This is a classic case of how people interact with technology to overcome the operational issues. Let us first understand the relationship between %u201Cpeople%u201D, %u201Cprocess%u201D and %u201Ctechnology%u201D factors to deal with operations.
It is the %u201Cpeople%u201D factor, which directly deals with operations. The %u201Cprocess%u201D factor deals with %u201Cplanning%u201D part and the %u201Ctechnology/system%u201D factor deals with compliance and auditing measures.
In this case each factor has got some gaps to fill in. Lets start with the %u201Cpeople%u201D factor and try to understand the following questions:
1) What motivates people to mislead systems? 2) Why they are motivated? 3) How they are motivated? People mislead systems (in this case by giving false cheque information) when they find organizational strategy is not directly linked with operational shortcomings. %u201CThe ability to do late payments%u201D is an operational shortcoming, which is not directly linked to the incentive system for a branch. There is an interesting point in the case, which states %u201CNon-collection was not as important a performance measure as revenue targets%u201D. If the non-collection becomes a parameter in the appraisal process, people will be de-motivated to take it further. An enterprise incentive system must track these issues and link it with the growth of a branch. Another point to highlight here is a gap in organization communication. The pressure on %u201Cworking capital%u201D because of late payments should be properly communicated to all branches of Trustworthy Securities Ltd. A well-communicated plan on penalty as well as rewards linked to this cause should be part of the agreement clause between the company and its different subsidiaries. Coming to the %u201Cprocess%u201D factor the penalty as well the reward system need to be well laid out. This system should be measurable and be directly proportional to the pressure on the working capital from %u201Cadditional interest%u201D point of view. If the branch is accountable for 10% of total late payments, the penalty will be to reduce the branch%u2019s exposure limits by the same percentage i.e. by 10%. The additional interest that the organization will have to bear to fund this 10% of late payment should be treated as an additional fine to be charged directly to a branch. In the same lines, those branches, which do not contribute to the late payments, need to be rewarded in terms of additional exposure limits and bonuses to the team responsible for the collections. Now discussing on the %u201Ctechnology%u201D side, systems should cross-validate the various input points. An interesting point highlighted here is %u201C people used to upload the cheque details, without having cheques in hand%u201D. The tool should make it mandatory that the authorized user who is specifying the cheque details should also have to upload a scanned copy of the cheque at that instant (tracking the branch id). For those deposits of another cheque (with a different cheque number) an alert should be sent to the branch manager as well as the head office. From the entry of the cheque to its deposit, the cheque number should be validated and tracked to its origin. The system should consolidate a report on these non-matching cheques and the late payments branch wise and send on every fortnight to the headquarters as well as a copy to the respective branch. So a combined approach on these three fronts will give a long-term solution for mitigating risk at Trustworthy Securities Ltd. -sabyasachee_panda@yahoo.com
