Issue: A major regional financial institution, as part of its planning cycle, was reviewing the operational strategy of one of its major divisions.

In planning for the strategy sessions, a series of interviews and data gathering exercises were conducted. The findings indicated a lack of teamwork in a team-based environment, morale issues and apathy towards the company’s long-term future, all within an extremely profitable environment.

Business Implication: A dysfunctional culture was beginning to emerge that threatened the long-term stability of the financial institution. A primary cause of the issue was that certain staff members were compensated on short-term results and on the quantity of business generated, and others on long-term results. The implication of this was that certain business was being transacted and approved that contained greater risk than initially identified. In essence, the systems of motivations for team members were at times, in conflict.

Phi Recommendation: Considering the financial institution’s overall risk appetite, a new team-based structure was developed, one component of which was a compensation structure that introduced a balance between rewarding short and long term performance. New deal-sanctioning performance metrics were established to provide better information and transparency to the review and approval process, and introduced a post-appraisal process.

The restructuring of the company’s systems and policies occurred after the strategic planning session to ensure self-reinforcing and integrated strategic and operational alignment. The result was a more productive team-based environment that was focused on the long-term success of the institution.