Progreso Financiero Essay

Progreso Financiero faces two unfavorable problems. First, it is falling importantly short of its gross gross revenue forecasts ( endanger 4), causing concern for investors and employees of the family. Second, Progreso has not save identified a occur bridle-path to profitability. There be four bring out drivers to underperformance at Progreso Financiero execrable gross gross gross revenue analytics systems, unseasonable human resource management, poor managerial end making and ineffective fee bonuss. The collective result of these shortcomings is that Progresos gross revenue employees ar passing unmotivated and badly equipped to help the comp whatever exculpate its gross revenue and profitability goals.In coiffure to be effective, gross sales executives need to wee-wee clear selling objectives and the ability to give chase their performance against key performance metrics. some(prenominal) to its detriment, however, Progreso Financiero does not have any syste ms in arrange to track conversion business and CPA over while. This has deleterious dip up both on managements ability to accurately forecast general sales ( belike the cause of the huge difference between forecasts and actual sales rule Exhibit 6) and the ac numeration executives ability to track potential and live guests throughout the sales- fierceness funnel. Indeed, Progreso Financiero suffers from mild lead-to-loan conversion (14%) as soundly as economic crisis customer retention (52%), which are key drivers of underperformance in terms of sales volume and customer lifetime range vis--vis the companys encyclopedism costs. galore(postnominal) of Progresos problems seat overly be attributed to poor HR management. Its finis to acquire its sales managers directly from the groceries in which it sells has created channel issues with its retail partners and has also go forth it with a sales force that is highly in go acrossd. As a result, these employees require signifi earth-closettly to a greater extent training in front they can effectively sell at a level of an experienced sales executive. Progresos decision to promote internally to carry its DSM positions is also highly questionable, since these employees have short to no people management experience.As such, they have a difficult time engaging and motivating their direct reports. When Gutierrez does carry outside help, he consistently makes poor decisions. Time and again he promotes individuals with dinky to no actual sales experience (Cortez, Caviness, Ulloa) to lead his sales team, resulting in a failure of leadership and execution. When he does hire someone with sales experience (Dudley), he choses someone that does not speak Spanish, creating a language communication barrier.The commission-based compensation construction used at Progreso is hurting the company instead of creating motivators for AEs to progressively sell more loans. plot of ground a progressive incentive anatomical structure is appropriate for Progreso loan sales are highly contingent on the efforts of its AEs it has not structured the incentives properly. First, the company has set a minimum brink of 15 loan sales per month before an AE can receive a baseline commission of $18 per loan, but in 2008 employees are averaging only 7 loans per month.At the same time, employees appear relatively discipline simply earning the hourly $8 wage, creating an ecosystem in which the utility of the fixed salary outweighs the effort-to-outcome of stunt woman ones loan sales output to earn incremental commission. Indeed, the goals are so far out of kick in that AEs have given up on achieving them. This has created a principal-agent dilemma whereby the sales force is no longer aligned with the riotous to secure its aggressive sales forecasts. The low morale caused by a misaligned incentive structure is also a likely contributor to the high turnover at Progreso, which in turn impacts overa ll sales force productivity due to the sales learning curve and training essential for each natural AE.Finally, Progresos decision to enter into the Sears/K-Mart channels was also a strategic mistake. The foot traffic of their hind end customer at these stores is much raze than that of their target customer in Latino grocery stores. Furthermore, these channels already had a product offering in place (with Citibank) and an incentive structure of their own that boost Sears employees to refer business to Citibank, not Progreso. Lastly, Progresos agreement with Sears forced it to offer its customers a form of payment (gift cards) that limited their spend flexibility and made the offering less(prenominal) attractive overall. While expanding to merchant accounts change magnitude overall volume of sales, it did so at the expense of its sales employees.As shown in Exhibit 1, Progresos merchant launch in September 2007 immediately precipitated a decline in its loan per employee ratio , well below the commission threshold level. antecedently AEs were able, on average, to reach or fleet 15 loans per month but after(prenominal) the merchant launch, loans per month declined to 7 per month on average. Despite this, Progreso made no change to its commission incentive structure to accommodate for the differences in sales hurrying by channel.Progreso faces two key challenges spill forward. It must satisfy investors by proving that it can meet its aggressive sales forecasts and it also must outline a clear path towards profitability. Currently Progresso is spending more to acquire a customer ($177 CPA, Exhibit 3) than it is earning in downstream value from customers acquired ($ coulomb CLV, Exhibit 2). In entrap to make better profitability of its customers, Progreso either needs to join on the margins per loan transaction or reform its retention performance. While Progreso could raise the APR and achieve a higher margin, this would to some percentage point tarn ish its brand positioning as a low-cost, low-barrier lending company.Instead, Progreso should continue to retrace CRM systems that provide a deeper connection with its customers at each stage through the sales pipeline. If, for example, Progreso was able to convert 85% of new customers into repeat customers (instead of 65%), the CLV per customer would then surpass Progresos CPA. While Progreso could also aim to get down its acquisition cost, this is not recommended since it would require either shutdown down some of its locations or decrease overall compensation to an already disapprove sales force.Progreso should also redesign its incentive structure. First, it needs to make its commission threshold more achievable in order to align its AEs with company sales goals. To contact this it should eliminate the threshold requirement all told and compensate using commission at all levels of sales (starting at 2% and rising to a 10% maximum). Secondly, it should put down the hourly w age to $6 in order to encourage its employees to earn a higher share of income through commission. In 2008 AEs sold 7 loans on average, core that most AEs did not earn any commission.By contrast, in the proposed compensation structure (Exhibit 5), AEs begin earning commission right onward but earn a lower base salary. It is expected that this model pass on improve morale, even though AEs volition need to double their loan count because they depart have a feel of ownership right away and their incentives will be aligned with Progresos. Lastly, Progreso should improve the prime(prenominal) of its sales force by recruiting outwardly and hiring managers that have relevant sales experience. either sales employee from top to bottom should be required to speak Spanish in order to improve communication. By amend the compensation structure and hiring an already conditioned sales force, Progreso can improve the lastingness of each AE and actually reach the sales goals it sets for i tself.