The Risk Assessment Report of Property Millionaires

Property Millionaires conducts seminars to teach their clients regarding how to invest in real estate market. The corporation also provides on-going mentoring services to its clients. The corporation attracts customers through its consultants who also take seminars with them and team clients how they can invest in real estate property to become millionaires. The purpose of this report is to evaluate the case of Property Millionaires to identify the key internal management challenges faced by the company which is likely to hinder its performance in the future. Robert Simons (1999) developed the risk assessment calculator which is a tool that can assist corporations in identifying their key internal weaknesses which hinders their performance. Evaluation of this tool assists the management in developing relevant strategies which can assist them in sustain the growth of the company even in adverse market conditions. This tool has categorised the internal factors which affect the operations of a company into three divisions which include growth, culture and information system. In this tool, points are given to companies on a scale of 1 to 5 where 5 is the highest point, and 1 is the lowest. Organisations which score between 9 and 20 are considered as safe. The score between 21 and 34 denotes that the corporations are in caution zone (Merson, 2016). Lastly, a score above 35 provides that the company is in danger zone. Following is the Risk Assessment Report of Property Millionaires by using the risk assessment calculator.

In fast-growing companies, there is substantial pressure on the management and employees to keep up with the growth of the company (Cappelli and Tavis, 2016). Employees operate under intense pressure to meet the deadlines or targets. The management often sets ambitious sales and profits goals which become difficult for the employees to achieve which leads to hindering the performance of the company (Groen, Wouters and Wilderom, 2012). Property Millionaires is growing rapidly due to effective performance of its employees, and the management is setting high targets without consulting with employees. George Kirzner provides that the performance of staff members is accountable for delivering strong financial performance in the company. It creates pressure on the management and employees to meet the set targets within the given deadline without which the company will find it difficult to sustain its growth in the market. Therefore, the company will receive 5 out of 5 points for the pressure of performance.

Pressure of Performance

The rate of expansion of a company has both positive and negative impact on its operations. Although a high rate of expansion assists the corporation in rapidly growing its operations and increasing its profitability; however, it also leads to overload which puts pressure on companies (Banalieva and Dhanaraj, 2013). Due to high work pressure, the employees are likely to sacrifice their quality in order to meet the set targets in the business. Property Millionaires has rapidly expanded its operations in different locations in Australia and hired over 100 employees. However, George provided that one of the key challenges faced by the company is that it is operating faster than its ability to hire and induct new staff members. Since the resources of the company are not able to meet the pressure of expansion, it received 5 out of 5 points.  

It is important that the corporations focus on hiring and retaining experienced employees in the company since they allow the company to sustain its performance even in adverse market conditions (Lofgren et al., 2012). George knows that the company is expanding quickly and it did not have the ability to hire or retain skilled and experienced staff members. The performance of the company is heavily dependent on the ability of the consultants to attract customers and convince them to invest in the real estate market. Therefore, the lack of experienced employees makes it difficult for the company to stay relevant in the adverse market conditions. The experienced employees build strong relationship with customers that ensure that they remain with the company and continue to visit its seminar. Therefore, the pressure to hire and retain inexperienced is high in Property Millionaires based on which it received 5 out of 5 points.

Due to intense competition, it has become difficult to remain relevant; therefore, they rely on innovation and risk taking approach to ensure that they change market requirements (Pines, Dvir and Sadeh, 2012). The corporations have to take calculated risks in the business to ensure that they remain relevant in changing market conditions. Innovation assists companies in finding what their customers want and using new and effective ways to conduct their business operations. However, innovation requires the company to become creative and take risks which provide them bigger rewards. Property Millionaires did not rely on innovation since it is using old techniques to conduct its operations. The management did not collect relevant data from regional managers other than sales revenue which makes it difficult for them to find out major factors which negatively reflect on the profitability of the company. The senior-level executives are unaware regarding market changes which make it challenging for the company to sustain its growth once the market demand or customer perception change. Therefore, the company will receive 5 out of 5 points in this criterion.

Rate of Expansion

The culture of a company is influenced by the executives’ resistance to bad news because it enables the company to form future strategies based on changing market conditions. If the executives did not prefer to hear bad news or they surround themselves with “yes” men, then it becomes difficult for them to realise the changes in the market which did not give them time to change their policies to remain relevant (Lines et al., 2015). The regional managers in Property Millionaires did not prefer to hear bad news from consultants. They have surrounded themselves with those consultants who only provide them good news. Due to this culture, the top level management is unaware of the market insight which might affect the company’s operations since they did not directly engage with the employees. It creates a negative work culture which will hinder the profitability of the company in upcoming years; therefore, the company receives 4 out of 5 points.

The internet competition is a key part of success of an organisation since it encourages employees to perform at their highest capacity. Employees are more likely to work with high productivity when they are competing with others; however, it also has many negative impacts on the company (Luft, 2016). A good example is increased conflicts between employees since they can rely on immoral tactics to beat their competition. The employees who did not perform well find it difficult to remain in the company since they did not receive support and appreciation from the management which increases employee attrition rate in the company (Siciliano, 2015). Property Millionaires has implemented policies which foster internal competition. The employees who perform better than others receive better perks which encourage others to perform better as well. However, it also leads to conflict between employees since they will do anything to be in the top position. It creates a negative working environment for new employees who are during the learning phase. It also creates pressure on those employees who are no performing better, and it discourages them since they did not receive any appreciation from the management for their work. Employees are also more likely to bring those customers in the company to meet their targets that did not have financial resources to invest in real estate sector which leads to decreasing profitability of the company. Therefore, the company receives 5 out of 5 points in this criterion.

Lack of Experienced Employees

The information system of companies should be capable enough to hand complexity and velocity of transactions to ensure that relevant information reaches the top level executives (Marshall, 2013). If the corporation did not implement effective means to handle the transactions, then it becomes difficult for the executives to collect market insight. The information system of Property Millionaires is affected by complex transactions rather than transactions with high velocity. The corporation requires experienced employees to understand such transactions to determine which customers are likely to join the seminar of the company. The management avoids collecting relevant data from the consultant, and the regional managers also share only sales revenue data. Therefore, the company is likely to face pressure to handle complex tasks in the future based on which it receives 4 out of 5 points.

Gaps in diagnostic performance

The management of a company has to focus on identifying the gaps in the diagnostic performance to ensure that they are prepared for changes in the market conditions (Karatepe, 2013). Identification of these gaps enables the management in implementing relevant policies to improve performance of employees which is crucial for them to remain relevant in the market (Anitha, 2014). The senior-level executives of Property Millionaires have not implemented policies for identifying gaps in diagnostic performance. The management did not collect relevant data from the regional manager regarding why some employees are not performing better, and they also did not engage with the consultants to understand their perspective regarding the matter. It creates pressure on the company and its employees to ensure that they sustain their performance with rapid expansion; therefore the company receives 3 out of 5 points.

The objective of decentralised decision making is to involve low and middle-level management in the decision-making process so that the senior level executives can use their experience and insights to develop better strategies (Rached, Bahroun and Campagne, 2016). The pros of decentralisation are efficient decision making, less burden on senior executives, motivated employees diversification, better control of operations and others (Thomas et al., 2016). However, there are many cons as well such as time-consuming process, lack of control in the hand of top executives, coordination problems, conflict between top and lower level management and others. Property Millionaires has centralised its decision making since the senior executives did not allow the lower management to contribute to the decision making. They did not take opinion of consultants who are the ones that connect with the customers. It makes it difficult for the management to be prepared regarding upcoming changes; therefore, the company receives 5 out of 5 points.

Lack of Innovation

Conclusion

Figure 1: Risk exposure result of Property Millionaires

(Source: By Author)

Property Millionaires received 41 points based on which the company is in the danger zone. The company is performing well in the market; however, the internal control problems are likely to hinder the progress of the company. The management is required to understand these internal risks in order to take action within a reasonable time to ensure that the company is able to sustain its expansion and profitability in the future.

Property Millionaires is facing many internal control related challenges which make it difficult for the company to sustain its growth in the future. The management should focus on addressing these challenges to improve the internal control system of the company. The company should slow down its expansion till the management is sure that they have enough experienced and skilled employees to effectively run their operations. Reducing the rate of expansion will remove pressure from the employees, and they are more likely to perform better. The company should provide a fixed base salary to its employees, and they should have the option to earn more by bringing more customers to the seminar. It will address the issue of a negative work culture where employees did not support each other. The corporation can establish a positive culture by promoting employee engagement programs and conducting meetings with them to understand their issues and resolve them. The information management system of the company should focus on increasing the quality of collecting and retaining complex transactions to understand the perspective of customers towards the services of the company. The management should include the consultants in the decision-making process since they can use their insights to learn about upcoming challenges and perception of customers. This will enable the company in ensuring that its growth is not affected by changes in the market and it is sustaining its profitability for a long period of time.

References

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