Have you ever considered, or attempted to determine the cost associated with the lack of transparency surrounding your sales incentive administration processes? This is not only a moving, and often hidden target; but in some cases it can increase administrative costs by as much as several hundred percent.
One case in point involves a large stock brokerage that ultimately was forced into bankruptcy because of the lack of transparency it allowed to affect the tracking of its stock transactions and the incentives associated with that process. As a London-based firm, it managed hundreds of thousands of stock transactions each month that would be sold based on one currency, bought using a second currency, valued as an asset under management in a third and generate commission in possibly a fourth.
As you can imagine, this amount of complexity exposed the company to many financial risks. Before Glocent was installed, the company employed 18 full-time programmers, whose sole task was to try to develop and maintain programs to sort through all the data associated with the transactions and then determine the value of the transactions in multiple currencies. Unfortunately for the agents who were being paid to carry out the stock transactions, commission payments were toward the bottom of the company’s priority list.
Glocent’s analysis of the situation produced several alarming findings:
- The data coming from the large bank providing the stock transaction details were invalidated, incomplete, and as a result, erroneous. The errors sometimes totaled many millions of dollars each month.
- In order to compensate for the inconsistent data, and suspected errors, the stock brokerage company elected to try to simply average out the data to guesstimate its revenues and calculate its incentives.
- In many cases, the agents were the people who suffered the greatest impact of these measures.
When Glocent was hired to install its automated SCM solution, the client did not know how serious its situation was. Although Glocent was able to have its solution in production in just over two months, what we uncovered was devastating. We were able to determine that the assets under management were highly overvalued. While we were able to provide a system that validated the data coming from the stock transaction clearing system, and demonstrate serious underpayments during the initial months of operation, the client could not recover what were likely tens of millions of dollars that went uncollected in the past. This all had led to a very mistrustful and demotivated group of agents, totaling over 500 people.
In less than six months of Glocent bringing to light everything that had been pushing this company to its eventual demise, it was determined that there was no way it could recover.