Campbell & Bailyns Boston Office Reorganization What we did well * Diagnostics: We arrived at the consensus conclusion based

on the numerical point analysis * Made an attempt to reach the depth of the problem * Please refer the examples given in the thread discussion * Discussion of compensation article and its key points (thread Key points from compensation articles - C&B) * Pros and cons of KAT (in thread - Pros and Cons of KAT) * Pros and cons of PM (in thread - Pros and Cons of PM) * Answered all the questions asked in the lecture slide (in thread - Questions From Slides, also highlighted below) * Recommendations (Highlighted below) What we missed * The overall structure of the recommendations * All the points Before arriving at the recommendations we have answered the following questions Refer thread Questions from Slides What are the trends in the investment banking industry affecting C&B in 2007 and what are the changes within the customer base that are putting pressure on the organization? In 2007, the recession affected C&B which included the meltdown in the mortgagebacked securities market that triggered the collapse of billions of dollars. The industry had undergone many changes in the last ten years, witnessing an increase in new competitors and new products. With the new products and more specialized customers came the need for more expertise to market and sell. Prior to the environmental challenges, what was C&Bs competitive strategy with respect to its bond division? The bond division consisted of five generalists who each managed their own group of accounts (60 in total) and four specialists who shared a common group of about 120 small customers. Salespeople invested years in building up key customer relationships, and they nurtured those relationships through social interaction outside of the traditional work environment. There was an unspoken pecking order within the office where the generalists focused on making large trades and earned the highest commissions. On a given day, they could be managing multiproduct trades that required the assistance of specialists and other staff members. Specialists managed smaller accounts which had fewer trades in smaller quantities per trade. What are the major design features of the KAT? The new KAT took the five generalists and turned them into specialists. For the first time in many of their careers, these salespeople would share customers with each other. Did the changes taking place in the bond industry and within client companies justify the decision to create the KAT? With the new products and more specialized customers came the need for more expertise to market and sell. The need for the new KAT was the difficulty many of the firms salespeople were having mastering the steady stream of new and increasingly complicated debt instruments introduced by the firm.

Does the specialization represented by the KAT to the sales people in the Boston office represent an incentive to try harder, work harder? Or the reverse? Is it neutral? For some sales people, the specialization did represent an incentive to work harder. For others, it didnt. For example, John Oates wasnt much of a team player. As a specialist he felt that this role would force him into something so specialized it would limit his career prospective. He also wasnt getting along with the New York crew. What incentives are created under the new performance management system that was not present earlier? With the new performance management system, the sales people are now evaluated by how they interact with the traders, product managers and researchers. If the sales people do not work well with them, they will get negative feedback which could ultimately result in lower compensation. The new system would give them the motivation to communicate and work well with the NY office. Recommendations highlights We arrived at the conclusions and recommendations based on the previous thread discussions and that discussion is completely based on the pros and cons of KAT & PM Some of the highlights * Sharing customers may not be balanced or evenly distributed. Of the 60 customers the spread may favor one component over the others; i.e. 10 customers may seek high yields, 30 may seek futures/options, 15 may seek mortgage, etc. With an imbalance, specialists with the most customers stand to gain the most compensation based on the number of accounts. * Give some kind of flexibility in team design and structure. Instead of top management allocating people in teams, there should be some flexibility in choosing the teams for employees. This may address the lack of Trust issue which John Oates having. Team structure flexibility will create a climate of trust within the team and this will enhance overall collaborative performance. * Potential career limitation; specialization can come with negative ramifications when it comes to ambitious individuals that enjoy seeing the big picture as opposed to a myopic view. Options can be limited when it comes to changing jobs or applying to other firms for more promising work (Recommendation is highlighted below) * Base pay can be based on skill based. It is actually 'Individual' and job oriented. It should reflect fair market value of an individual's skills and knowledge. This should serve as foundation for overall compensation strategy. * Base pay reflects the individuals ability. And it will be adjusted to market inflation. This way everyone is guaranteed that their base skills are well respected and there is an incentive to learn new things. As they learn or acquire new suitable skill set, their base pay will be adjusted as it is purely Skill based * Potential decrease in compensation due to a lower performance review * Team should know how they are measured for bonus payments. The criterias such as multi source feedback should be clearly communicated to avoid any uncertainty or ambiguity during final performance reviews. * doesnt evaluate how the team works together

* Multi way feedback mechanism for all the team. * While specialization increases efficiency on the big accounts, there is little to no impact on the smaller accounts, customers still have to make multiple calls. * Customer feedback to improve the process * About half of the customers were not satisfied by the change which could potentially lead to losing these customers * 360-Degree review across the organization and the customer feedback. The 360 review will help the salespeople not feel so frustrated that this is a one way street and can include the feedback they have about the NY team. The customer feedback will help them understand what is going on between the salespeople and the customers and get an idea of what they need to improve on to keep customers happy. By rewarding the salespeople, it will motivate them to keep those relationships at their best.