Developing LankaBangla Finance

A Progressive Study on Human Resources Planning of a NBFI in Bangladesh

BRAC University
MGT 721
Md Tahmidul Islam | ID: 18374010

September 22, 2020

Executive Summary

LankaBangla Finance is a key player in the NBFI industry of Bangladesh. With

approximately 1,804 employees, the organization required a heavy-weighted Human
Resources function. The organization and the industry require a facelifting of the way their
Human Resources function is viewed and managed. The company carries out headcount
planning and recruitment efficiently, but in order to keep its employees satisfied, efficient and
performance drive, some proven advanced Human Resources Planning, Development and
Operational practices need to be incorporated.

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 Table of Contents

Section Page No.

1. Introduction and Objectives 4

2. Study the HRP Practices of LankaBangla Finance and the 6

NBFI Industry of Bangladesh

3. Discussion on the HR Planning Approaches for LankaBangla 7

Finance and the NBFI Industry of Bangladesh

4. Building a Dynamic System to Ensure Better Talent 11

Acquisition and Utilization

5. Recommendations for Futureproofing 12

6. Conclusion 15

Appendix A - Case Study 16

Appendix B - References 20

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1. Introduction and Objectives

A non-banking financial institution, commonly referred as NBFI, is a financial institution that

does not operate with a full banking license or is not supervised by local or international
banking regulatory bodies.

However, NBFIs in Bangladesh are supervised by Bangladesh Bank, following a risk-based

supervisory system. Bangladesh Bank has taken some policy measures in order to put in
place good corporate governance in NBFIs. It has outlined clearly, the authority
responsibility and functions of the Board of Directors, Executive Committees, Audit
Committees, Management and Chief Executive Officer of NBFIs. The Chief Executive
Officers are responsible to conduct day to day functions and materialisation of the strategic
business plan.

NBFIs have been awarded license and regulated under the Financial Institution Act, 1993 in
Bangladesh. At present, the minimum paid up capital for NBFIs is Taka 1 billion as per the
Financial Institution Regulation, 1994. Currently there are 33 NBFIs operating in
Bangladesh, including 3 owned by the government. These organizations are playing a crucial
role by serving additional financial services that cannot be always catered by the banks. The
NBFIs, with more diversified products and services have taken their place in the competitive
financial market to satisfy the changing demands of customers. Similar to banks, the
performance of NBFIs in Bangladesh are measured through the CAMELS (Capital adequacy,
Asset quality, Management, Earnings, Liquidity, and Sensitivity) rating system. NBFIs
account for 34% of the financial market in Bangladesh.

The journey of LankaBangla Finance Limited commenced in the year of 1997 as a joint-
venture financial institution with multinational collaboration having license from Bangladesh
Bank under Financial Institution Act-1993, with a few reformations carried out after
Financial Institution Regulation, 1994 has come into effect. Fast forward to 2020, it is now
one of the leading leading providers of integrated financial services of Bangladesh.

The major products offered by LankaBangla Finance are corporate financial services, retail
financial services, SME (small and medium sized enterprises) financial services, brokerage
services of stock market, corporate advisory and wealth management services. It is also the
only NBFI in Bangladesh to offer credit cards to retail and corporate customers. Since 2006
LankaBangla has been listed in both Dhaka Stock Exchange and Chittagong Stock Exchange.

The vision of LankaBangla Finance is “To be the most preferred financial service provider in
creating, nurturing and maximizing value to the stakeholders, thereby, Growing Together”.

The core values are embedded into the organization’s cultures and include:

 Cherish a sense of ownership  Be customer centric

 Grow as a team
 Act with integrity and professionalism
 Deal with respect

In 2019, LBFL focused on showcasing its strength to sustain in harsh situation through
meeting obligations in time along with keeping calculative growth. In 2019 LankaBangla
Finance has settled total BDT 37 billion Term Deposit encashment claim. It has managed to

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pay around BDT 1 billion compensations to its 1,804 full time and temporary employees. The
company has also contributed over BDT 1000 million to government exchequer and paid
over BDT 7 million cash dividend in 2019.

The Group consists of a total of six companies including the Parent LankaBangla Finance
Limited (LBFL). LBFL has direct holding on three companies LankaBangla Securities
Limited (LBSL), LankaBangla Investment Limited (LBIL) and LankaBangla Asset
Management Company Limited (LBAMCL). LBFL has indirect holding on two companies
LankaBangla Information System Limited (LBiSL) and BizBangla Media Limited.

Group structure outline:

LBFL

LBSL LBIL LBAMCL

LBiSL

BizBangla

Fig I: LBFL Company Structure

Objectives of this research report

The aims of this research report are to:

 Study the Human Resource Planning practices of LankaBangla Finance and the NBFI
industry of Bangladesh
 Discuss the Human Resources Planning approaches for LankaBangla Finance and the
NBFI industry of Bangladesh
 Outline the methodology for building a dynamic workforce to ensure better talent
acquisition and utilization
 Outline the recommendation for futureproofing the Human Resource Planning
challenges of the NBFI industry in the 21st century.

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2. Study the HRP Practices of LankaBangla Finance and the NBFI Industry of
Bangladesh

The NBFI is often referred as the backbone for the growth of any economy. This industry is
an important component of the financial sector for proper management of financial resources
across the globe and plays a pivotal role in the economic development of a country.
Bangladesh is an emerging economic power with a very large pool of human and natural
resources, and a growing large pool of skilled professionals. Correlating to these facts, the
NBFI industry is a vital resource for the economy of Bangladesh.

Experts often say that the most important asset of an organization is its human resources.
Qualified and capable employees are important in the context of achieving goals and
objectives of an organization. The victory of an organization primarily depends attributes
such as hard work, loyalty, and involvement of employees. In the past, when the time of
personnel management system prevails, humans were treated as a machine because of which
the behavior could be manipulated for the advantage of the organization and replaced when it
was worn out. Also, the policies of the organization were less flexible and organizations were
centralized. But after the emergence of a conception of Human Resources Management
(HRM), the organizations found more malleable & decentralized which is more compatible
with the organic system and has cross-cultural and cross hierarchical system.

The real challenge of running a NBFI successfully is that skilled manpower is in short supply.
This point of view that Human Resources are becoming scarce; both in quality and quantity is
not acceptable. It is a radical issue that any resource that is in short supply needs to be
properly managed for the benefit of society and, therefore, banks need to pay attention to the
entire Human Resource Management process. The entire spectrum of Human Resources
Management practices requires revolutionary changes if the NBFIs have to sustain
efficiently.

Based on research, the key attributes and challenges of the Human Resources Planning of
LankaBangla Finance are:

Finding Explanation
LankaBangla Finance follows a thorough
Long-Term Headcount planning procedure.
Long-Term Headcount Planning However, the process can be fine-tuned for
better alignment of business goals and HR
requirements.
The traditional recruitment process is very
Traditional Recruitment much focused on theoretical knowledge,
rather than potential.
The methodology of employee promotions
is somewhat misaligned with performance
due to a hierarchy that is not suitable for an
Promotion Expectations
established organization operating in the
twenty first century.

The lack of use of modern technologies

Lack of use of Modern Technologies at such as communication and approval tools
Workplace results in prolonged communications and

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 longer time for document approvals.
3. Discussion on the HRP Approaches for LankaBangla Finance and the NBFI Industry
of Bangladesh

Long-Term Headcount Planning

Analyzing Matching
Analyzing org. plans Forecasting Forecasting Monitoring
Objectives of demand &
& objectives HR demands supply of HR & control
HRP supply
Fig II: HR Headcount Planning Activities

The Long-Term Headcount planning is a vital part for any organization. The processes,
outlined above, have been discussed in details below:

 Analyzing Organizational Plans and Objectives - Human Resources Planning

processes of LankaBangla Finance commence with the general organizational plans
and goals analysis. Reason being the plans of human resource generate from business
strategies. Study of the strategies for success into practical plans (e.g. innovation,
creation, compensation fund, promotion forecast etc.) accommodate surveying the
human asset prerequisites for every movement in each segment and office.
Correspondingly the analysis of objectives of the organization also delivers for
Human Resources needed by the firm. For instance, if the objective of the
organization is speedy growth and expansion it would require more manpower for its
all functional areas. Therefore, it is obvious the Human Resource Planning is high-
priority activity of the organization.
 Analyzing Objectives of HR Planning - Major function of Human Resources
Planning is matching employees’ abilities to organization requirements, with an
emphasis on future instead of current arrangements. The crucial mission of human
resource planning is to relate future Human Resources to future enterprise need so as
to maximize the future return on investment in human resources. Human Resources
planning responsible have to to identify the objectives of Human Resources Planning
with regard to the utilization of manpower in the organization.
 Forecasting HR Demands – Human Resources neeeds in the firm have a tendency of
varying contingent on both outer and inside components. Development and extension,
plan and auxiliary changes, administration rationality, death, change in authority style,
representatives abdication retirement and demise are among inward factors. Outer
variables comprise of rivalry, financial, political atmosphere, and innovation and
government strategy. Subsequently, the accompanying elements should be viewed as
while foreseeing future interest for Human Resources in the firm; Forecasting demand
for Human Resources help to:
o Maintain sufficient accessibility of workforce with various capabilities and
aptitudes as and when required in LankaBangla Finance.
o Measure the quantity of works aimed at creating a given number of products
or services at a given time in given administrations measure.
o Establish a staff-mix required at dissimilar themes within the future.
 Forecasting Supply of HR - This step helps to measure the amount and nature of
employees accessible from inner and outside wellsprings of candidate supply,
subsequent to considering truancy, exchanges advancements, and changes in work

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 hours, and different states of works. Estimating of Human Resources starts with the
present human asset stock, otherwise called human resource review. The Human
Resource stock comprises of data about current Human Resource in the association.
The human asset stock what is accessible in the supply of labor and what can be
normal in future. Accordingly, it can bring up whether the supply of Human
Resources is not as much as its interest or the other way around. At all be the
circumstance, a similar will be made great thusly. The supply evaluating includes
workforce assessments; laborers consumption; and change made because of
employment rules.
 Matching Demand and Supply - This comes when supply and demand for
workforce of firm is projection, this requirement should be settled. The settlement
tend uncover either shortage or overabundance of Human Resources in future.
Consequently, plans will be set to meet the situation that is to strike a balance between
the two. If there shortage of human resources, this will be overcome by recruitment,
transfer, promotion, training and development and retention. On the opposing, in case
of excess human resources, it can be made good through schemes like redeployment,
retrenchment; voluntary retirement scheme through golden handshake.
 Monitoring and Control - Monitoring and control is the final stage encompassed in
human resource planning. After implementing actions plan, they require evaluation,
regulated and monitored against the standards set. Indeed, the monitoring of action
plans and programmes help expose shortages. Remedial activities empower the
association expel deficiencies and, in this way, control the usage of activity designs in
the right way. On the off chance that adjustments in business environment happen, the
activity designs arranged before should be tweaked in the light of association changes
and in the changed business atmosphere.

Traditional Recruitment

Organizations go through a huge amount of time and resources to find the right person for the
right job. Over the last few years, LankaBangla Finance have been appointing various
external recruitment agencies, along with their in-house recruitment team of the Human
Resources Department, however there are still struggles to close critical positions and there
every year they have to let go a number of employees due to the ‘wrong recruitment’. The
root cause of such recruitment is the traditional approach of recruitment that is being
followed by the organization since its inception.

At times, these failure of hiring the right resource is often blamed at the Human Resources
responsible and the external recruitment agencies, without looking at the root cause. The
overwhelming majority of recruitment agencies will present very similar processes. To sell
clients, they spend significant amounts of time formulating an organized, set process that
appears highly organized, effective and destined for success.

Promotion Expectations

Employee Promotion means the climbing of an employee to a higher rank. It involves an

increase in salary, rank, responsibilities, status, and benefits. This aspect of the job is what
drives employees the most. The ultimate reward for dedication and loyalty towards an
organization. In theory, a promotion requires more work and effort in a job. Based on
different organizational policies, these promotion based decisions are taken on different

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aspects. These can be the length of service, experience, seniority, performance, etc. Owing to
this, there are four different types of promotions for employee development.

Employee promotions are classified into several categories:

 Horizontal Promotion - This kind of promotion rewards an employee with an increase
in pay but little to no change in responsibilities. It is also regarded as an up-gradation
of an employee. In the educational sector, an example of this is the move from
Finance General Manager to Finance Controller.
 Vertical Promotion - This refers to an upward movement of employees with a change
in skills and experience. It brings a change in salary, responsibility, status, benefits,
etc. In the marketing industry, this can be the promotion of a marketing supervisor to
the marketing manager. Due to its nature, it can also change the nature of the job as
well. This can be a shift from functional head to the chief executive, both being very
different jobs.
 Dry Promotion - A Promotion that employees aren’t particularly fond of. This
promotion refers to an increase in responsibilities and status without the benefits. It
means no increase in pay or any financial benefits for that matter.
 Open and Closed Promotion - Open Promotion is a situation wherein every individual
of an organization is eligible for the position. Closed Promotion is a situation wherein
only selected team members are eligible for a promotion.

At Lanka Bangla Finance, the employee promotion exercise is questionable to a number of

employees as well as external observers (e.g. HR project consultants). The two most common
forms of promotion are Dry Promotion and Closed Promotion.

The NBFI has a culture of promoting employees basin on their work tenure and loyalty for
the organization. This has led to a number of pre-determined promotions every year which
are not very aligned to performance, potential and business requirements. Hence, a lot of
employees get promoted without having any added responsibilities. On the other hand, there
is also a common trend of Dry Promotions, without change of designations, for a number of
employees. As per new business expansions and challenges, a number of employees receive
additional responsibilities several times a year. Along with these responsibilities, the
expectations from them by the management also climbs high, but they are not formally
recognized or compensated.

There are been several resignations from the organizations due to this poor promotion
structure over the last few years. A number of critical resources have also been poached by
competitor NBFIs, sometimes without any compensation premium, as those employees were
not satisfied and engaged.

Lack of use of Modern Technologies at Workplace

When the COVID-19 pandemic hit Bangladesh back in March 2020, the country has gone
through a strict lockdown for over a month, to contain the spread of the virus in the country.
Offices, factories, educational institutes and public places were asked to keep shut and
movement of people on the streets was also restricted. This was the scenario of over 80% of
the cities in the world. The options for allowing business continuity was to let employees
work from home. As the lockdown has started easing from May 2020, some organizations
have started reopening but others allowed to let their employees continue working from home

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as the thread of the virus yes yet to be neutralized. Till this day, the number of daily infected
cases in Bangladesh is between 1000 to 3000, with 20 to 30 fatalities.

Modern organizations use a broad variety of tools to stay productive. It always turns out best
if the individual building blocks are perfectly coordinated and there are no issues with
interfaces or redundancies. Several tech organizations, from Microsoft to Slack, offers
reliable, mutually compatible technologies with which mobile collaboration does not remain
wishful thinking, wherever and whenever the individual contributors happen to be at work.

The key benefits of using technology at work are:

 Enabling employees from work anywhere, from any workstation in their office
buildings to any room in their residence.
 Reducing processing times including document approvals.
 Increasing employee communications through instant messaging applications
(designed for commercial use) and video callings, reducing time and cost (including
cost of travelling for meetings and trainings).
 Allowing job interviews online opens the door candidates resigning in different cities
for participate in interviews (as they don’t need to travel intercity or sometimes
internationally).
 Enabling transparencies, by eliminating the possibility of tampering of papers and
signatures.
 Syncing multiple devices like laptops and smartphones to get work done.
 Allowing employees to work from home also reduces absenteeism due to sick leaves.

The current processes and practices of LankaBangla Finance includes relatively low amount
of automation at their workplace. During the lockdown, some of the activities have moved to
online, but no permanent solution has yet been proposed for full automation. A brief
conversation of an employee of the organization has revealed that here are plenty of cases of
loss of paper documents every year. During recruitment, candidates were asked to travel to
the head office of LankaBangla Finance in Dhaka from other cities, several times (during
several rounds of interviews). Often verbal approvals from senior executives are
misinterpreted and money was spent for wrong outcomes.

Every employee of the organization is now working physically at their office premises, with a
high risk of transmission of COVID-19. Moreover, many experts have mentioned that the
COVID-19 pandemic has propelled automation of workplaces by 10 years, LankaBangla
Finance, along with most of the NBFIs, are yet to cope up with the automations implemented
by some other industries (e.g. telecommunication industry) in Bangladesh.

Being a NBFI, there are some parts of the business that requires physical documentation due
to regulatory rules, but that is handled only by a fraction of the employees of LankaBangla
Finance.

In the lights of Human Resources Planning and Operations, technology at workplace helps to
simplify and speed-up process like recruitment and trainings and also helps to enhance
employee productivity and employee engagement. It is an important criteria to allow
employees to work from home or from any remote location. Even after the COVID-19
pandemic ends, a number of organizations, both locally and globally, have already decided to
allow employees to work fully or partially from remote location. This transformation of work
culture is a giant leap from the conventional work culture from office locations. Not only

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employees will save time, cost and enhance productivity, the traffic and transport
infrastructures of megacities like Dhaka will be eased slightly as not everyone will be out
commuting between 8 am – 10 am or 5.00 am – 7.00 pm every weekday.
4. Building a Dynamic System to Ensure Better Talent Acquisition and Utilization

In order to building a dynamic workforce to ensure better human resources acquisition and
utilization, the below recommendations are outlined LankaBangla Finance. The
recommendations are based on studies of Human Resources practices of various
organizations in the NBFI industry and beyond:
 Business Objectives and Human Resources Planning: this function is executed
effectively in LankaBangla Finance, but can be fine-tuned to meet the organization’s
overall plan and Human Resources requirements.
 Cross Functional People Development: this practice was originated by a few
international FMCG and Telecommunication operators in Bangladesh. The purpose is
to make an employee work in different departments or overseas placements through
short-term assignments, usually ranging from 3 to 12 months. This program ensures
an employee serving in an organization gets a holistic view and hands on experiences
of more than one function or culture. Employees successfully completing Cross
Functional People Development programs can be assessed for leadership positions of
an organization.
 Succession Planning: this activity ensures that an organization always has the right
leaders in place should a change happen quickly. A detailed discussion on Succession
Planning has been carried out in Section 5 of this report.
 HR Analytics: data from different Human Resources systems need to be compiled to
measure forecast, activities and outcome of Human Resources quantitatively.
Moreover, this data-driven approach helps to use Human Resources to grow business
revenue. A detailed discussion on Human Resources analytics has been carried out in
Section 5 of this report.

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5. Recommendations for Futureproofing

As the challenges of acquiring, developing and retaining human capital are increasing year
after year. During the research and discussion with an employee of LankaBangla Finance, it
has been observed that, in terms of Human Resources, the organizations always tend to
benchmark and follow other organizations of the same industry. Although it is not a wrong
approach, but studying other industries and taking inspiration from them can also be
beneficial for Human Resources Excellence. For example, the largest telecom operation in
Bangladesh has moved to process automations almost a decade ago, but NBFIs have never
made any attempt follow that organization because it belongs to a different industry.

In addition to the discussions of Section 4.0, a few recommendations have been outlined
below for LankaBangla Finance, as well as most of the NBFIs of Bangladesh to implement.

Succession Planning

There’s an old saying that can represent the characteristic benefits of succession planning: If
you fail to plan, you plan to fail. When a business is marching along, and the economy and
financial future looks secure, it can be hard to stop long enough to consider what might
happen to the organization if the critical employees are not there.

The purpose of succession planning is to make sure an organization always has the right
leaders in place should a change happen quickly. By failing to create an orderly plan for
succession, an organization may not get a second chance if it doesn’t adapt immediately after
a key player leaves, retires or passes away.

Many business leaders and Human Resources practitioners believe that succession planning
is a complex process and a practice restricted to the largest organizations with the most
sophisticated Human Resources departments with dedicated employees for organizational
development function. How contrary to popular belief, succession planning can greatly
benefit smaller organizations as well. No matter the size, it is an essential tool for business
continuity. Effective job analysis, internal development opportunities and smart
organizational structure are important practices to promote the achievement of organizational
objectives while creating an environment that promotes employee engagement and retention.

Key objectives for engaging in succession planning include the following:

 Adapting to demographic changes and scarcity of talent pool.
 Identifying gaps in competencies and training needs analysis.
 Retaining institutional knowledge in a knowledge economy.
 Boosting engagement and retention by investing in employees.
 Replacing or transferring unique or highly specialized competencies.

For developing and maintaining a successful succession planning, LankaBangla Finance

needs to work on the following areas, leading to succession planning:
 Training: the preparation of an employee to perform the tasks required for his or her
current role.

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  Development: the practice of equipping an employee (or group) for future roles and
responsibilities.
 Career planning: an employee-centered practice of identifying the interests of the
employee and assisting that individual, as well as providing personal development
options consistent with his or her talents and interests.
 Career management: an organization-centered practice of creating jobs and
organizational structures that promotes the achievement of business objectives.
 Replacement planning: A shorter-termed practice of identifying replacements for
personnel in key operating functions.
 Succession planning: The future-focused practice of identifying the knowledge,
skills and abilities to perform certain functions and then developing a plan to prepare
multiple individuals to potentially perform those functions.

HR Analytics and Workplace Automation

Over the past 100 years, Human Resources management has evolved. It has moved from an
operational function towards a more strategic function. The term Strategic Human Resource
Management (SHRM) exemplifies this. The data-driven approach that characterizes Human
Resources analytics is in line with this development.

When an Human Resources manager calls you and asks to come by their office, it’s likely
that there’s something bad about to happen. You may get reprimanded, put on notice, or even
fired. If it was good news, like getting a promotion, your manager would tell you, not Human
Resources.

Second, traditionally Human Resources is regarded as an old-fashioned function. A large

percentage of large organization in Bangladesh does not even have an established Human
Resources department; and some of the basic functions of the department are usually carried
out by Administration department. A lot of the work in Human Resources is based on ‘gut
feeling’. We’re doing things a certain way because we’ve always done it that way. Human
Resources doesn’t have a reputation of bringing in the big revenue or dealing with numbers
like sales and marketing functions do. Human Resources also struggles to quantify and
measure its success, as marketing and finance do.

Some example questions of Human Resources analytics are:

 How high is your annual employee turnover?
 How much of your employee turnover consists of regretted loss?
 Do you know which employees will be the most likely to leave your company within
a year?

These questions can only be answered using data. Most Human Resources professionals can
easily answer the first question. However, answering the second question is harder.

To get started with people analytics, data from different Human Resources systems need to
be compiled, e.g. to measure the impact of employee engagement on financial performance.
To measure this relationship, annual engagement survey with your performance data need to
be combined. This way the impact of engagement on the financial performance of different
stores and departments can be calculated. Key Human Resources areas will change based on
the insights gained from Human Resources analytics. Functions like recruitment,
performance management, and learning & development will change.

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A case study has been presented in Appendix A - Key Drivers of Retail Sales Performance.
The study has been conducted by HIHR in a retain environment of an FMCG (fast-moving
consumer goods) organization. The case walks through a great example of combining Human
Resources analytics with financial results to optimize business.

As mentioned in the earlier sections, bringing in automation in Human Resources and the
workplace is another key area of futureproofing the Human Resources planning and
operations of LankaBangla Finance. Continuous improvement and update of tools and
processed need to be in constant motion. Employee communication can be done instantly
through business instant messaging platforms line Slack and Rocket Chat. These platforms
also allow video conferencing, file sharing and screensharing. Documents can be approved
using full-fledged ERP (Enterprise Resource Planning) systems where only two to three
clicks can get a document approved in minutes, that used to take two to three days using
conventional ERP systems in NBFIs that only allows record keeping and report generations.

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6. Conclusion

LankaBangla Finance is a key player in the NBFI industry of Bangladesh. With

approximately 1,804 employees, the organization required a heavy-weighted Human
Resources function. After studying the key areas of the Human Resources function, four
fields have been identified for discussion: Headcount Planning, Recruitment, Promotion
Expectations and Technologies in Human Resources. Although the Headcount Planning
function is carried methodically, the other three areas require finetuning. In addition, it has
been recommended to implement Succession Planning and Human Resources Analytics into
the Human Resources function of the organization.

In the NBFI industry of Bangladesh, the Human Resources function is often viewed as a cost-
center to support an organization’s manpower. However, this function has evolved over the
last two decades. It is a strategic business partner for an organization and the NBFI industry
can follow the recommendations to transform their Human Resources.

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 Appendix A - Key Drivers of Retail Sales Performance

Case study: Key Drivers of Retail Sales Performance

By AIHR

We approached a major fast-moving consumer goods (FMCG) company operating in

Zimbabwe with the intention to help management understand why some of their retail outlets
performed above expectation while other outlets performed below expectations.

The aim was to identify controllable and non-controllable factors that influence the
performance of each outlet. The identification of controllable factors would then lead to
strategies that manipulate those factors in order to optimize each retail outlet’s performance.
We sought to answer the following questions:
1. Does the diversity of product lines in each outlet influence sales performance?
2. Does location have an impact on the sales of each retail outlet?
3. Does the presence of certain employees (e.g. sales representatives, merchandisers,
merchandising supervisors) have an impact on the sales of each retail outlet?
4. Does the psychometric profile of employees influence the performance of their
respective retail outlets?
5. Does the brand name of each retail outlet attract more (or less) customers leading to
differences in sales?

As seen in the table above, our descriptive analytics model managed to explain
approximately 86% of the variation in sales. In other words, we identified four factors that
significantly impact the sales performance of each retail outlet. These factors can be used to
accurately explain why some outlets meet set expectations while others do not.

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Manipulating the presence of merchandisers to improve profit

Although the differences in merchandiser presence in each outlet explain only 5% of the
differences in sales performance (as suggested by our model), changing the presence of
merchandisers in an outlet from one to two has a greater impact on sales than other
controllable factors.

This implies that the FMCG company benefits from increasing the presence of merchandisers
in all its outlets. Merchandiser presence could be improved by either rotating the available
merchandisers so that each outlet has enough merchandisers, or by recruiting externally, if
funds permitted.

Manipulating product diversity and the number of sales representatives per outlet

Product diversity turned out to be the factor that explains most of the variation in outlet
performance. This retailer distributes merchandise through contractual agreements on shelf
space with wholesalers, supermarkets and other shop owners.
Some outlets had only one product line whereas others had more than a thousand. Outlets
that fall in the latter category consistently outperformed outlets with less product diversity.
The table above shows that if the number of product lines changes by X units, sales change
by 1.3X%. This implies that improving an outlet’s product diversity by adding, for example,
one more product line improves an outlet’s sales by 1.3%. This number is practically
insignificant. However, when ten new product lines are introduced in an outlet, this would
translate into a 13% increase in sales performance, which is a major improvement.
For this particular retailer, product diversity is linked to the number of sales representatives
who frequent each shop. Therefore, the retailer needs to do a cost-benefit analysis since
introducing more product lines means more sales representative presence. This results in
more wages or overtime hours.

Taking advantage of the different brand names the outlets belong to

Among all the outlets, some outlets had better average sales because of the brand names they
belong to. The implication of this is that when the retailer introduces new products – after
having taken into consideration e.g. the socioeconomic class of the outlet’s clientele – he
would consider trying brand names that consistently outsell the other brand names to ensure
adequate market penetration.

Not focusing on the wrong things

According to our analysis, outlets with different merchandising supervisors had no

significant differences in sales performance. Such a scenario is highly unlikely. The
expectation is that some employees excel while others fall behind. This result suggests that
the way the role of the merchandising supervisor was structured was not contributing to the
business. Also, any form of remuneration for these supervisors that is linked to the
differences in their respective outlets’ performance, was erroneous.
 

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Broadly speaking, average performance of outlets in urban areas could not be differentiated
from the average performance of outlets in peri-urban and rural areas. This means that,
when deploying merchandise, merchandisers and sales representatives, all outlets would
have to be treated equally, without preferential treatment driven by location.

The Second Phase

Having identified that manipulating the presence of merchandisers in an outlet greatly

improves sales, we sought to identify the attributes of the ideal merchandiser. Should the
FMCG company choose to recruit, it would not only need the right number of merchandisers,
but also merchandisers with the ideal profile.

We sampled merchandisers from selected outlets and invited them over for psychometric
profiling. This allowed us to measure the cognitive abilities and personality traits of each
merchandiser. We also gathered demographic information (e.g. age, marital status etc.) on
all tested merchandisers to establish if there is a link between selected demographic factors
and the performance of the merchandisers’ respective outlets.

We identified three personality traits which, in the right combination, explain 20% of the
variation in performance of each outlet. In other words, the FMCG company now knows the
personality traits of its merchandisers that are associated with higher performance.

The three personality traits are defined as follows:

1. Striving for social acceptance  describes a person’s striving for social status and
recognition. The higher the percentile rank, the more important it is for the person to
feel socially accepted and to behave accordingly.
2. Aspiration level – This dimension indicates whether the respondent tends to set
realistic or unrealistic goals for him or herself (e.g. with regard to the quantity of
work that one can carry out or to the accuracy and thoroughness one aims at).
Achievement-motivated people set realistic but ambitious goals that somewhat exceed
their previous achievements. Goals of this type are indicated by medium to high
percentile ranks.
3. Extroversion  – The merchandiser enjoys being around and interacting with people.
He/she would rather take charge than be reserved.
The insight above is invaluable when the company wants to recruit new
merchandisers or take merchandisers that are already in the system through training.

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The Way Forward

Instead of linking psychometric profiles to the performance of outlets, it would be ideal to

link each psychometric profile to each merchandiser’s performance appraisal score.
However, at the time, the retailer’s performance appraisal system for merchandisers was not
reflecting true merchandiser performance.

When monitoring if the identified psychometric attributes are indeed vital to the company’s
performance, we worked hand in hand with the company’s HR manager and merchandising
manager to draft a new performance appraisal system. This system would not only
accurately measure merchandiser performance, but also improve the contribution of
merchandising supervisors to the business.

The objective is to link performance appraisal scores from this new system to each
merchandiser’s psychometric profile.

Conclusion

By following the stages of this project, we identified critical factors that are crucial to the
performance of this FMCG company’s outlets by using analytics methods. We also identified
factors that did not significantly contribute to differences in performance. The combination
of all these insights provided an invaluable guide to decide which factors the company
strategy should or should not focus on.

We continued our interrogations and found that psychometric tests where indeed a valid way
for recruitment and developing merchandisers.

We conclude that basing your organisation’s strategy on scientific methods and moving on to
validate the insights that subsequently come from this approach, is of utmost importance.
This case study demonstrates the benefits of applying people analytics to the day-to-day
business. By applying analytics and combining these analytics with financial outcomes we
were able to optimize the business and improve sales performance.

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 Appendix B - References

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Selection process of Management Trainee Program of Lankabangla Finance
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4. Lyimo, BJ ‘Human Resources Planning’ pp. 5 – 22. Available from: Institute

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9. SmartRecruiters (2015). Why Traditional Recruitment Fail (Online). Available

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