BUSINESS COMMUNICATION II LONG REPORT

INCREASING THE MOTIVATION OF SALES FORCE AT PHARMEVO (PVT.) LTD.

Ahsan Adil (9168) M. Usman Khan (9034) Omar Muhammad Khan (9809)
(Section A) Submitted To: Ms. Samra Javed Submission Date: 6th Decemeber2010

INCREASING THE MOTIVATION OF SALES FORCE AT PHARMEVO (PVT.) LTD.

Presented to Miss Samra Javed Course Instructor Business Communication II IoBM

Prepared by Ahsan Adil (9168) M. Usman Khan (9034) Omar Muhammad Khan (9809) Students

December 6, 2010

TABLE OF CONTENTS
Letter of Authorization................................................................................II Letter of Acknowledgement........................................................................III Letter of Transmittal....................................................................................IV Executive Summary......................................................................................1 Introduction..................................................................................................2 Background of the problem..........................................................................3 Research and findings...................................................................................3 Solutions and alternatives.............................................................................5 Establishing the criteria for selecting appropriate method..........................5 Value of each method...................................................................................6 Evaluating each method by criteria...............................................................6 Comparative analysis and costs of each method..........................................7 Conclusion.....................................................................................................7 Recommendation..........................................................................................8 Bibliography..................................................................................................9

LETTER OF AUTHORIZATION

December 06, 2010

Dear Readers, As students of BBA Honors; Ms. Samra Javed Course Instructor for Business Communication II has authorized us to prepare a recommendation report on the Declining Performance of Pharmevos Sales Force. The requirement is to conduct a primary and secondary research and to identify the various alternative solutions and give recommendations to solve that problem. This research is conducted by interviewing the sales force and the top management of the organization about the problem, various alternative solutions and also exploring about this problem through other sources.

The report is required to be submitted on December 06, 2010.

Sincerely,

Omer Mohammad Khan (9809) Ahsan Adil (9168) M. Usman Khan (9034)

LETTER OF ACKNOWLEDGEMENT
We would first like to thank the Almighty Allah for giving us the strength and endowing us with the privilege of completing our report on the subject of finding ways to improve the performance of the sales force. We are also extremely thankful to our mentor and guide Ms. Samra Javed whose help, suggestions and encouragement helped us during the time of research and in the making of this report. I have learnt a lot of new things during this report and found it to be very interesting. We would like to express our gratitude to all those who helped us in completing this project. We want to thank the management of Pharmevo for giving me the permission to commence the project, to do the essential research work and to use their organizational information. We would like to thank Mr. Saif ul Hassan (Senior Sales & Distribution Manager, Pharmevo) who gave us permission to go ahead with our project.

Thank you Omer Mohammad Khan (9809) Ahsan Adil (9168) M. Usman Khan (9034)

LETTER OF TRANSMITTAL

December 06, 2010

Ms. Samra Javed Professor, Business Communication Institute of Business Management

Dear Madam, Here is the report, authorized on one of the major problem faced by Pharmevo which is the declining sales performance of the sales force and in this report we come up with measures to improve the sales force performance by carrying out a research through face to face personal interviews. The report focuses on the problem that the Pharmevo has been facing fopr the last few years due to the decline in the performance of the sales force and studying the deep insights of the reasons as to why the sales force hasnt been performing up to the mark. It further studies the various alternatives that can be used to overcome this problem by evaluating each of them in terms of cost, effectiveness, time period and importance for the sales force. We hope that this report is helpful in helping Pharmevo overcome their problem. This report conveys our findings based on the research been conducted, and we have researched the topic to the best of our abilities.

Sincerely,

Omer Mohammad Khan (9809) Ahsan Adil (9168) M. Usman Khan (9034)

EXECUTIVE SUMMARY
PharmEvo is a successful pharmaceutical company that started the business as distributors but then started to manufacture the medicines itself. The company was doing well when recently they faced a gradual decline in the sales in the past two years. The company conducted an internal research and came up with the result that the sales have been hampered by the inefficient performance of the sales force. Our group went to the company and interviewed their Sales and HR manager as well as few sales personals to gather the first hand knowledge so as to come up with the recommendations that can be helpful in aiding the company to deal with the current situation. We conducted face-to-face interviews using convenient sampling. Our findings showed that indeed the research conducted by the company pointed out the correct factor which was affecting the sales i.e. the decline in the performance of the sales force. Some basic elements that were responsible were lack of training sessions, provision of non-monetary incentives to the frontline sales force and proper timely evaluation of the sales personals. To cope up with the situate we came up with the three alternatives (a) Outsourcing (b) Training and development (c) Motivation. Outsourcing included hiring another distributor for compensating the reduced sales. Training and Development would require constant measures for the skill development of the sales force that have to carry out on regular basis. Motivation includes providing the sales personals with non-monetary incentives, also on long term basis. A detailed analysis of the aforementioned alternatives is also provided with respect to the cost and the comparative analysis of the ways discussed. After the analysis we came to the conclusion that it would be in companies best interests to opt for Motivation to cope up with the current situation as the other two ways proved to be unpractical for the time being.

INTRODUCTION:
PharmEvo started the business as the distributors of the pharmaceuticals and consumer products in 1971 and then expanded the business by manufacturing baby care/dental products, pharmaceuticals, textile, food and others products. Currently the company holds group employees of 3000 people. Today PharmEvo is a team of approx. 600 people, offering wide range of formulations with an unpredicted growth of 40% over the years. Their focus is to offer solutions in major therapeutic categories through quality, ethical and biopharmaceutical products. PharmEvo factory is a state of the art purpose built building stretching over an area of approximately 40,000 Sq. meters. It is located at Port Qasim, a newly developed industrial area that is about 40 km north of downtown Karachi and at half an hour drive from the PharmEvo headOffice.

BACKGROUND OF THE PROBLEM: Decline in sales forces performance

Sales force of PharmEvo is underperforming for last 2 years. They have failed to meet the forecasted sales. The actual sales lagged behind the expected mark. The sales force is not either actively working for the attainment of their goals or they are de motivated and unsatisfied with their jobs. For clarifying the exact reason for the problem PharmEvo carried out a research that helped them to find out the core of the problem. The hired a research agency for this purpose who conducted a thorough research among the sales force personals and some members of the top management. The report findings that they came up with are given below. 1. 2. 3. 4. 5. 6. Lack of training Lack of single minded pursuit of sales excellence. Not exposed to best practices, including having a formal, structured sales process. Lack of accountability/no proper performance evaluation. Ineffective sales coaching No learning or study courses were taken by the sales force in past 6 months.

Although the basic factors that affects the sales persons are many there are some factors that are liable to change as per the change on the external factors such as motivation, skill-set, role perception etc. For increasing the motivation of the sales force we came up with the following set of solutions and alternative ways and evaluated each of those to see which of them is more prudent to be implemented at PharmEvo.

RESEARCH & FINDINGS:

In order to figure out the reasons for the declining performance of sales force, secondary research was carried out by reviewing the previous performance and records of the sales force and the historical data of the company to get a deep insight of the issues. However the most critical breakthrough was through the primary research, which included personal meetings and face to face interviews with the sales manager, HR manager and major sales force personal. Convenience sampling was used for the research process i.e. the persons who were available were interviewed briefly. Some of the primary questions that we asked from the concerned people were as follows: In your opinion do you think that the sales force has decreased morale? Has there been a timely scheduled performance evaluation of the sales personals? What is the basic criterion of providing incentives/bonuses/commissions to the sales personals?

Is there any timely training sessions for the old sales personals? Have your sales force attend any workshops and/or seminars regarding the skill development of the respective field? Do you think that management has provided you with enough facilities to carry out your routine tasks? Apart from sales commission provided to the sales personals, what other ways you follow to motivate your sales force? What were the factors that lead you to conclude that declining sales are primarily the result of inefficient sales force?

Findings of the research process helped us out in evaluating and analysing the respondents answers and thus making a judgement and recommend: According to the manager whenever they are doing evaluation for the sales personals, they accepted that their main focus and concern is the current sales or units sold by a particular sales representative. Despite the fact that they should consider the previous records, increase or decreased in the performance, yearly contribution to the sales and other modern methods for the evaluation of the sales representative. The sales manager also said that there has been a general decrease in the targeted sales that a unit in charge of localities and they are ordering less quantities. Performance evaluation is done yearly and not all the sales personals are evaluated; only the ones which hold and maintain the key accounts are evaluated regularly. As for the training only the new inductees go through training sessions while the old ones have not been a part of any training sessions. It was also the same scenario for workshops and seminars. We were also told that apart from the monetary benefits there arent any significant factors that the management uses for sales personals while upper management and senior sales personals do get non-monetary incentives. The sales personals expressed slight discontent feelings regarding the facilities provided by the management and the awarding of incentives. The sales manager also justified his concerns about the sales personals by pointing out the fact there their whole industry uses a very limited marketing and thus the flux of sales are chiefly dependent upon the sales force that a particular company holds, its not merely sales force they are holding, it is their human capital which in their opinion were not performing up to the optimum level.

SOLUTONS AND ALTERNATIVES:

In an effort to improve the sales force performance and achieve the forecasted expected sales. Pharmevo will have to both fire the existing sales force and outsource a new one completely through independent distribution channel. This will reduce cost and be less costly, and at least better than relying on a sales force that has let the company down for the last 2 years. Selecting a well reputed distribution channel would be a good idea. The other option could be to train the existing sales force through various training and development programs, seminars and workshops. This would train the existing sales force to perform better and ways to achieve the forecasted sales. Although this will be a costly procedure but if it is successful then its going to be very helpful for Pharmevo in the long run. The third option could be to motivate the sales force by various monetary and non-monetary incentives; this will keep the sales force satisfied with their jobs and as a result their performance will improve and they will work more effectively and efficiently in order to achieve the expected forecasted sales. As motivation is the key for the employees to work hard and perform well.

ESTABLISHING CRITERIA FOR SELECTING THE APPROPRAITE METHOD:

To choose from the three methods, here are the three groups of criteria we used in evaluating the three methods: 1. Costs- include the whole cost associated with the method and the costs that will have to be incurred for the continuation of the process. Will the cost incurred be worth the return generated? 2. Effectiveness-how effective will be each method in improving the sales force performance? What are the probability of success and the chances of the method being productive? How will it benefit the company both in the long run and in the short run as well? 3. Time span required- the amount of time taken for each method? The time span, will it take a long time or very short time? Does the company have enough time to forgo the method?

VALUE OF EACH METHOD:

To asses and evaluate the value of each method. We conducted secondary research from Companys past records to see the course of action taken in the past in similar circumstances, to measure the effectiveness. We also consulted the sales force personally to better understand the reasons as to why they were not able to achieve the forecasted sales.

EVALUATING EACH METHOD BY CRITERIA:

Each method was evaluated using the following criteria: Criteria Outsourcing Costly Long run benefit Short run benefit Finance department concern Yes Yes No Yes Method Training & Development Yes No Yes Yes

Motivation No Yes Yes No

Human Resource department Yes Yes Yes concern Probability of effectiveness 50% 70% 90% Sales force interest No Somewhat Yes Findings of research study No Yes Yes The above table evaluates each method with different criteria and areas of concern for the company. The evaluation suggests that motivation is the least costly compared to outsourcing and training and development which are both expensive. In terms of long run benefits both outsourcing and motivation are aimed at providing long run benefits to the company whereas training and development only provides short term benefits and outsourcing cannot be beneficial in the short run for the company. Both outsourcing and training and development are an area of great concern for the finance department in terms of the huge costs associated with them. Since the HR department has to deal with all the 3 methods (whether it is outsourcing, training and development or motivation) because all the three methods are related to the tasks of the Human Resource department. Motivation has the highest probability of effectiveness (90%), so greater chances of achieving the desired results compared to outsourcing and training and development (50% and 70%) respectively. The most important criteria which deals with the sales force is that, of course the sales force will retaliate through labor unions if outsourcing is done, because no employee would like to lose his/her job. Training and development programs are of somewhat interest for the sales force as it gives them the opportunity to learn in excel in their careers in the long run. However motivation is the method that is of greatest interest for the sales force as it benefits them directly whether it is in the form of paid leaves, extra pay, incentives, bonuses, commission or fringe benefits.

COMPARATIVE EVALUATION AND COSTS OF EACH METHOD:

The costs associated with each method are different; The cost for outsourcing the distribution channel is comprised of both firing cost for every salesperson along with the cost associated to be paid to the distribution channel. The firing cost per salesperson will be Rs. 50,000 for a low-level sales person who has served the company for less than 5 years, comprising of the provident fund. Those who have served the company for more than 10 years or the Sales force manager their firing costs will range from Rs.100,000Rs.200,000, which will include the gratuity, provident fund and compensation benefits. The cost for hiring the best distribution channel (outsourcing) that is the Global Distributors is 10% of the sales achieved. The cost for the training and development include both off-site and on-site single-day workshop sessions programs and is Rs.70, 000 for each session in a single day along with an additional fee of Rs.1,000 for each participant. The cost for the motivation of staff varies widely according to the monetary or non-monetary plan for motivation selected by the companys human resource department. The motivation plan would include these benefits to be provided continuously, not just for an initial or a specific period, but over a long period of time.

CONCLUSION:
The cost of outsourcing is very high and it also does not give a surety as to whether the new distribution channel would be able to perform better than the sales force or not. Although Global distributors are the best distributor company but the method is just too costly to take a risk. The cost for firing each sales force is very high and will be paid to all the salespeople at the same time i.e. at the time of firing, so this would be a very heavy amount that will cause some serious problems for the finance department to manage. The cost of keeping the sales force motivated is although low but it needs to be carried out for an indefinite period as a result the company will have to keep on paying this either in the form of money or other benefits. Comparatively keeping the sales force has the lowest cost. It also helps the company to evaluate the performance of the sales force as to whether the motivation is effective to improve the performance or not. This will also help the sales force to work more effectively and efficiently, by being satisfied with their jobs and focusing more on work, thereby helping Pharmevo achieve its sales targets.

RECOMMENDATION:
Therefore we recommend that Pharmevo adopt the method of keeping the sales force motivated to improve the performance of sales force and achieved the expected sales forecast and targets. To keep the sales force motivated PharmEvo have to conduct proper evaluation thus they can appraise the sales persons accordingly. As stated in Evaluating sales force: Overview the concerned person involved in appraising and evaluating the sales force can find the qualitative and quantitative criteria of great help. Qualitative criteria include sales skills, territory management skills, personality traits, etc. The quantitative factors include the sales volume, average calls per day, sales orders, etc. Quantitative criteria are those aspects that measure the sales performance in terms of the end results whereas qualitative criteria involve all those activities that the sale person does to achieve the end results.

BIBLIOGRAPHY

Sales and distribution management, Evaluating sales force performance: Overviwe, viewed 4 December 2010,
http://www.icmrindia.org/courseware/Sales%20and%20Distribution%20Management1/S SDM16.htm PharmEvo, viewed 4 December 2010, http://pharmevo.biz/ Mr. Saif-ul-Hasan, Senior Manager, Sales Support & Distribution