Progreso Financiero faces two critical jobs. First. it is falling significantly abruptly of its gross revenues prognosiss ( Exhibit 4 ) . doing concern for investors and employees of the company. Second. Progreso has non yet identified a clear way to profitableness. There are four cardinal drivers to underperformance at Progreso Financiero: hapless gross revenues analytics systems. improper human resource direction. hapless managerial determination devising and uneffective compensation inducements. The corporate consequence of these defects is that Progreso’s gross revenues employees are extremely unmotivated and ill equipped to assist the company recognize its gross revenues and profitableness ends.
In order to be effectual. gross revenues executives need to hold clear merchandising aims and the ability to track their public presentation against cardinal public presentation prosodies. Much to its hurt. nevertheless. Progreso Financiero does non hold any systems in topographic point to track transition grapevine and CPA over clip. This has hurtful effects both on management’s ability to accurately calculate overall gross revenues ( likely the cause of the immense disagreement between prognosiss and existent gross revenues – see Exhibit 6 ) and the history executive’s ability to track possible and bing clients throughout the sales-force funnel. Indeed. Progreso Financiero suffers from low lead-to-loan transition ( ~14 % ) every bit good as low client keeping ( ~52 % ) . which are cardinal drivers of underperformance in footings of gross revenues volume and client life-time value vis-Ã -vis the company’s acquisition costs.
Many of Progreso’s jobs can besides be attributed to hapless HR direction. It’s determination to engage its gross revenues directors straight from the food markets in which it sells has created channel issues with its retail spouses and has besides left it with a gross revenues force that is extremely inexperient. As a consequence. these employees require significantly more preparation before they can efficaciously sell at a degree of an experient gross revenues executive. Progreso’s determination to advance internally to make full its DSM places is besides extremely questionable. since these employees have small to no people direction experience.
As such. they have a hard clip prosecuting and actuating their direct studies. When Gutierrez does engage outside aid. he systematically makes hapless determinations. Time and once more he promotes persons with small to no existent gross revenues experience ( Cortez. Caviness. Ulloa ) to take his gross revenues squad. ensuing in a failure of leading and executing. When he does engage person with gross revenues experience ( Dudley ) . he choses person that does non talk Spanish. making a linguistic communication communicating barrier.
The commission-based compensation construction used at Progreso is aching the company alternatively of making inducements for AEs to increasingly sell more loans. While a progressive inducement construction is appropriate for Progreso – loan gross revenues are extremely contingent on the attempts of its AEs – it has non structured the inducements decently. First. the company has set a minimal threshold of 15 loan gross revenues per month before an AE can have a baseline committee of $ 18 per loan. but in 2008 employees are averaging merely 7 loans per month.
At the same clip. employees appear comparatively content merely gaining the hourly $ 8 pay. making an ecosystem in which the public-service corporation of the fixed salary outweighs the effort-to-outcome of duplicating one’s loan gross revenues end product to gain incremental committee. Indeed. the ends are so far out of range that AEs have given up on accomplishing them. This has created a principal-agent quandary whereby the gross revenues force is no longer aligned with the house to accomplish its aggressive gross revenues prognosiss. The low morale caused by a misaligned inducement construction is besides a likely subscriber to the high turnover at Progreso. which in bend impacts overall gross revenues force productiveness due to the gross revenues larning curve and preparation required for each new AE.
Finally. Progreso’s determination to come in into the Sears/K-Mart channels was besides a strategic error. The pes traffic of their mark client at these shops is much lower than that of their mark client in Latino food market shops. Furthermore. these channels already had a merchandise offering in topographic point ( with Citibank ) and an incentive construction of their ain that encouraged Sears employees to mention concern to Citibank. non Progreso. Last. Progreso’s understanding with Sears forced it to offer its clients a signifier of payment ( gift cards ) that limited their disbursement flexibleness and made the offering less attractive overall. While spread outing to merchant histories increased overall volume of gross revenues. it did so at the disbursal of its gross revenues employees.
As shown in Exhibit 1. Progreso’s merchandiser launch in September 2007 instantly precipitated a diminution in its loan per employee ratio. good below the committee threshold degree. Previously AEs were able. on norm. to make or excel 15 loans per month but after the merchandiser launch. loans per month declined to 7 per month on norm. Despite this. Progreso made no alteration to its committee inducement construction to suit for the differences in gross revenues speed by channel.
Progreso faces two key challenges traveling frontward. It must fulfill investors by turn outing that it can run into its aggressive gross revenues prognosiss and it besides must sketch a clear way towards profitableness. Currently Progresso is passing more to get a client ( ~ $ 177 CPA. Exhibit 3 ) than it is gaining in downstream value from clients acquired ( ~ $ 100 CLV. Exhibit 2 ) . In order to better profitableness of its clients. Progreso either demands to increase the borders per loan dealing or better its keeping public presentation. While Progreso could raise the APR and accomplish a higher border. this would to some degree stain its trade name placement as a low-priced. low-barrier loaning company.
Alternatively. Progreso should go on to construct CRM systems that provide a deeper connexion with its clients at each phase through the gross revenues grapevine. If. for illustration. Progreso was able to change over 85 % of new clients into repetition clients ( alternatively of 65 % ) . the CLV per client would so excel Progreso’s CPA. While Progreso could besides take to take down its acquisition cost. this is non recommended since it would necessitate either closing down some of its locations or diminishing overall compensation to an already discouraged gross revenues force.
Progreso should besides redesign its inducement construction. First. it needs to do its committee threshold more accomplishable in order to aline its AEs with company gross revenues ends. To carry through this it should extinguish the threshold demand wholly and counterbalance utilizing committee at all degrees of gross revenues ( get downing at 2 % and lifting to a 10 % upper limit ) . Second. it should take down the hourly pay to $ 6 in order to promote its employees to gain a higher portion of income through committee. In 2008 AEs sold 7 loans on norm. significance that most AEs did non gain any committee.
By contrast. in the proposed compensation construction ( Exhibit 5 ) . AEs begin gaining committee right off but earn a lower base wage. It is expected that this theoretical account will better morale. even though AEs will necessitate to duplicate their loan count because they will hold a sense of ownership right off and their inducements will be aligned with Progreso’s. Last. Progreso should better the quality of its gross revenues force by enrolling externally and engaging directors that have relevant gross revenues experience. Every gross revenues employee from top to bottom should be required to talk Spanish in order to better communicating. By bettering the compensation construction and engaging an already knowing gross revenues force. Progreso can better the effectivity of each AE and really make the gross revenues ends it sets for itself.