Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Motivation: (to reduce costs)

No description
by

Rebecca Varon

on 9 October 2013

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Motivation: (to reduce costs)

Global Investors Inc.
Global Investors, Inc.
Key Personnel
Agenda
Privately owned investment management company
Headquartered in New York

Focuses on 2 activities
Investment management
Client Services
Institutional Investors
Independent Brokers & Dealers

To maximize profits
Objectives
Strategies
GI Subsidiaries
London, Tokyo, San Francisco, Singapore

Specific Desired Behaviors
1. Use Headquarter-developed trading strategies

Specific Desired Behaviours
2. Minimize costs
Direct
Indirect

GI Subsidiaries
Separately Incorporated
Ownership: GI founders + Sub. CEOs
Clients funds managed with HQ-developed
trading strategies.
Assigned local and NY contact



 ....Link to global clients, adding a
few investment and client services

Specific Desired Behaviours

Strategy # 1: Differentiation - Academic Research
Strategy # 2: Reduce Costs
a. EOS
b. Liquid Tech. Investments
c. Crossing activities
Strategy #3: Global Growth
Subsidiaries
Strategy # 4: Client Satisfaction

Specific Desired Behaviours
3. Client Satisfaction
Tailoring products and services to client’s needs

4. Compliance with local regulations
Tax authorities and financial regulators

Strategy # 1: Differentiation - Academic Research
Strategy # 2: Reduce Costs
a. EOS
b. Liquid Tech. Investments
c. Crossing activities
Strategy #3: Global Growth
Subsidiaries
Strategy # 4: Client Satisfaction

Strategy # 1: Differentiation - Academic Research
Strategy # 2: Reduce Costs
a. EOS
b. Liquid Tech. Investments
c. Crossing activities
Strategy #3: Global Growth
Subsidiaries
Strategy # 4: Client Satisfaction

GI Subsidiaries - What is really occurring?
HQ trading strategies
Local Funds to attract new clients
Tokyo & London Personnel
Portfolios: Japan, Pacific Rim, Europe
Trust management
…Link to global customers value generating unit?

“I have a basic gut discomfort with the proposition
that investment management as a profit-making function exists only in New York.”
-Allistair Hoskins, Chairman/CEO London

Management Control Systems
Action Controls
Minimize decision-making responsibility of Sub managers
Behavioral Constraint: HQ dictates trading strategies
.......Why?


Strategy # 1: Differentiation - Academic Research
Strategy # 2: Reduce Costs
a. EOS
b. Liquid Tech. Investments
c. Crossing activities
Strategy #3: Global Growth
Subsidiaries
Strategy # 4: Client Satisfaction
Results Controls
1: Transfer Pricing Model
Cost-focused Profit Center
Revenues allocated based on:
Direct Controllable Costs + 10% mark-up
Indirect Costs - Allocated by administration services
.....Why?
Strategy # 1: Differentiation - Academic Research
Strategy # 2: Reduce Costs
a. EOS
b. Liquid Tech. Investments
c. Crossing activities
Strategy #3: Global Growth
Subsidiaries
Strategy # 4: Client Satisfaction
Low Profits - Compliance with Local capital regulations
Problem Identification
Action Controls
Action Control # 1: Centralized Decision Making
Behaviour: Managing funds using both HQ &
locally-designed strategies for global clientele.



Results Controls
1. Transfer Pricing Model
Behaviour: Subsidiary employees focusing on
generating value rather than reducing costs.


2. Management Compensation
Direction
Direction:
Not explicitly clear that employees should ONLY be using HQ strategies
Customers demanding local fund management
=
Inconsistencies between different pillars of GI strategy:


Personal Limitations
Not Relevant
Motivation
Provide local research function to pursue global growth
Follow HQ orders, will not attract new customers and grow

Inconsistencies between Strategies
Strategy 1
Use HQ trading Strategies
Strategy 3
Grow globally by attracting new clients:
Clients demand tailored products using local inputs
Strategy 4
Client Satisfaction:
Build and maintain long term client relationships
2: Management Compensation
Bonus pool – Total GI profits
Bonus Point System
Compensation committee (B.O.D & VP HR)
.....Why?
Reward executives for performance aligned
with company objectives
Strategy # 1: Differentiation - Academic Research
Strategy # 2: Reduce Costs
a. EOS
b. Liquid Tech. Investments
c. Crossing activities
Strategy #3: Global Growth
Subsidiaries
Strategy # 4: Client Satisfaction
3. Management Ownership
Additional shares issued to GI subsidiary chairmen/CEOs
London (Hoskins) - 23%
Tokyo (Hashi) - 5%

Strategy # 1: Differentiation - Academic Research
Strategy # 2: Reduce Costs
a. EOS
b. Liquid Tech. Investments
c. Crossing activities
Strategy #3: Global Growth
Subsidiaries
Strategy # 4: Client Satisfaction
3: Management Ownership
Behaviour: Going beyond what management wants them to do - therefore, not behaving properly
Direction

Subsidiary role not clearly communicated
Subsidiary View: Autonomous Profit centers
Value generation – local strategies
HQ View: Cost-focused profit Centers
No clear quotas or targets

“All investment strategies used to manage clients’ funds designed by the research team in New York”
– Davis


Personal Limitations
Not Relevant
Motivation
Minimize costs Minimize Revenues.
TPM does not reward employees for “value generating” local activities.
Autonomous profit centers in Financial Reporting:
Investor clients interested in learning about financial health
Ownership stakes/ Spinoff value
Inaccurate views by financial and tax authorities in sub countries
Compensation is subjective and unrelated to cost minimization.

Direction

Subsidiary objectives vs. HQ objectives
Sub wants to increase value by going beyond management desired behaviours
Management wants to use global sales force as strictly a link to clients




Personal Limitations
Not Relevant
Motivation
Incentive for sub CEOs to create value for the firm

Direction

No definition of performance dimensions
Performance cannot be measured accurately
Hard to measure performance because subjective and unclear
No performance targets




Personal Limitations
Not Relevant
Motivation
No direct link to subsidiary performance
Linked to GIs total profit
Bonus pool allocated based on subjective measures of performance and contribution to GI
No motivation for employees to perform better

Behaviour: Going beyond what management wants them to do
- Not behaving properly
Summary:
Are the Employees Behaving Properly?

Employees Behaving Properly, however:
Lack of Motivation and Direction to meet strategies
Strategies & Controls are incongruent
Strategies are inconsistent

Inconsistencies between Strategies
Strategy 1
Use HQ trading Strategies
Strategy 3
Grow globally by attracting new clients:
Clients demand tailored products using local inputs
Strategy 4
Client Satisfaction:
Build and maintain long term client relationships
Aaron Ehgoetz
Maximilian Gubert
Robyn Shapiro
Rebecca Varon
Corrective Measures
Overall: Increase Direction & Motivation
Action Controls:
Decentralize decision making
Clearly define subsidiaries’ role

Results Controls:
Evaluation based on relevant measures
Set clear targets to increase motivation
Transfer pricing model: Need to properly communicate goals & responsibilities

Strategy #2: Lowering Trading Costs
No control currently exists

Recommendation: Transfer Pricing Model
Align subsidiary and management goals
Improves management evaluation & motivation

Example:
Allocate revenues to subsidiaries where value is generated
Provides motivation for subs to grow client base & lower costs
Questions?
Singapore - 3%
San Francisco - 3%
Reward executives for performance aligned with company objectives
Desire for higher EBITDA multiple valuation in case of spinoff/buyout
80
1. Use differentiation to create value for the firm
- Academic research based
investment strategy
2. Lowering trading costs
a. Economies of scale
b. Technological investments aimed at
increasing liquidity
c. Crossing activities (matching client’s buy
and sell needs)
3. Use global sales force to
attract and retain clients
around the world

4. Client Satisfaction
- Overseas personnel necessary to
maintain long-term international
client relationships
Full transcript