GYC (Grow Your Capital)
Financial Advisory Pte. Ltd. is a leading provider of financial services in
Singapore. GYC was started in the late 1980s by Goh Yang Chye, and has now
grown into a one-stop financial services center for both companies and
individuals.
GYC has a flexible reward system
designed specifically for its four types of staff: the support staff, business
development staff, partners and practices, and portfolio executives. The
support staff receive monthly salaries and yearly bonuses, with their bonuses
being calculated based on three factors: their personal performance, the company's
performance, and the industry's performance. The business development staff are
those who are responsible for servicing the clients, as well as securing
business for the company. They are paid a basic monthly salary, as well as
"on-target earnings" that are paid based on a percentage of the
revenue from new clients that they bring into the company beyond a certain
agreed-upon target. Business development staff also receive discretionary
bonuses, which are paid based on a percentage of any recurring fees GYC
receives from the clients that they bring to the company.
GYC's partners are experienced
individuals, who bring with them a pool of clients. These individuals are in
great demand in the financial services industry and often do not wish to be
full-time employees of any firm. Upon joining GYC as partners, they receive a
percentage of the revenue they help secure for GYC. Practices are similar to
partners, except that they have grouped themselves into teams. Some practices
are formed internally by partners who joined GYC as individuals. Other
practices join GYC as preexisting teams. Like partners, practices are paid a
percentage of the money they make for GYC.
Portfolio executives are
independent advisors or consultants to GYC. They provide professional advice to
GYC on various issues. They are paid regular monthly fees called retainers, and
are managed by predefined deliverables. This arrangement works well for GYC as
it is able to get good advice and insights from these portfolio executives
without having to pay them on a full-time basis. It also ensures that they maintain
objectivity in the advice they give to the company.
GYC's reward system also
includes nonmonetary benefits like flex- hours and shorter working days in
order to attract and retain selected talented staff. This is because some of
the staff value flexibility more than financial rewards. There is a need to
fine-tune the reward system at GYC. For example, the income of some of the
business development staff at GYC can be very significant in good years. Past
experience indicates that business development staff are prone to leaving the
company after receiving the large windfall. Further, they may actually not want
all the money to be paid out in that year because they will be taxed very
highly. Another challenge that GYC faces is that there is a tendency for
business development staff to take undue risks when their rewards are directly
linked to the revenue they bring to the company.
Questions
12-22. How do GYC's remuneration packages relate to the various motivation theories?
12-23. What are strengths and weaknesses of GYC's remuneration packages?
12-24. Portfolio executives are paid based on retainer fees. Is
this effective? What else can be done to reward portfolio executives?
12-25. What advice would you give to Goh Yang Chye to overcome the remuneration challenges GYC faces?
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