[Opinion] What If 'Low Birthrate Resolution' Is Included in Bank KPIs...

The concentration of banks within the four major financial holding companies is excessive. Based on net profit, the proportion of banks within the holding companies is about 90% for Woori Bank, 80% for Hana Bank, and around 60% each for KB Kookmin Bank and Shinhan Bank. Woori Bank and Hana Bank are in a serious situation. Can we just dismiss it as the eldest sibling doing more household chores? It's not that simple. If the eldest sibling falls ill, it's a big problem, and if they are stubborn, the household won't be peaceful.

Wasn't there also an episode within Samsung Group involving Samsung Electronics and the later Samsung affiliates? Although Samsung Electronics is struggling now, at one time it truly enjoyed a dominant position. Samsung Electronics made good money, lived comfortably, and received generous bonuses, while the other affiliates, the later Samsung companies, felt intimidated and accumulated dissatisfaction. This does not create synergy for the entire group.

A president of a securities firm affiliated with a bank said, “Although we are family, I don’t like what the bank does. They work in a rigid way, comfortably making money from interest, and are obsessed only with short-term profits. But since they are the eldest sibling of the group, their voice is the loudest.” In short, there is concern about the ‘bankification of the organization.’

A clear example of banks’ obsession with short-term profits is the bank core performance indicators (KPI) revealed by the Hong Kong H-Index ELS (Equity-Linked Securities) sales scandal. KPIs are indicators that members of an organization must maximize to achieve the goals set by the organization, and evaluations based on these are linked to rewards. Because KPIs are goal-oriented indicators, they make the organization operate in a highly coordinated manner, but problems in the process are overlooked.

The reason banks sold as much as 20 trillion won worth of the high-risk Hong Kong H-Index ELS to elderly customers and others lies in the KPIs. Since promotions and transfers are decided based on KPIs, the structure forces employees to focus on sales performance of high-risk products that have high KPI scores. There were even cases where sales performance was checked daily, ranked, and shared with all employees. The pressure on bank employees must have been unimaginable.

In fact, according to the bank KPI scores (as of the first half of 2021, from the office of Democratic Party lawmaker Oh Ki-hyung), profitability-related scores were high: Kookmin Bank 300, NH Nonghyup Bank 310, Shinhan Bank 440, Hana Bank 400, while scores related to preventing incomplete sales were low: Kookmin Bank 20, Nonghyup Bank 45, Shinhan Bank 100, Hana Bank 70.

There is a saying that clearly shows how much bank employees are obsessed with KPIs: “If we add low birthrate response to bank employees’ KPIs to solve the ineffective low birthrate problem, they would move in perfect unison and come up with solutions. Even if we add the national aspiration of North-South unification, they would find a solution.”

Of course, this is sarcastic. It means that instead of genuine solutions, they would forcefully push through ideas without creativity, thinking “as long as we get to Seoul, it doesn’t matter which way we go.”

John Chambers, former Cisco chairman, emphasized the importance of swift change by saying, “Just because you are a small fish doesn’t mean you are always eaten by big fish, but slow fish are always eaten by fast fish.”

Currently, the four major commercial banks are big and slow fish. Three small but fast internet banks have entered the arena. Can the commercial banks, criticized even by their own family members for being slow, survive on size alone? The answer is ‘NO,’ the crisis point is ‘soon,’ and the possibility of defeat is ‘100%’ (“always eaten”), so this is a warning bell.