state the

problems snd the recommended solutions

Chapter 5 Control System Costs level employees like him who were the object this team, some of the other demands of the job were beginning to wear on him. Things had not tamed criminal prosecution, not the top executives As Phil saw it, his job was to develop and ma out as he had expected. Phil thought of himself as a hard-working and loyal employee, a good manager, profitable relationships with as many clients a and an ethical businessman. The "compromises possible, and the specific products and services d to clients should be dictated by the needs of these that his career seemed to demand were beginning to he knew that his job required balancing conflicting goals, but he wondered how far he could bend with- out breaking. trouble him. He did not consider himself a saint, and clients. Consequently, he could never bring himse to pushing his team to adhere to the firm directives and this approach had negatively impacted his compensation in the last few years. Invariably. Phil started his brokerage career with one of the annual bonus lagged behind those of other managen at Stuart & Co., even though his branch was one of the largest in the firm in terms of clients, sales volume largest firms in the industry. He moved to Stuart & Co., then a boutique firm, in the hope of breaking free from the high-pressure sales-oriented attitude pre- and net profits. Phil felt his current situation w valent in the industry. He thought that the perception unfair. He also was beginning to worry that his fail to meet specific product sales targets was coding that the large firms tried to perpetuate - that their advisors are experts at providing unbiased financial whatever measure of job safety his overall res advice- is for the most part wrong. Phil learned had given him. To compound the situation. Start& Co. had recently been bought by one of the larges firsthand that brokers are paid, first and foremost, to sell products and services. Meeting the financial brokerage firms in the country, and it seemed th the new hierarchy did not take well to independen needs of their clients was not paramount. pursue the objectives set out by corporate Stuart & Co. seemed to be different. It was a firm minded managers like Phil who did not aggresand that emphasized the development of long-term client relationships based upon rendering expert independ- ent financial advice. Its investment advisors were to be trusted counselors to clients on all financial matters. But Phil was also lured by Stuart's com- pensation package, which included a relatively large fixed salary and a bonus based upon overall branch revenues, growth in the number of ties or relationships (financial, insurance, investment) developed with each customer, and the number of business referrals to other branches. Phil was getting tired of the game but could see how he could avoid playing it. He was almo 54 years old and was the sole provider for his family His wife had retired a year before from her teach job to take care of their three teenage sons. They hat just recently bought a 4.000 square feet home an exclusive neighborhood of Scottsdale. And las fall, Phil had fulfilled a college dream by buying f himself a brand new red Corvette. Phil feared that i he allowed his team of advisors to continue focu ing on meeting their clients' needs with little regat for corporate targets, more than his discretion compensation would be at risk. However, things had changed since he had joined the firm. As the investment and analysis units expanded, the demand on the branch managers to push specific products began to be in-corporated into their annual sales budgets. Phil felt that those changes had compromised his ability to deliver investment options suited to his clients financial situations. They risked the many long-term relationships with clients that he had worked hard to develop and created ethical dilemmas for him and his staff. Phil felt that pursuing some of the new budget goals could result in future financial losses for some of his clients. However, Phil had worked in the brokerage indus- try and at Stuart & Co. long enough to know that it was dangerous to openly express those concems to his boss. Additionally. Phil was troubled with the recent scandals in the industry. It was mostly low- Phil had many questions and doubts and fes answers. Was he right in allowing his clients' line cial goals to take precedence over his own family's financial security? Was he being unreasonable, nav or impractical? Was there somewhere a proper balance? Was he being too ethical at a time when family's future should be his primary concern perhaps it was time for him to find another employe that shared Phil's philosophy, if one existed in brokerage industry? But could he find another good job at his age? Or should he even bother? After he had done his part. Maybe it should be the job some younger managers to champion the case service to clients and continue the battle. 198 AKSARA It was three days to month end. Philip Anderson, the Phoenix branch manager of Stuart & Co., the largest brokerage firm in town, was dreading the monthly teleconference meeting with his bosses in New York. Once again his team had failed to deliver on some of the specific product sales targets set for them in the company's sales budget. Specifically, the ratio of in-house to outside product sales of items such as mutual funds and insurance product offerings had not improved from the prior month; his team had not been successful in pushing equity issues syndicated or underwritten by the parent firm to the levels set by his boss a few months earlier, and his team had not increased the overall balance of margin accounts. On the positive side, the number of margin accounts had increased, new clients had This case was prepared by Research Assistant Juan Jimenez and Professors Kenneth A Marchan Rein er Case Study Philip Anderson We been signed up, and overall branch revenues had increased. But Phil questioned how long he would be able to justify not meeting some of the specific targets the firm had given his branch. Phil began his sales career right after college. His first job was with a cereal producer, as an inside salesman. He switched to the brokerage business after just two years, lured by the potential for higher income and the opportunity to have direct contact with retail clients. Phil was an outgoing individual who had a talent for financial matters, and he looked forward to a job that would allow him to interact with clients directly. Just five months ago, Phil had celebrated his thirtieth year in the brokerage industry and his twenty-first year with Stuart & Co. Although he truly enjoyed being a manager and working with Chapter 5 Control System Costs level employees like him who were the object this team, some of the other demands of the job were beginning to wear on him. Things had not tamed criminal prosecution, not the top executives As Phil saw it, his job was to develop and ma out as he had expected. Phil thought of himself as a hard-working and loyal employee, a good manager, profitable relationships with as many clients a and an ethical businessman. The "compromises possible, and the specific products and services d to clients should be dictated by the needs of these that his career seemed to demand were beginning to he knew that his job required balancing conflicting goals, but he wondered how far he could bend with- out breaking. trouble him. He did not consider himself a saint, and clients. Consequently, he could never bring himse to pushing his team to adhere to the firm directives and this approach had negatively impacted his compensation in the last few years. Invariably. Phil started his brokerage career with one of the annual bonus lagged behind those of other managen at Stuart & Co., even though his branch was one of the largest in the firm in terms of clients, sales volume largest firms in the industry. He moved to Stuart & Co., then a boutique firm, in the hope of breaking free from the high-pressure sales-oriented attitude pre- and net profits. Phil felt his current situation w valent in the industry. He thought that the perception unfair. He also was beginning to worry that his fail to meet specific product sales targets was coding that the large firms tried to perpetuate - that their advisors are experts at providing unbiased financial whatever measure of job safety his overall res advice- is for the most part wrong. Phil learned had given him. To compound the situation. Start& Co. had recently been bought by one of the larges firsthand that brokers are paid, first and foremost, to sell products and services. Meeting the financial brokerage firms in the country, and it seemed th the new hierarchy did not take well to independen needs of their clients was not paramount. pursue the objectives set out by corporate Stuart & Co. seemed to be different. It was a firm minded managers like Phil who did not aggresand that emphasized the development of long-term client relationships based upon rendering expert independ- ent financial advice. Its investment advisors were to be trusted counselors to clients on all financial matters. But Phil was also lured by Stuart's com- pensation package, which included a relatively large fixed salary and a bonus based upon overall branch revenues, growth in the number of ties or relationships (financial, insurance, investment) developed with each customer, and the number of business referrals to other branches. Phil was getting tired of the game but could see how he could avoid playing it. He was almo 54 years old and was the sole provider for his family His wife had retired a year before from her teach job to take care of their three teenage sons. They hat just recently bought a 4.000 square feet home an exclusive neighborhood of Scottsdale. And las fall, Phil had fulfilled a college dream by buying f himself a brand new red Corvette. Phil feared that i he allowed his team of advisors to continue focu ing on meeting their clients' needs with little regat for corporate targets, more than his discretion compensation would be at risk. However, things had changed since he had joined the firm. As the investment and analysis units expanded, the demand on the branch managers to push specific products began to be in-corporated into their annual sales budgets. Phil felt that those changes had compromised his ability to deliver investment options suited to his clients financial situations. They risked the many long-term relationships with clients that he had worked hard to develop and created ethical dilemmas for him and his staff. Phil felt that pursuing some of the new budget goals could result in future financial losses for some of his clients. However, Phil had worked in the brokerage indus- try and at Stuart & Co. long enough to know that it was dangerous to openly express those concems to his boss. Additionally. Phil was troubled with the recent scandals in the industry. It was mostly low- Phil had many questions and doubts and fes answers. Was he right in allowing his clients' line cial goals to take precedence over his own family's financial security? Was he being unreasonable, nav or impractical? Was there somewhere a proper balance? Was he being too ethical at a time when family's future should be his primary concern perhaps it was time for him to find another employe that shared Phil's philosophy, if one existed in brokerage industry? But could he find another good job at his age? Or should he even bother? After he had done his part. Maybe it should be the job some younger managers to champion the case service to clients and continue the battle. 198 AKSARA It was three days to month end. Philip Anderson, the Phoenix branch manager of Stuart & Co., the largest brokerage firm in town, was dreading the monthly teleconference meeting with his bosses in New York. Once again his team had failed to deliver on some of the specific product sales targets set for them in the company's sales budget. Specifically, the ratio of in-house to outside product sales of items such as mutual funds and insurance product offerings had not improved from the prior month; his team had not been successful in pushing equity issues syndicated or underwritten by the parent firm to the levels set by his boss a few months earlier, and his team had not increased the overall balance of margin accounts. On the positive side, the number of margin accounts had increased, new clients had This case was prepared by Research Assistant Juan Jimenez and Professors Kenneth A Marchan Rein er Case Study Philip Anderson We been signed up, and overall branch revenues had increased. But Phil questioned how long he would be able to justify not meeting some of the specific targets the firm had given his branch. Phil began his sales career right after college. His first job was with a cereal producer, as an inside salesman. He switched to the brokerage business after just two years, lured by the potential for higher income and the opportunity to have direct contact with retail clients. Phil was an outgoing individual who had a talent for financial matters, and he looked forward to a job that would allow him to interact with clients directly. Just five months ago, Phil had celebrated his thirtieth year in the brokerage industry and his twenty-first year with Stuart & Co. Although he truly enjoyed being a manager and working with