Management Perspective Essays

Management Perspective Essays Management Perspective Essay Management Perspective Essay In order to obtain managements perspective on the issue, Denise Sampson, Operations Manager in the Des Moines office, was interviewed. Ms. Sampson stated that while CHE has not run into any Fair Lending / ECOA violations to date, the current incentive pay system is not ideal in keeping with the spirit of the rules, and compliance with these laws could hypothetically become an issue. Ms.Sampson also recognizes that borrowers seeking larger loans have the potential to receive superior service in relation to those who want smaller loans. While the current commission system pays more dollars to the TLC to encourage larger loans, the risk remains that smaller loans could be neglected in favor of the more lucrative loans. Citigroup claims that its employees have shared responsibilities to our clients, each other, and to the company. In keeping with that philosophy, CHE management realizes that the current compensation system for TLCs has room for improvement. Ms. Sampson stated that TLCs should have incentives to work equally hard on all applications. However, she believes that TLCs are already fairly paid for their efforts, and that a system that pays more is not required. CitiMortgage, a separate division from CHE, uses a system that pays per booked unit to the TLC. While this system has been considered for CHE, management is concerned that the 0.0515% budget for TLC commission could be exceeded regularly, and expected profits not met, if the average loan size were to fall below the financial models used in predicting success for the division. Ms. Sampson indicated that a replacement compensation system that uses a pay per booked unit and does not exceed the budgeted allotment would be optimal for the clients, employees, and the company. Additionally, the new system should be more transparent for the TLCs to estimate their end of the month commission check Employee Perspective When utilizing a commission-based pay structure (whether in whole or in addition to a base salary), individuals may be motivated to make additional sales calls, work harder to ensure sales are closed, and encourage customers to purchase additional products or services. The success of commission-based employment is conditional on individuals believing they have some control over the sale, the commission schedules are relatively stable, and incentive plans are not overly complex (Scholl). A commission-based system can have several problems that should also be considered. These include the potential to encourage employees to focus only on closing the sale to the detriment of customer service after the sale and the potential for high levels of variability due to conditions beyond the representatives control, such as business and economic cycles (Scholl). When developing the revised commission-based pay structure for TLCs, these considerations will be taken into account to ensure the program meets the needs of the organization, federal and state laws and the employee. The new system must achieve the goal of motivating and rewarding effective TLCs, while ensuring appropriate customer care. Industry Best Practices Des Moines is also the home base of Wells Fargo Financial and Wells Fargo Home Mortgage, subsidiaries of Wells Fargos Home and Consumer Finance division. Both companies specialize in real-estate secured lending and offer variable compensation programs for their sales professionals. According to John Crawford, Program Associate for Wells Fargo Financial, the Wells Fargo model is a hybrid that pays for both volume and booked dollar amount in a tiered structure. Once credit managers sell four real estate loans in a given month, they receive a kicker for additional loans and are compensated at a higher rate. In the end, credit managers are encouraged to book all loans (in alignment with fair lending practices) and also up-sell to higher loans (to benefit the companys bottom line). Conversely, CitiMortgages (as explained previously) compensation structure pays a set dollar amount for each loan closed and is not based on the size of the loan.