sbb 1h18 kras - royal commission

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SBB 1H18 KRAs Performance Objectives, Measures,

Weightings and Targets

ANZ.800.528.0309

https://max.global.anz.com/People/Rewards and recognition/Pages/Corporate-and-Commercial-Performance,-Incentives.aspx#tab1

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Welcome to 1H18

Hi,

Welcome to 1H18.

There’s a lot of changes ahead for ANZ this year to meet evolving customer, shareholder & regulator needs. As discussed at Summit, we are well positioned to meet these changes by having an increased customer obsession focus. This will ensure the Small Business DNA of supporting Australian Business Owners continues to grow.

To support this, we’re changing the way we measure performance to make our KRAs fairer & assist in delivering better customer outcomes.

Our 1H18 KRA changes are based on 4 key objectives:

1. Focus on key customer solutions;

2. Improve SBB NPS and create an improved customer centric culture;

3. Maintain a well-managed business without overly impacting staff; and

4. Create a culture that demonstrates ANZ values.

The intent of these changes are to ensure we see more customers and embed the Small Business Banker Proposition. Successfully delivering these outcomes will lead to more positive customer outcomes and bring ANZ’s Purpose to life.

I wish you all the best for a successful 1H18 and look forward to seeing you soon, Guy

ANZ.800.528.0310

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These are the key changes we’re making

Role Type What are the key changes? Why?

All roles

• Re-balancing and equally weighting financial and customer measures

• Introducing New KRA measures: • Customer Service Mindset • ICARE values • Loan pre-Assessment rework rate • NPS Score replacing survey response volume

• Simplified and revised well managed dashboard including the removal of accreditation and negative alerts

• Enhanced focus on a holistic view of the customer

• Reinforced the importance of establishing a working relationship with our customers

• Increased focus on behaviours, ensuring alignment to the ICARE Values

Relationship Managed

(BBM/Snr BBM/SBM/PBBM/HBBM/Premium SBS)

• Moving to a model with greater focus on banker’s Total Effort Revenue (ICIS)

• For BBM’s this will be via Business and Personal Lending FUM growth, and for SBM’s more of a deposit focus

• Recognising the importance of holistic relationships to drive revenue performance

• Ensuring less focus on specific product outcomes

Portfolio Managed

(Snr SBS/SBS/SBSR/Merchants/Retention)

• Minimal changes from FY17

• Personal Loans added to home loans to capture all personal borrowing needs.

• Existing framework aligns to grouping of financial outcomes with only minor changes needed

Sales Leader

(AM/CSC Team Manager)

• TER the sole financial measure for Sales Leaders

• Coaching Effectiveness has been introduced as a new KRA

• Enhanced focus on coaching as a key responsibility of people leaders

ANZ.800.528.0311

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Managed Sets FAQ - Financial

If I’m a managed set banker, do I have a drawdown target? You will have a FUM draw down target though not a widget target. Managing a set requires the focus on proactively engaging and managing the needs of your customers. Having targets relating to FUM and TER ensure the focus on delivering to the needs of the customer (including acquisition and retention), not widget based. You will be provided a tool which can be used to identify your required draw down rate to achieve your target. To achieve an accurate forecast of what you need to drawdown to achieve your Financial target, you will need to know your attrition rate and enter this into the tool. Why are we not using a % growth target? Using a $ value is more equitable. This removed advantages and disadvantages of having either a small or large baseline. If I have a large or small set, will I be disadvantaged? No, using a $ value uplift model means everyone is equally responsible for their contribution to the overall SBB TER growth target. How will we ladder TER or FUM growth? In order to make it fair and to remove the issues associated with % growth targets, you will be ranked against your net growth or loss ($ value) from your prior half against your uplift target.

ANZ.800.528.0314

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Customer FAQs

What is changing? Half of the Customer KRA’s will be about behaviours (called “Customer Service Mindset”) and half will be customer NPS scores.

Portfolio Managed bankers will see their NPS scores from Voice of the Customer (VOC) surveys following completion of AZ Reviews. VOC Survey response volume measure has been removed.

Important: A-Z Reviews as a KRA measure has been removed, however this and other key customer activity will form part of the Customer Service Mindset measure.

What if I am a BBM and have both VOC and RSI? You will receive a score for each channel of customer feedback which will roll up to a total 15% of the KRA

What if I am marked down because of a bank issue I can’t control, but the customer likes me? This may happen and it is for this reason we have introduced the Customer Service Mindset which measures how you service customers and will give balance to the occasional scenario where issues outside your direct control are raised.

What if I don't get enough responses? VOC surveys are generated from completed A-Z Reviews. This reinforces the importance of a) having quality conversations with customers via the A-Z Review platform, and b) positioning the pending survey to the customer seeking their honest feedback. Therefore it is expected that each Banker will have the opportunity to receive a VOC score. Where there are no responses, discussion between the individual and line manager is required and may be factored in other parts of the KRA.

For RSI, it is expected that each Banker positions the value of each customer providing feedback on their experience with ANZ. It is the Banker’s responsibility to ensure all contact details are up-to-date for their customer set for surveys to be completed.

Can we opt out customers? No, unless there is very good reason, for example they don't speak English. Otherwise you won’t have the option to opt out customers. Our customer obsession mindset means we must hear from everyone so we can continuously understand the issues and concerns our customers face and make improvements.

It is important that appropriate use of iKnow continues to enable an accurate reflection of your activity related to each customer. Updating iKnow post every customer interaction is expected and will form part of the behavioural inputs for customer and people measures.

ANZ.800.528.0315

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Customer - Why are we moving to Net Promoter Score?

We are moving to Net Promoter Score (NPS) as it aligns to ANZ’s vision of:

• Radically improve customer experiences

• Putting the customer at the centre of everything we do

• Embedding a NPS focus across all businesses within ANZ to drive a consistent customer focus

• Powering our customers to succeed.

Net Promoter Score (NPS) is a customer loyalty metric used globally to evaluate a company's brand, products or services.

Calculation: NPS is calculated by subtracting [% Detractors] from [% Promoters]. Benchmarks: Top US brands*

Costco +78

Apple (laptop) +76

Nordstrom +75

Amazon +69

Southwest Airlines +66

Trip Advisor +36

* Satmetrix US brands 2013

NPS can be as low as −100 (everybody is a detractor), or as high as +100 (everybody is a promoter). An NPS that is positive is considered good, and an NPS of +50 is excellent.

40% – 30% = NPS 10

ANZ.800.528.0316

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Customer Service Mindset

Why is this being introduced?

• This measure aims to reward and recognise bankers who demonstrate a ‘Customer Service Mindset’. A more balanced culture between sales and customer service will help improve the overall customer experience, which will lead to an improved NPS outcome.

How will it be measured?

• Through monthly 1:1 coaching sessions, your line manager will provide you feedback on how you are performing against the below criteria. This will include conversation outlining what is considered best practice. For example:

o Quality of A-Z Reviews

o Actively on boards and educates customers ensuring deep product utilisation (including Digital usage)

o Proactively contacts customers with new and improved solutions and value add solutions (Mail Merge for Employment Hero, Honcho, Cyber Security etc.)

o Regular contact and meetings with all customers (minimum every 6 months)

o Actioning of all Customer Conversation leads

o Ensure all servicing requests are efficiently executed (high usage of admin teams, see value in CSV changes, interest only loan expiry, restructures and temps overdrafts etc.)

o Responsive and adheres to the ‘Sunset Policy’

o No customer complaints and receives customer complements

o Complementary verbatim comments from RSI and Voice of the Customer

o Proactively looking for opportunities to improve customer service within the organisation.

Your line manager will give you a score of 1 to 5 each month after your coaching session. The intent is for these results to be shared and discussed at State Based Leadership meetings so that new best practice and calibration can occur. Discussing customer service mindset behaviour is the first step toward changing the culture.

ANZ.800.528.0317

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Customer FAQs

What is the 'Customer Service Mindset'? You leader will score you on how you compare to best practice customer service mindset. We have conducted workshops with reps across each State to understand what some of the key behaviours and actions that deliver best practice customer service.

Your leader will conduct a review monthly and these results (a score of 1 to 5) will be collated for ranking purposes. Your final result will be your average score across the half. We expect that whilst certain behaviours and actions will be articulated up-front, that no list can ever be definitive, so it’s the principles that are important.

How will I know how I am going? It is expected that you will have regular catch ups – minimum monthly - with your leader to discuss how you are going. But performance conversations are two way, so if you require further clarity be sure to seek it out.

ANZ.800.528.0318

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Process FAQs

Why are we changing the Well Managed Dashboard?

• Using a severity based point system enables SBB to apply exceptions based on the level of risk versus impact to the business

• Flexibility to adjust to a change in the risk appetite for exceptions in future halves.

• Consistent and equitable model that will be clearly understood by all frontline staff

• The proposed model will prevent the current issue whereby one Well Managed point can have significant impact in terms of incentive knock-outs.

Key aspects of the changes are:

• Lending accreditation is being replaced with the new Quality Assurance Framework, which is a separate KRA for increased focus

• Negative alerts are being removed

• Rework and input quality has an increased focus

• Relative ranking of all frontline for overall well managed KRA outcome

Why is Input Quality a separate item? A tremendous amount of effort is going into improving all elements of the credit chain, and our role is to significantly improve the quality of our submissions. This in turn results in faster time to decision, and a better customer experience.

Will there be an appeals process for Drawdown, Finalisation and Compliance checks?

The appeals process for all stage gates (Pre-Assessment, Drawdown, Finalisation and Compliance checks) have been aligned with an identical appeal process, this being:

• Banker to discuss with Credit Coach who can raise an appeal on behalf of the individual

• Appeal (raised by the Credit Coach) must occur within 5 business days of receiving the email.

• Only a Credit Coach can raise an appeal, not a banker

• The appeal is discussed at the Appeals Forum where a decision is made and provided to the Credit Coach to update the individual.

ANZ.800.528.0319

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Process FAQs

How frequent will my files be checked? Each banker will have their lending submissions checked minimum 1 x each month selected randomly. For individuals with New Starter status (ie a new to role banker or an non-accredited banker in old language) will have all files checked until they achieve 100% pass rates for 5 consistent files across all 3 stage gates. Once this is completed, they will become an ‘Established User’.

What about when assessors make mistakes? They will also have a similar measure in their KRAs.

Do new starters receive a grace period where they will not be allocated any demerit points? Yes, new starters in their first 3 months in role will not be allocated any demerit points and any scores received in Quality Assurance checks will not count to their half to date percentage score average. This acknowledges that new starters need sufficient time to gain proficiency in their role.

How will my overall Quality Assurance Framework percentage be calculated?

Your overall Quality Assurance percentage will be the average of all your scores received on files checked across all stage gates half to date.

Eg. If you have an average of 94% for Drawdown checks, 96% for Finalisation and 90% for Compliance across all your files half to date, your overall percentage will be 93.3%.

ANZ.800.528.0320

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Process FAQs

Well Managed Area Item Detail Severity and Points

Exception Management

DDA Rejection Low (1)

Exceptions (Refer Appendix 1 for item list) Low (1)

IG Acceptance Low (1)

Out of Segment Low (1)

QC Drawdown - Business Critical Fail

HTD Percentage Score Average Across Compliance, Drawdown

and Finalisation stages

QC Drawdown - Internal Breach

QC Finalisation - Business Critical Fail

QC Finalisation - Internal Breach

QA Test - Compliance Business Critical Fail (6%+)

Internal Breach(3%-5%)

QA – Call Monitoring (CSC only) Compliance Breach – Privacy, Code of Banking Practice High (3)

Compliance Breach – Telecommunications Act Low (1)

Maximiser

- Customer Conduct (Adverse on bureau report; Adverse PI or Risk Grade; Adverse ANZ conduct; Insufficient ANZ relationship) - CTS (CTS exercise not provided; Negative UMI) - Lending term (invalid finance term) Other Eligibility (Breach of sub-limits; Goods not acceptable)

High (3)

- Customer Conduct (Bureau reports not provided; PI not provided) - Other Eligibility (ABN < 2yrs; Financials not provided (AF > $200k))

Low (1)

KYC Compliance (Not measured until national roll-out of re-designed KYC process is completed)

Low (1)

Simple Merchant Sales (SMS) SMS Re-work

Low (1)

ANZ.800.528.0321

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People FAQs

Why are we introducing ‘ICARE Values’ as a separate KRA? The purpose of this KRA measure is to bring the newly refreshed ANZ Value to life within Small Business and to make sure this is embedded into our culture. How we do things, is as important as what we do. ICARE Values • ANZ has created a clear understand on what behaviour is expected within each ICARE value • SBB to model some SBB specific behaviours using workshop process with Area Managers What is this measure? Your leader will have frequent discussions with you about your behaviours and the associated ICARE values so you’re getting immediate feedback and understand how you’re going. From your discussion, your line manager will give you a score of 1-5 each month. Your final score will be the average of your scores for the half. It is expected that your leader will discuss your performance monthly and will assist you on how you can improve in each of these values. Examples of measuring behaviour against the ICARE Values •Does the individual have <160hrs of annual leave available • Is The Edge updated with Mandatory Learning and CPD? •What has the individual done for the team not just themselves? •What have they been involved with that impacts all of SBB? •Do they recommend improvements and best practice •Do they collaborate with positivity and energy, focusing on the customer • Is the individual regularly sought after by peers for assistance/guidance •Do they always act with the customer and bank’s best interests in mind – not KRA blinkers on •How well do they work with their peers, business partners & stakeholders • Attends ICARE & Huddles consistently • Embraces change.

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People - Coaching Effectiveness

Why are we introducing Coaching Effectiveness?

The purpose of this KRA is to reward and recognise leaders who spend time coaching and developing their bankers. A re-focus upon effective coaching will assist in the execution of the Small Business FY18 strategy and increase banker capability, which will lead to a better customer centred experience.

• In FY17 KRAs the sales leaders coaching measure was based around A-Z Review activity. This measure is made up of the following components:

● A-Z Review volume uplift (volume based)

● Area / Team A-Z Review banker participation

● Coaching examples sent through to manager

● Area / Team RTCF Customer Experience Score

Vic/Tas Area Managers have been on a pilot program looking at effective coaching techniques. The GRIST Consulting program has identified 60+ behavioural traits of effective quality coaching. When measured against industry piers, Vic/Tas Area Managers scored slightly under the average (50.3% vs 59.8% average). A refocus on coaching culture and the utilisation of coaching tool/skills is a significant opportunity.

How will it be measured?

The Anatomy of the Best Sales Leader details best practice behaviours.

State Managers would be expected to rate their leaders against best practice coaching behaviour each month. Your final score will be an average of your scores across the half.

ANZ.800.528.0323

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Area Manager / Small Business Manager Team Manager

Objectives Measure Purpose Weighting Meets Exceeds

Financial 30%

Total Effort Revenue ICIS Ensure growth of primary revenue drivers

30% >100% of Target >110% of Target

Customer 30%

Customer experience

RSI (Area Manager Only) Ensure customer interactions

are positive and customer experience is understood

15%

7.5% 7.1 – 7.6 >7.6

NPS VoC 7.5% Area Manager: 50 < 75

SBM TL: 10 < 40

Area Manager: 75 and above

SBM TL: 40 and above

Customer service mindset Ensure culture is balanced between sales and customer service

15%

Manager assessment compared to

peers

3


peers

< 3

Process 20%

Quality Assurance Framework

Ensure outcomes are achieved in a way that adherers to the ANZ values

10% Middle 26-75% of bankers nationally Top 25% of bankers nationally

Well managed Dashboard 5% Middle 26-75% of bankers nationally Top 25% of bankers nationally

Pre-assessment loan re-work rate 5%

Middle 26-75% of bankers nationally Percentage of overall lending

applications for pre-assessment (less withdraws)

Top 25% quartile Percentage of overall lending

applications for pre-assessment (less withdraws)

People 20%

ICARE values (10%) 10%


peers

3


peers

< 3

Coaching effectiveness (10%) 10%


peers

3


peers

< 3

ANZ.800.528.0325

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Appendix 2: Our Small Business Banker Proposition

ANZ.800.528.0344

sbb 1h18 kras - royal commission

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