Financial service of wealth management banking: balanced scorecard approach.

Author:Wu, Cheng-Ru
Position:Company overview
 
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INTRODUCTION

Taiwan's economic and financial markets have experienced dramatic changes in recent years. Additionally, the organizational structure of the wealth management service sector has improved as banks have implemented management practices that have helped to increase their competitiveness. In such an intensive environment, selecting a performance measurement of wealth management banking has become a priority. During the process of selecting a wealth management bank, apart from legal issues, policymakers and business groups seldom consider potential factors that could impact a bank's competitiveness.

Many business organizations have found the Balanced Scorecard to be a valuable tool in performance and strategic management (7), (8), (9), (10). The objective of this study is to examine the value of Balanced Scorecard in the organizational performance of wealth management banks and to describe an analytic hierarchy framework that can be used to evaluate scorecards of departments and programs within wealth management banks and the organizational performance of wealth management banks as a whole.

The Technique for Ordering Preference by Similarity to the Ideal Solution (TOPSIS) was first developed by (2), based on the concept that the selected alternative should have the shortest distance from the positive ideal solution and the farthest from the negative-ideal solution for solving the MCDM problem. Thus, the best alternative should not only have the shortest distance from the positive ideal solution, but also the longest distance from the negative ideal solution. In short, the ideal solution comprises all of the optimum criteria values, whereas the negative ideal solution comprises all the least optimal criteria values. However, the results vary according to period, modeling and approach. In the proposed AHP model, the dimensions of the organizational performance for the wealth management banks have been taken from the four perspectives of the Balanced Scorecard, thus balancing as well as linking the financial and non-financial, tangible and intangible, internal and external factors. Therefore, the proposed framework provides a holistic approach to the selected Multi-Criteria Decision-Making (MCDM) problem for wealth management banks. Next, a case identifies proposal model using AHP and the TOPSIS technique to evaluate wealth management banks' organizational performance. This proposal further combines the concepts of the AHP and TOPSIS models to evaluate and rank wealth management bank performance. The AHP and TOPSIS-based decision-making method for constructing an evaluation method can provide bank decision makers or administrators with a valuable reference for evaluating the organizational performance. Importantly, the proposed model can provide Taiwan's bank accreditation policy a reference material, making it highly applicable for bank administrators and financial sector analysts.

MATERIALS AND METHODS

The AHP Methodology: Analytic Hierarchy Process (AHP), which is a technique of Multi-Criteria Decision Making (MCDM), was developed by Saaty in 2000. AHP is used to solve complex decision-making problems in different areas, such as maintenance selection problem (16), selection of location (13), (14), (15), measuring performance (1), (14), allocating resources (17), choosing the best policy after finding a set of alternatives (18). As a decision method that decomposes a complex multi-criteria decision problem into a hierarchy (11), AHP is also a measurement theory that prioritizes the hierarchy and consistency of judgmental data provided by a group of decision makers. AHP incorporates the evaluations of all decision makers into a final decision, without having to elicit their utility functions on subjective and objective criteria, by pair-wise comparisons of the alternatives (12).

The TOPSIS Methodology: The TOPSIS was first proposed by Hwang and Yoon (2). The underlying logic of TOPSIS is to define the ideal solution and the negative ideal solution. The ideal solution is the solution that maximizes the benefit criteria and minimizes the cost criteria; whereas the negative ideal solution maximizes the cost criteria and minimizes the benefit criteria. The optimal alternative is the one, which is closest to the ideal solution and farthest to the negative ideal solution. The ranking of alternatives in TOPSIS is based on 'the relative similarity to the ideal solution', which avoids from the situation of having same similarity to both ideal and negative ideal solutions.

The balanced scorecard: Kaplan and Norton (5), (6), (8) presented the Balanced Scorecard concept in a series of articles published in the Harvard Business Review. They argued that traditional financial accounting measures such as return-on-investment and payback period analysis (4), (8) offer a narrow and incomplete picture of business performance and that reliance on such data hinders the creation of future business value. Accordingly, they suggest that financial measures can be supplemented with additional ones that reflect customer satisfaction, internal business processes and the ability to learn and grow. The Balanced Scorecard was designed to complement "financial measures of past performance with measures of the drivers of future performance" (8).

Of the four key performance perspectives of the Balanced Scorecard, only one involves standard financial performance indicators, whereas the other three involve non-financial performance measurement perspectives: customer satisfaction, internal business processes and learning and growth capacities. These four perspectives constitute the framework of the Balanced Scorecard (Fig. 1).

[FIGURE 1 OMITTED]

Evaluation model: The evaluation procedure of this study consists of several steps as shown in Fig. 2. The first step is to identify the multiple criteria that are considered in the decision making process for the decision makers to make an objective and unbiased decision. The Delphi method is adopted here not only to accumulate expert opinions, but also to identify the determinants of the integrated marketing communication-based model. After constructing a criteria framework, the criteria weights can be calculated by using AHP. Finally, we conduct a TOPSIS approach to achieve the final ranking...

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