CLEARION SOFTWARE

-GROUP 3

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

In preparing your response, please consider each of the following:

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

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

3.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).

Q -1

Need for accountability in directors

Whether team had become inefficient and poorly managed

Challenges- Sandbagging, Lobbying, Gaming

Headcount investments not used to address immediate needs-time lag in hiring

High demand and hoarding of SE and TSMs

No penalty for excessive use of resources

Slow sales cycle in Federal region but expected benefits in long term

Things to consider

• Increase headcount; not decrease quota

• Sales force tripled in past 24 months

• Targeted Productivity also reduced

• Smallest shortfall• Comparable quota

setting • Headcount by 5 units• Should have improved

productivity

• Most promising region• Allocation same as

Jacoby• Could have reduced

headcount and tried to raise productivity

• Had set the previous targets high

• Allocations comparable to West region H2 2005

• Expectations for performance by Mid-Atlantic region

EAST WEST

FEDERALLATIN AMERICA

Allocation in H1 2006

Most profits to the business will depend on oThe sales team mixoTargets assigned to the sales managers

Highest possibility for Federal Region to achieve target since its lowered

In terms of revenue we can expect highest contribution from West owing to past performance , capabilities of the

director of the region and headcount allocation

East & West Regions and profitability

Chances are that East should exceed West in terms of profitability

Formation of Mid-Atlantic region can help in focused strategies and

reap maximum benefits

Data about the dynamics of two regions would throw more light

Should be concerned about the lobbying of Garton

Jacoby 5Garton,

4Hall 3Cheng 2Chapas

1Dreyer 6

Predicted Rankings of achieving targets

Limitation: Info about Latin America Region and the details about the Inside Sales is missing

Reasons: Since the targets of Federal is lowered and Latin America not drastically increased from H2-2005 allocation, chances of achievement is moreHall has high chances of achieving target but the scenario could be tight since the revenue expected is high

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

Q-2

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

conditions

Allocating Headcount and Quotas equitably increases

pressure on New Hires

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

expensive)

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

Q-3

Impact on Stakeholders

Stakeholder Role Impact

Sales Force (CAM,TSM,SE,Field Reps etc)

Closes the deal, gets the sales/revenue

Increase in Rev through large accounts -> large bonuses -> decreasing trend of profitability -> reduce quotas? Increase quotas -> morale of sales rep?

Increase in Rev through several small accounts -> lower bonuses -> increasing trend of profitability -> increase quotas? -> realistic?

Thus, indirect alignment of goals could create complications

Sales Managers of regions (East, West, Latin America etc)

Manages accounts in the region

Challenge & complexity of forecasting cost of sales -> Need to calculate trends in cost of (say) a CAM for x% increase in rev -> Compensation/Bonuses have a wide range

Regional Sales VPs

Responsibility of geographic territories

Receive Quota from SVP of worldwide sales based on revenue -> Need to achieve increase in rev based on increase in budget for resources

(Case Fact: Compensation was performance based & wide-variations were possible)

Productivity – a useful metric(Case Fact: Compensation was performance based & wide-variations were

possible)• Simple approach – converting headcounts into number of units

• Refer Mentioned Case Fact – thus the weightage is different, inherits cost of sales

• This Metric gives visibility about the bottom line

• Objective to the extent of factors considered for assigning weightage

• Facilitates Comparison – Exhibit 5 : East v/s West -> Rev up by 23.75% by increase of 7% in headcount units

•Beneficial to keep a cap on increase in Headcount Units along with assigned Quotas

• Field Mgr – (Highest) 2.5, avg of 5 Field Mgr in regions, fixed component of salary must be high

• CAM – actual sales , costly (2 units), bonuses/salary, has defined quotas

• TSM, SE – Less than TSM (1 unit), to avoid hoarding of resources, no quotas

• Managers like CSM, CSE, TSM & SE manager - similar units in range of 1 – 1.5, managerial role

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

Q-4

Understand sales cycle of

regions

Comparison of East & West regions to be

done

Consider the cost factors

Collaborate for goal setting and forecast

Achieve transparency

in pipeline

Monitor allocations

within regions

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?

Q-5

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

Q-6

VP along with SVP should mutually decide the corporate goal.

Process◦ VP should present the sales potential of his region

on the basis of proper feedback from his sales managers.

◦ SVP should explain how the assigned corporate goal aligns with the overall financial goals of the company.

◦ This facilitates the VP to justify his sales quotas convincingly to his subordinate sales managers

Top-down approach of goal setting based on ambition should be balanced with bottom-up approach based on ground business realities

to arrive at final corporate goals.

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?

Issue Effect

Industry conditions Allows top management to set ‘Realistic’ goals

Business growth in the regionGives top management ‘benchmarking’ and ‘measurement’ indices

Nature of product or serviceDefines target market, will eventually lead to ‘Effective’ sales effort by the sales representatives

- Nature of Customer base - Past Sales

Helps sales managers set sales quotas

Size of the sales organization Limits the ability of the company to ‘Scale’ up

The degree of sales force participation

Higher participation helps improve sales force ‘Morale’

THANK YOU