Chemical Bank Case Study

Executive Summary

The decline in sales and profitability of Due Bills will be improved by addressing fee allocation between divisions, altering employee-level incentive structures, and relocating the required administrative functions in order to minimize processing costs.

In particular, Personal and Banking Services will be credited the full customer transaction fee of $25/Due Bill to motivate Branch personnel at the point of contact (i.e., One Stop Shop). The Metro employees' incentive system will be altered to include Due Bills and rectify other inefficiencies, resulting in increased Due Bill sales volume. Treasury will benefit from increased Due Bill volume, albeit they will initially experience profit decrease from the fee shift.

The Due Bill administrative processing functions will be moved in their entirety to Treasury, where synergies with existing Treasury functions will permit a substantial savings. These savings will improve Metro profitability and will not affect Treasury profits. Overall corporate profits will improve.

Finally, two long-term suggestions for future investigation are offered for improving Treasury's incentive system, and consolidating Personal and Banking Service's consumer level investment sales operations.

Discussion

The overall goal of these recommendations is two both increase Due Bill sales, and improve their profitability in the face of falling interest rates. The issues that must be addressed to achieve this are:

1. Metro currently has a disincentive to sell Due Bills as they currently lose $26.50 on each sale.

2. Metro's current employee incentive program does not include incentives for the sale of Due Bills. As well, incentives for the sale of SuperSaver accounts reduce Treasury profits and lay outside the main incentive system.

3. While SuperSaver accounts are generally restricted from receiving funds from other Chemical deposits, customers are currently allowed to move funds from mature Due...