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Clearion Software: Sales Management Presented by Group 8

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Page 1: Clearion Software v1 Group8

Clearion Software: Sales Management

Presented by Group 8

Page 2: Clearion Software v1 Group8

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Agenda

Overview Questions Key Take Aways

Page 3: Clearion Software v1 Group8

Overview

3

Clearion Software founded in 1996 was a software solution provider for large enterprises and government

Clearion was a market leader in SLA niche market with a little direct competition

Market opportunity in this segment existed only by scaling the sales organization and having a first mover advantage

The protagonist of the case is Mark Jacoby, who is the VP of the Americas sales organization.

After missing his quota for the first time in his career at Clearion, he needed to revaluate his strategies for setting quotas, allocating headcount, and assigning territories

Jacoby proposed a new model called a unit size model in which headcounts were treated as units and sales managers accountable for activities like shared resources, costs

Page 4: Clearion Software v1 Group8

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1) How equitable and sensible were the specific headcount and quota allocations given out by Jacoby in January 2006?

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Which region would likely yield the most profitable investment of headcount in H1 2006: east, west, federal, or Latin America?

Year East West Latin America Federal

Quota H2 2005 (Rev $ in mn)

32 39.6 2.5 7.0

Quota 2006 (Rev $ in mn)

38.2 45.1 2.8 6.3

% shortfall or surplus in 2005

-15% 20% -10% -19%

% growth Quota 19% 14% 14% -10%

Headcount H2 2005 200 214 19 64

Headcount H2 2006 220 242 24 72

% Headcount Growth

10% 13% 27% 13%

E

ast In spite of

East not achieving 2005 targets; highest increment in quota for 2006 + least increment in headcount

W

est Even though

they had achieved 20% surplus over their quota, they also had a very high headcount.

West had utilized maximum shared resources

L

atin

A

me

rica

Headcount increased by highest % growth

In spite of shortfall, Quota also increased

F

ed

era

l Quota reduced by 10% and headcount increased by 13 %

West

Federal

Latin America

East

Most Profitable investment of

headcount

Revenues/UnitRegion 2005

Achieved2006

Targets

West 0.19 0.19

East 0.16 0.17

Latin America

0.13 0.12

Federal 0.11 0.09

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Should the east and west regions be equally profitable (i.e., achieve the same revenues per unit)?

Id

eal

scen

ario

East –west equally profitable

Targeting same customer Profile

E

ast :

As-

Is

East territory was re divided. Sales persons would be de motivated

Larger Quota with smaller territory

East had not met their targets. Their quota was further increased and least headcount growth.

Already difficult goal made even more difficult

W

est:

As-

Is

Surplus over targets in H2 2005. But were the H2 2005 targets were correct? Did the West region have more potential than targets actually set?

West utilized maximum shared resources. More experience sales persons selling for West.

As per current allocations, east and west will not be equally profitable. There is motivation

issue here and clear unfairness in allocation of quotas and headcounts.

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Force-rank Jacoby, Garton, Hall, Cheng, Chapas, and Dreyer in order of their likelihood to achieve their target, from 1 (most likely to achieve goal) to 6 (least likely to achieve goal).

Rank Manager

1 West: Hall

2 America: Jacoby

3 Inside Sales: Dreyer

4 Federal: Chapas

5 Latin America: Cheng

6 East: Garton

Key Issues

If quotas are imposed on your salespeople without an explanation of how they were developed and defined,

the result could be resistance

Don’t penalize successful sales people by pushing their quota out of reach;

they may retaliate by selling less

Page 8: Clearion Software v1 Group8

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How equitable and sensible were the specific headcount and quota allocations given out by Jacoby in January 2006?

Not Equitable and Sensible

What was needed?

• Focus on what is achievable with reasonable effort

• Look at the territories and determine the areas that have the best opportunity to succeed

• Logical quota based on research and fact (Geography, historical achievement, market research, competitors’ actual sales, etc.)

• Consider ‘stretch goals’ - additional bonuses, incentives

• Create culture of discipline to drive consistent behavior year-round

• Understand that everyone has different levels of drive, ambition, motivation

Page 9: Clearion Software v1 Group8

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Can Jacoby’s model for allocating headcount and quotas equitably account for realistic new hire productivity levels and still accelerate hiring times?

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Can Jacoby’s model for allocating headcount and quotas equitably account for realistic new hire productivity levels and still accelerate hiring times?

• Allocating Headcount and Quotas equitably increases pressure on New Hires

• New Hires should initially be assessed on Activity based outputs(Hiring CAMs was expensive)

• Hiring decisions ought to be well in advance and at corporate level based on the company strategy for the next Half/Year and external conditions

• Headcount based quote might decease the hiring times and make managers accountable for the Hiring process

• However, it might result in a sub-standard sales force

Hiring needs to be centrally controlled in due consultation with Regions

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Should quotas be based on profitability (and not revenues) if managers will be judged on their contributions to profitability?

Quotas should be based on both Top line & Bottom line

• Revenues• No. of Customers(Market Reach)

Top Line

• Net Profits• Maintaining healthy PV RatioBottom Line

1.Evaluate(Appraising) 2.Control( Expense,

Profitability) 3.Plan(Sales Plan, Forecast)

Sales Quota

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Developing a Sales Quota-Current Scenario

Establish parameters for

developing quotas

Add a growth expectation

Adapt the quotas to each

sales rep

Adapt quotas to market

conditions and company

revenue plan

Get buy-in from your sales team

The quota setting process was subjective instead it should have been based on territory analysis, lifecycles

Challenging but realistic in line with ‘SMART’ format but it was not the case for east region

Carryover sales was not used and make mangers accountable to SEs and TSMs

Jacoby was placed n an adversarial situation and managers had no incentive to work collaboratively

Page 13: Clearion Software v1 Group8

Headcount allocation

• The shared resources should be adjusted in accordance with the sales targets of the relationship managers

• Penalties to be imposed for excessive use of resources• Focus on efficiency when accounting for compensation• Carryover sales to be accounted• Central hiring team after the quotas have been set will improve the time lag 13

M

etr

ics Current:

Salesperson capability based

To be: Gross Contribution Margin

D

ata

V

iew

s Currently: Growth

To be: Target/Goal to fair a fair relative valuation and consistency

F

ocu

s Currently: Market Segment

To be: Product and aligned with company’s goals to remove inefficiencies

T

imin

g Currently: Semi annually

To be: Annually so that forecast includes carryover sales to address growing needs

Page 14: Clearion Software v1 Group8

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What areas, if any, of Jacoby.s model and processes for allocating headcount and quotas needed to be adjusted?

Page 15: Clearion Software v1 Group8

New Model Adjusted Model

15

Optimize for profitability

Improve understanding of spending allocations

Merge decisions about headcount and quota

allocations Empower managers to participate in the decision

process

Accelerate hiring times

Make managers assume the cost of TSMs and SEs

Selling budget to be enforced to build in efficiencies and reduce costs instead of

unitization method

Exhaustive Pipeline analysis

Aggressive sizing strategy was not in line the profits and revenues because

although their was a dip in the target for Federal region the headcount was

actually increased Carryover Sales to be accounted for: Quantitative method of forecasting that

takes into account cyclical changes, seasonal variations and trends or long

term changes Separate hiring agency that collaborates with the team of Davitian and based on the

quotas assign an equitable mix of TSEs, SMs and CAMs(to avoid an all CAM

organisation

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Assume for the moment that Jacoby believes that his sales organization would be most efficient at roughly the fixed ratio of one CAM to one TSM and one SE. What do you think of his new policy of giving regional managers the power to spend units in any manner they choose? How would you amend, if at all?

Page 17: Clearion Software v1 Group8

Power to regional managers to spend units in any manner they choose

Fundamental

Issue:

Assigning SE and TSM

1 unit

each

• Can’t quantify the extent an SE or TSM are used by a region

• More dominating and experienced regional manager extract more from TSM and SE resources e.g. West Region

Power to regional

managers to spen

d units will

result in

• More focus on CAMs• More Productive• Quota attached to CAMs and not to SE and TSM

• Underutilization of SE and TSM

Page 18: Clearion Software v1 Group8

Suggestions

Allocate SE and TSM’s Head counts in proportion of their region wise utilization

A new Sales person should not have the same head count as an old sales person in the same role

Account reallocation in case of territory redesign should reflect in the Quota setting

Page 19: Clearion Software v1 Group8

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Jacoby received a $92 million goal from Davitian representing the Americas share of the overall corporate goal. The case does not provide any information as to how that corporate goal was established. Who do you think should be involved, and what processes should be employed in this goal setting? What are the issues that a company should consider in establishing the corporate sales goal? For each of the issues, how does this affect the various constituencies?

Page 20: Clearion Software v1 Group8

Who do you think should be involved, and what processes should be employed in this goal setting?

Corporate Team

Colin Davitian,

SVP, Worldwide

sales

Marc Jacoby VP Americas

Director, East Region

Director, West Region

Director, Latin

America

Director, Federal

Director, Inside Sales

SVP should explain how the assigned corporate goal aligns with the overall

financial goals of the company.

VP should present the sales potential of his region on the basis of proper feedback from his sales managers.

This facilitates the VP to negotiate with SVP and justify his sales quotas convincingly to his subordinate sales

managers

Balance Top down approach with bottom-up approach based on

ground realities

Page 21: Clearion Software v1 Group8

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What are the issues that a company should consider in establishing the corporate sales goal? For each of the issues, how does this affect the various constituencies?

• Historical trends• Last year’s revenue• Territory analysis

Establish Parameters

• Realistic• Challenging

Add a growth

expectation

• Assigned job• Market potential• Competition

Adapt the quotas to

each sales rep

• Over assignment Add Quotas

to market conditions

• Explain quota• Involve sales people• Individual meeting

Get Buy in from Sales

Team

Better sales forecasting Helps understand Industry growth

Territory alignment

Better Sales force management Sales Activity Goals

Sets Manager’s Credibility

Differentiate type of sale Helps assign personal quotas

Motivation levels maintained Guide Behaviour

SMART goal establishment Compare reults

Page 22: Clearion Software v1 Group8

Key Takeaways

• Market conditions of region• Sales cycle

Regional Quotas should reflect Territorial conditions

• Cycle should start a few months before the Sales quotas are set

• More Centralized and structured hiring process Hiring

• Outline the process to set quotas• Involve sales people in the information gathering and

decision making process Sales Meetings

• Sandbagging- More direct involvement required by Jacoby

• Lobbying- Better understanding of the market scenario• Gaming- More analytical quota setting

Tackling challenges

Page 23: Clearion Software v1 Group8

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THANK YOU

Presented By:

Archana Ashar D007

Shivani Bhatia D014

JayKaran Singh Chadha D020

Deeksha Nigam D040

Shwetank Sharma D055