A Human Resource Management assignment

on

Janalakshmi Financial Services’ HR

Dilemma

By

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Section 1 FAS 4 D1

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Parth Kushwaha 19F134

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rs e Pavni Aggarwal 19F135
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Pradeep Lobo 19F136
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Bhargav Devadiga 19F115

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Harsimran Chawla 19F123

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Th

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 Introduction
Janalakshmi Financial Services is India’s largest microfinancing organization with an
asset base of 70 million rupees. The company was headed by Mr. V.S. Radhakrishnan,
CEO who was motivated to run the organization aligning with the social mission of the
company.

The major client base is rural and semi urban areas with a particular targeting towards
SHGs and women. The rapid growth of the company in recent years came with several
external and internal challenges. These problems were majorly linked to the
performance of the sales persons and the high attrition rate of 41%. Along with these,
problems like declining productivity were also a major concern.

Situation Analysis
• To capitalize on profitability while maintaining the social commitment of

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financial inclusion

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• Portfolio predominantly consisting of Small Group Loans

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• Improve customer focus & create a performance-oriented culture among
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the last mile delivery representatives of the organization.
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Current operational structure
Each branch, headed by a Branch Manager, is divided into 3 areas and each area
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(max. 25 km2), headed by an Area Head, is handled by 2 sales agents (CRES) and 4
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collection agents (CREC) Area Head responsible for determining high potential
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catchment areas
Recruitment is focused on locals with low socioeconomic background and a
comparatively lower educational level. Currently the sales targets are set based on
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portfolio size of branch with capped commissions. There is also a process of offering
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uniform salaries across cities for CRES with low base salaries.
JFS presently faces problems which include a lack of employee recognition and
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communication of non-cash benefits as compensation.

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Problems
 Examine the possibility of streamlining JFS’s sales staff.
 Suggest ways to improve the existing sales-force compensation scheme so that it
would instill a performance-focused culture
 lower the attrition rate
 Align employees with the firm’s social mission and values

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 Currently proposed solution
To come up with the solutions to these problems, Mr Radhakrishnan hired Mr. Sumit
Sharma, a seasoned Human Capital Resources professional as a HR team lead. Sumit
Sharma proposed the following options as a solution

Slider Target compensation structure

In this structure, JFS employees would be grouped into four distinct career bands, based
on the managerial level. He recommended that employee pay levels in each band be set
at a percentile of market rates. Mr. Sharma believed that a sliding-scale compensation
scheme would not only help reduce attrition among the firm’s field sales staff, but also
help contain costs at senior levels of the organization.

Vintage portfolio structure

In order to change the way sales targets were set Mr. Sharma proposed linking targets to

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the age of a branch rather than existing portfolio size to avoid the ratcheting effects. The

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plan was to implement branch structuring as vintages. Vintage 1 branches that had

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existed for up to 12 months, Vintage 2 branches that had been in operation for 13–24
months, and Vintage 3 branches that were even older. The older branches would have a

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comparatively higher sales target.
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Bonus payment
Mr Sharma proposed a system to link performance incentives proportionally to fixed
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pay. He devised a new performance management tool for ranking employees from 1 to 5.
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Average employees would earn a bonus equivalent to 10% of fixed salary at junior and
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mid-management levels, and to 15% of fixed salary at senior and top management
levels.

Introduction of a cost-of-living allowance

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HR team proposed raising the fixed salaries of junior staff by 20%, and introducing a
cost-of-living allowance (COLA) for officers based in expensive cities each classified as
Tier 1 Plus, Tier 1, and Tier 2 ranging from most to least expensive.
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Cross selling
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The HR staff in order to broaden the responsibilities of CRES officers proposed an idea
to link the bonus payments of sales officers with their ability to generate repeat loans
from existing clients. Another idea proposed was to incentivize the sales force to cross-
sell financial products, in addition to micro pensions.

Critical Success Factors for JFC

- Productivity in junior-most employees and customer focus
- Talent Capability and Retention

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 - Different categories of product offerings

- Customer Service Capability

Options:
1. To carry on with the existing system at JFS

2. To consider the proposed changes in the system by HR:

a. Introducing a sliding-target compensation structure
b. Linking targets with branch age rather than size

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c. Calculating bonus payments as a percentage of a fixed pay

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d. Raising junior staff salaries and introducing a cost-of living allowance

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e. Linking bonus payments of sales officers with cross-selling/repeat loans
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3. To devise a new system to address the new issues.

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Decision Criteria
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 Employee Retention
 Performance Orientation
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 Customer Service
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 Cost
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Recommendation Strategy:
The problems at hand need to be targeted at different levels. The four major divisions
being:

Compensation strategy-
The 4 bands proposed by Mr. Sharma is a great thought. Optimising the strategy so that
it is dynamic would ensure it can be implemented without restricting the HR

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 department. These bands would be designed to incorporate the standard of living in the
area the branch is operating. This, combined with the percentile pay bracket would
provide a flexible system that is fair on ground.
Total rewards system would further augment the existing reward system. The intangible
reward system should expand and incorporate factors like:
● Recognition and appreciation for completing challenging work
● Creating more professional growth opportunities by providing additional
training and upskilling programs
● A motivating work environment wherein programs like: ‘Bring your family to
work’ day can foster a deeper bond with the company and further improve the
image of the company in the eyes of the family

Structural change strategy:

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● Combining the roles of CREC and CRES would increase accountability as

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functions would be answerable to the same team leader.
● Encourage building deeper relationships with their customers by providing them

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a guide on the information they should know about the client: Income level,
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number of family members, short and long term goals, etc. These would in turn
help cross sell products. Once the change is successfully implemented we can
implement a reward system for cross selling. Implementing the program
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prematurely would increase the chance of miss-selling.

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Variable Pay:
● Special commission on cross-selling would increase the potential for their bonus
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pay
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● Determine a minimum target for the SGL that needs to be achieved. This
minimum threshold will be relatively low in order but would be in line with the
overall strategy of increasing the targets to match the increased variable pay that
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these officers can earn.

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● Step-wise commission offered at different rates can be offered based on the

number of customers the officers have reached.

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