MGT-521 Human Resource Management

HRM: End Term Evaluation Assignment

Name:- Karan Trivedi

Enroll No.:- AU1814018

AMSOM-MBA 2018-20

Submitted to Faculty :- Ms. Ekta Sharma

Ms. Reema Gandhi (TA)

1) Discuss the problems with Janalakshmi Financial Services. Suggest alternatives to
solve the ongoing problems with pros and cons of each alternative.
Ans) Janalakshmi Financial Services began in 1999 by name ‘Sanghamithra Urban Program
(SUP). In 2006, it was changed to ‘Janalakshmi Social Services’ (JSS) and in 2008 to
‘Janalakshmi Financial Services Pvt Ltd’. Since it’s inception, JFS had grown rapidly
acquiring an asset base of more than 70 billion Indian rupees ($1.2 Billion). Here the name
Janalakshmi means ‘Jana’ means “people’ and ‘Lakshmi’ means ‘wealth’. JFS is an India-
based non-banking financial company. The company is engaged in micro-finance operations.
It provides financial services, including grant loans, advance and take credits, and other
related services.
Microfinance is services that provide financial support to poor and low-income clients so as
to help them raise their income, thereby improving their standard of living”. Mohammed
Yunus was awarded the Nobel prize for application of the concept of microfinance, with
setting up the Grameen bank in Bangladesh.
JFS vision was “ To break apart the narrow definition of micro-credit in India by providing a
full variety of financial services with main focus on urban poor.
JFS termed their market segment as the “Pyramid of the bottom of the pyramid”. This group
was a largely unbanked section of the population. Unlike the rural poor, this segment of the
urban population has regular incomes and a positive cash flow. They need financial services
at a reasonable cost, but the traditional loan sharks charged usurious rates. JFS’s mission was
to emerge as a full-scale financial services provider for the financially excluded in India
including urban poor and segment having problems in accessing financial services.
JFS’s retail branches had a unique organizational structure. Every branch had a manager and
was broadly divided into three areas, each led by one area head (AH). Each area typically had
two customer-relation executives for sales (CRESs), and four customer-relation executives
for collection (CRECs). CRES and CREC officers collectively constituted 80% of the
workforce.
Each branch officer at JFS had a specific task. The AH was responsible for identifying the
highest probability of potential microfinance clients. Each area could have a maximum
possible territory of 25 square kilometres. The AH often substantiated his view of market
potential by gathering information on competitors, including competitor presence, portfolio
performance, and number of employees. Once the AH had pinpointed high-potential areas,
the CRES officers, or loan sourcing officers, are being informed to networked within these
areas, explaining JFS loan offerings to people and making the sales.
The situation analysis of Janalakshmi Financial Services is as follows:-

 Customer impression of the brand is completely reliable on the field sales executive.
 Getting proper training and recruitment , satisfied compensation structure so that the
performance appraisal process is simple & fair.
 The Attrition rate was 41% which was extremely high whereas the market rate stands
at 32%. The employees stay only when they are: paid well, mentored, challenged,
promoted, involved, appreciated, valued, trusted, which may not be happening.
Based on the analysis, the problem faced by Janalakshmi Financial Services is being
identified:-

 A key problem was the low salaries for sale officers. Even the top performing senior
CRES officer was paid a salary at Rs. 108,000 per year, which was too low
 Designing of the compensation structure. Many branch heads believed current
compensation structure of CRES officers focused on origination of small group loans
(SGLs) alone
 The firm was penalising officers by raising their targets and this reducing their sales-
force motivation.
 Problems like lack of effective engagement among employees, communication gap
and information non-sharing among the employees.
The alternatives should be based on following criteria like:-

 lowering the attrition rate

 increasing awareness of non-monetary benefits
 employee engagement and inclusion
 providing incentives which will lead to productivity
 implementing employee recognition program

The alternatives for the ongoing problems are as follows:-

1) Introducing a sliding-target compensation structure
In these, JFS employees would be grouped into four major career bands, in which, Band 1
represents top management, and Band 4 represents Junior management.

Career Band Career level Composition

1 Top management 50th percentile market:
variable component to be
paid annually
2 Senior management 66th percentile market:
variable component to be
paid annually
3 Mid management 75th percentile market:
variable component to be
paid annually
4 Junior management 90th percentile market:
variable component to be
paid annually
Pros:-

 This scheme would help in reducing the attrition among firm’s field sales staff.
 Help contain cost at senior level of organization.
 Provide motivation to junior level employees to work hard and rise through the ranks
to top level.
 Scheme is in line with company’s social goal of uplifting and enhancing quality of life
to those at bottom of pyramid.
Cons:-

 Would be difficult or hard to attract and retain top talent at senior level of
organization.
 Based on 1st outcome, investors could also get worry and loose of trust and investment
might occur.
2) Linking Targets with Branch Age Rather Than Portfolio Size
This includes linking targets to age of a branch rather than company’s recent performance
and portfolio size. Branches will be divided into 3 categories: vintage 1 branches that existed
up to 12 months, vintage 2 branches in operation for 13-24 months and vintage 3 branches
older than 24 months. These means, older branches will have higher sales target and vice
versa.
Pros:-

 Ease of pressure on newer branch heads and their employees to perform and achieve
high sales target.
 Helping the employees to get used to company environment and the demographic
conditions by providing more time to explore the area.
Cons:-

 Questions whether approach can be considered fair and whether unbiased targets are
provided to the branches.

3) Raising junior staff salaries & providing cost-of-living Allowance (COLA)

This scheme includes raising fixed salaries of junior staff by 20%. Also, COLA for officers
was also decided based in expensive cities. Team would be classified in 3 categories- Tier 1
plus cities (Would receive Highest allowance), Tier 1 & Tier 2 cities (receive least
allowance).
Pros:-
 95% of JFS employees would become eligible to receive COLA, 75% would receive
immediately.
 Junior staff would be motivated.

Cons:-

 Arises conflicts in top management over fixed salary issues.

 CEO in favour of increasing variable pay, but HR head oppose it claiming that could
make sales officer aggressive. Clash of thoughts.
4) Emphasis on Cross-Selling and repeat customers
This scheme includes linking the bonus payment of sales officer with their ability to
generate repeat loans from existing clients. It also involves cross-sell of financial products
such as home loans, mortgages, and savings products.
Pros:-

 Increase in sales in different product category

 Increase in profits and client base.
 Scheme in line with firm’s social vision, thereby enhancing brand name in market.

Cons:-

 Chances of CRES officer being aggressive to make the sales even to unsuitable clients
arises.
 Cost implications, chances of low profitability

5) Calculating Bonus Payments as a percentage of fixed pay

Diving employee’s performance from 1 to 5, 1 being poor and 5 being outstanding
providing incentives based on it.
Pros:-

 More systematic and fair approach to bonus calculations

Cons:-

 A bit complicated system to understand

 Bonus payment only after meeting certain threshold requirements, these could
discourage weak performers.

Suggestion:-
As a contingency plan, introduction of non-cash reward system should be done. Firstly,
employee recognition should be made possible. Areas like employee engagement,
communication and information sharing among hierarchy should be worked out. A
Collaborative culture where junior employee van contributes in decision making process
should be brought upon. Reward & recognition programs implementation should bring
employees performance visibility in office. Some of the suggestions also include Combining
responsibilities of CRES & CREC, thereby increasing in group co-operation.

2) Suggest what & how Janalakshmi Financial  can use Artificial Intelligence

Ans). Machine learning has wide applications in finance before the advent of mobile
banking apps, proficient chat bots, or search engines. Today, machine learning plays an
integral role in many phases of the financial ecosystem, from approving loans, to managing
assets, to assessing risks, maintaining reports, carrying out transactions.
Getting the organization moving is not an easy task. Being a first mover made it harder.
Adding the technology backbone made the effort a true challenge. JFS believed that urban
poor are inherently migrant. The reality was that the urban poor are already empowered to a
certain degree because of the incomes they draw. What they wanted were products which
would improve the quality of their lives and at the same time make them more upwardly
mobile.
In microfinance business, each transaction is of small value compared to what is being
handled in a bank. And to make this business viable, scale is extremely important. Scaling up
cannot be done using a manual system or an Excel based system. JFS made use of FINO
Promoted by ICICI Bank coincidentally in 2006, Financial Information Network and
Operations Ltd. (FINO) was a technology solutions provider focusing on the micro-finance
sector. The technology platform designed by FINO for MFIs (microfinance) comprised of a
core banking solution coupled with a distribution component and transaction acquisition
system that was scalable and flexible to suit changing business needs. The core banking
solution would host customer accounts for MFIs. The system would be accessed by
customers using biometric enabled multi-function personalized smart card. The smart cards
would serve as proof of identity and electronic pass-book for the customers.
JFS could make use of hand-held terminals for data entry, calculation for the work done by
the field staff. This decision would minimize the number of transactions that would be
recorded manually by the staff. Also, staff who would be dealing with customers at their
places of residence and would be moving around during the day would have the mechanism
to record the transactions as simply as possible. This would help in reducing the manual data
entry when they returned to the branch office and would have the additional effect of
reducing any data entry errors. The effect of using a hand-held terminal is it could make the
transactions audit very easily and very quickly. As soon as the terminals were connected to
the network at the end of the work day, all systems would get updated. Shortly after the
updates were completed, any management reports could be generated in quick time. In this
way, information can be gathered quickly and can be analysed.
Another metric was the measure of biometric confirmation of a transaction. The metric for
biometric confirmation of a transaction would allow JFS to flag potential defaulters and for
the staff and Branch Managers to follow up when necessary.
Microfinance transactions are all cash transactions, and therefore handling cash daily is an
important operational issue. In a banking set up, a customer would have to go to the bank to
make monthly repayments and adhere to business timings of the bank. For a microfinance
customer, who is a petty trader, or a street vendor, auto driver etc. would mean several hours
spent in going to the bank every month. The time spent in this non-productive but necessary
activity would impact his earnings or daily sales. His earnings are a direct function of the
number of hours spent on his business. It is for this reason that microfinance customers would
usually go to a local money lender who is open round the clock to do transactions, even
though it meant paying fancy rates of interest.
The handheld device would help to keep track of every single transaction more effectively.
The device provided a printed receipt to the customers and the CREC’s documenting every
single transaction. The collection transaction itself could take place at the home and
completed in a very short time allowing the customer to continue with their normal routine
with a minimum of disruption.
The Core Banking Systems holds the customer account data. The loan disbursals as well the
periodical loan repayments are captured in the handheld device which is operated using a
smart card and a biometric. For each transaction, the device gives out a printed receipt. This
is an enhanced sense of security to the customer.
With a hand-held device, one requires a smart card as well as the biometric, and unless the
two inputs match the transaction does not go through. For JFS, it will also ensure data
accuracy, because the transaction will get posted to the right customer’s account and the
customer will walk away with a printed receipt in her hand, thus enhancing the trust and
confidence in the system.
The CRM (Customer Relationship Management) application connects the data from the
customer transactions as well as the Core Banking system and provides the data for the
management reports the balanced score card. Details of the transaction, including whether the
customer scanned their finger print are recorded by the CRM application. The data is then
readily available for all the reporting systems. What the management sees in the reports each
day is almost exactly what has happened that day in the field.
The choice of Core Banking System, CRM application as a shared service and the successful
use of biometric technology in its hand-held devices together helped JFS accomplish the
goals.
These inclusions of software’s and devices would help Janalakshmi Finance Services to
achieve its goals. Also, these would ease the life of its clients as well as employees. CRM &
core banking software when implemented will help data collection easy and provide
protection of the data. Biometric and hand-held devices provide protection from defaulters
and help in storing and accessing of data conveniently.
Hence, Artificial Intelligence is a boon for financial sector and should be implemented.