems (PMS) adopted by UK retail banks to cope with these vagaries. Besides, studying the PMS utilised by banks operating in leading economies like the UK, could provide useful insights, guidance, and practice-adoption for other developed and emerging nations. The research was undertaken to address these concerns. Data was collected through a survey of 15 UK retail banks. Statistics such as charts, percentage analysis, Wilcoxon signed rank test, Pearson Chi – square, Kruskal Wallis test, and Mann- Whitney U test were utilised for data analyses. There is empirical evidence from the study that within the UK retail banking industry, the three most common PMS utilised are; the Balanced Scorecard, Performance dashboards, and financial performance measures. Notwithstanding that the PMS in the UK banking industry is symmetrical across banks, and relatively balances a mix of financial and non-financial measures, it is the recommendation of this research that the UK banking industry can be improved by making PMS more flexible in order to embed and account for changes in banks’ strategies.

Keywords: Performance measurement, risk, strategy, strategic cost management, UK Banks