clearion software v1 group8
TRANSCRIPT
Clearion Software: Sales Management
Presented by Group 8
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Agenda
Overview Questions Key Take Aways
Overview
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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
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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
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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
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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
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
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What areas, if any, of Jacoby.s model and processes for allocating headcount and quotas needed to be adjusted?
New Model Adjusted Model
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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?
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
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
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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?
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
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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
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
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THANK YOU
Presented By:
Archana Ashar D007
Shivani Bhatia D014
JayKaran Singh Chadha D020
Deeksha Nigam D040
Shwetank Sharma D055