CASE ANALYSIS ON:

Eureka Forbes Ltd. Managing the Selling Effort

1. Critically examine the role of the EuroChamp at Eureka Forbes

Limited (EFL) in the context of EFLs business and business strategy. Answer:
Let us first have a brief look at the EFLs business and its business strategy: EFLs business: EFL was established in1982 as a joint venture between the Forbes (India) Group and Electrolux of Sweden. Euroclean vacuum cleaner Aquaguard vacuum were some of the leading products of the company. The company offers broad range of industrial cleaning products targeted for the health and safety of consumers and their homes reflect a corporate vision that embraced the customer as a Friend for life. One of the companys most recent model was Euroclean Bullet which incorporated Deep Cleaning+ as a technology designed for cleaning delicate electronics as well as drapes and carpets and the like. EFLs business strategy:

 The business strategy of the company deals with using the direct sales approach without the involvement of the middlemen. Also the company followed performance linked pay system. It involves targeting customers at home in order to enhance extensive presentation, demonstration and customer objection handling. EuroChamp : EFL recruited primarily young men in their early 20s from lower middle class homes. These recruits were expected to be able to read and write effectively in both English and local language. EuroChamp s were basically customer sales specialists who have the responsibility of front line sales representative. Their commission was linked to the performance they did. Critical Evaluation: The EuroChamps task was result oriented. However no importance was given to how they achieved this task. So the end was more important but the means to achieve the end are not important. Due to the direct sales approach of the company and performance linked pay system being followed the EuroChamps focused just on targets. The selection of the EuroChamps is not based on the academic criteria. It is mainly based on the subjective judgments of the people. Due to this it may be possible that efficient EuroChamps may not be recruited since their recruitment is purely judgmental. Also, the training which they received was not adequate. Due to which it was observed that the EuroChamps ignored the art of responding to customer objections. Lack of clarity and lack of communication of companys expectations led to the improper and inefficient performance of the EuroChamps. The commission of the company was related to the sales the EuroChamps made and the targets they achieve. Hence if there is no sale happening, EuroChamps prefer to exit very quickly.

 Poaching takes place in the company. The focus is on buying talent from other leading organizations by offering lucrative offerings. Thus raiding/poaching is seen a lot in the company because result is more important than the means of achieving the same. Less attention is given by the EuroChamps on relationship building. The job of the EuroChamps is a high pressure job. It is a high pressure job in terms of the physical, psychological and economical conditions involved in it. The psychological pressure of the job makes it very important for the company to focus just on results and targets more than anything else. This phenomenon is thus cyclical as too much focus on results leads to psychological pressure and too much focus on psychological aspects leads to more result oriented approach.

2. Describe the designs of the old and the new incentive and compensation plans for the EuroChamps. Discuss the strengths and limitations of both these schemes keeping in mind the expectations that Goklaney had from the field force. Answer:
In 1980s Eureka Forbes had launched a number of new products that were new in the market. These products were intended to bring in a better quality of life in Indian homes, however the need for these products were not felt among the potential customers, hence the customers first need to be convinced of the importance of these products i.e. selling the concept and then be persuaded to buy the product. Selling the concepts to customers depended on extensive presentations, demonstrations and customer objection handling, hence it needed considerable human interaction, thus the EuroChamps were expected not only to sell the product, but before that build a good customer relationship, sell the new concept to the customer and then enter into a sale. Thus Mr. Goklaney expected his EuroChamps to not only focus on sales, but also on good customers relationships. The Old Compensation Scheme

The base Compensation structure of a EuroChamp included salary, rent allowance, leave travel concession, holiday bonus, medical reimbursement and travel reimbursement. Commissions were earned on the basis of sales volume. A EuroChamp could earn as much as two thirds of his monthly earnings in the form of commissions. In a month a EuroChamp was required to give 60 demos, do a minimum sale of 10 and have an average of 50 customer contacts. Thus a lot of emphasis was laid in number of sales done and earning commissions accordingly. Other forms of recognition for high achievers included membership in Achievers club, Silver Circle Club, which were platforms to promote excellence of performance. The high performers in these clubs were given full expense paid holidays in various international destinations. Strength of the Current System Highly result oriented System, where commissions were directly impacted by the number of sales done. Direct contact with customer is possible as there is no middle line of distribution. There is no limit to the commission one can earn, as it is dependent on the number of products sold. Transparent system of compensation, where performance of each employee and the commission earned is known. Recognition of high achievers through membership in exclusive clubs with awards and paid holidays in attractive destinations. Compensation was directly related number of products sold. Limitations of the Current System Achieving maximum sale was objective, how it is achieved was not important. The main concern of the employee was to just complete the task than understanding the addressing the concerns of customers and winning their confidence.

 No importance of good customer relation was seen among the employees, they were interested only in making a sales deal. If a Sales representative is not able to sell any product, he would not earn any incentive, hence his morale would go down and his performance would further deteriorate if he is not able to come up, and this will lead him to quit the organization.

The New Compensation System Instead of compensating the employees solely on the basis of sales volume, the new system would award points for successful completion of each stage of the selling process, and link compensation to the points scored. Bigger goals were divided into smaller targets so that the EuroChamps motivation and Spirit is kept high. Daily target setting and recognition by superiors was done. Strengths of the New System Clarity of the various processes of sale and how each stage has point to be earned. Every stage was important so there would be no usage of unfair means, like poaching other employees customers and regions. Daily recognition of performance would put a control on low performers and hence would lead to low attrition. Productivity of low performers would be improved. Number of daily demonstration would increase. Customer engagement time would be enhanced. Morale and Sprit of the sales team would be improved. Sales productivity and overall sales quality will improve. Limitations of the New System
EuroChamps focus of making sales would get shifted to earning more points,

with no end result. Non performers with substantial points, but without any actual sale would get rewarded.
Daily filling of activity report forms by EuroChamps was time consuming. Daily monitoring and tallying the point of EuroChamps performance required

considerable time in paper work and also training in using the spreadsheet of the computerized reporting system.

 No method to prevent the EuroChamps from overrating their efforts in order to

gain more points and earn more money.

3. Would you suggest that Goklaney go ahead and implement this

scheme as it is?

Substantiate your answer by referring to the

relevant case facts and your inferences there from. Answer:

Let us first have a brief look at the new scheme: The new scheme was named: Bettering the Best. As per the new scheme the focus shifted from compensating based on the end result to the entire process of reaching there i.e. not only the end but the means adopted for the end is also necessary. (See Exhibit 1) Daily recognition is introduced; a EuroChamp can be now recognized by his superior at least 10 times a day. A monthly reward of Rs.500 can be earned by the top performing employee in their departments. Suggestions: In my view it would not be wise to implement this scheme as it is. Some reforms need to be made in it and then implemented. No doubt the intention behind this scheme is to motivate all the EuroChamps, including the low performers and lift their spirits, however due to some of the following reasons there is some room for improvement: 1. There is a scope for getting compensated equally even when the EuroChamps call has not been converted to sale. This way a EuroChamp with say point 1000 having 2 sales (600 points each) and a EuroChamp with same 1000 points but only 1 sale (300 points) would be compensated the same and sense of inequality would creep in. 7

2. Because of the above mentioned discrepancy non-performers would earn points but there would be no result. For e.g. there is a possibility of someone earning 1000 points solely on the basis of door knock, demo and attending meetings. 3. To keep track of every EuroChamp would mean too much time consuming and tedious work for the sales manager. The sales managers major time would go in this which would affect their performance. And this would give rise to inflationary risk of self-reporting. 4. A trade-off would always exist between improving organizational performance (sales) and earning more points. However every cloud has a silver lining. If the organization succeeds in providing proper training to the EuroChamps and putting across its value system, it would not be very difficult to make the EuroChamps abide to their morale and keep them motivated to achieve the targeted sales through this new scheme. Exhibit 1: Bettering the Best plan point scheme Criteria Door Knock Appointment Service Request Demos Sale: Standard Reference Meeting Commercial Appointment Points 5 10 10 100 300 50 200 50 Daily Target 30 5 2 3 1 1 1 1

4. If Goklaney engaged you as a management consultant and referred the scheme to you to suggest a modification in the plan, what will be your suggestions? Why? How will these suggestions address the organization objectives in a better way than Goklaneys scheme? Answer:
The CEO of EFL, Mr. Suresh Goklaney must decide which changes to sales compensation systems would better motivate his sales reps and also improve their sales performance, as a result increasing revenues. He needs to decide whether sales force should be motivated by setting goals for the results or for the efforts themselves. Following key points should be taken into consideration for any further modification in Goklaneys scheme: Linking various stages of selling process to the compensation: Organization follows the slogan of Your friend for life for its salesmen. The proposed compensation plan truly allows them to adhere to this motto as compared to existing compensation system. Because rewarding only through sales volumes doesnt achieve that. While in the proposed plan, the EuroChamps achieved the points for different phases of the selling process like door knock, demo, attending meetings and purchase. So it served the multiple purposes of improving sales productivity, improving the spirit and morale of the sales team, improving overall quality of the sales. It might help to reduce current attrition rate of the organization which is one of the factors for revision of the compensation system. Consequently, it will serve companys business strategy of customer services. Probable solution: Financial rewards: Current financial rewards linked to the points system were too small to make any difference. Once the sales rep realizes how much effort he needs to put in before he got

something in return. Financial rewards should be linked for all stages separately. This would ensure the accountability for all the stages. Equality of opportunity: Changing demographics have made some territories more lucrative than others. Senior reps who claimed more popular territories or poached sales in areas assigned to new sales reps were a source of conflict and tension within EuroChamp ranks. In relation to commissions, the central issue in this regard is how sales territories or customer portfolios are determined. Here, carelessly drawn line on a map made a substantial difference to the sales potential of the territory and the compensation plan fall into disrepute. Not only that, the emphasis on sales volume had an impact that the EuroChamp who cant learn to sell doesnt get a commission. This individualistic approach led to customer dissatisfaction and also losing opportunities in the lucrative territories. Probable solution: Individual vs. Team: The key question is the extent to which the salespeople are dependent on each other to achieve success. Currently, every EuroChamp is assigned his own territory. Organization can think of widening the territories and putting more number of EuroChamps in these territories. This would require coordination and cooperation for the salesmen to convey who is responsible for which customer base with senior managers in the loop to avoid the disputes. Here, the commission can be made team based in order to increase the involvement with other team members. These teams would have mix of senior and new EuroChamps to remove the issue of senior EuroChamps claiming on popular territories. Selling efforts of EuroChamps: It might be possible that one salesman has achieved more points in the preliminary stages of door knock, demo etc but he has earned less points for less sales. Another salesman has earned fewer points in preliminary stages but more points in terms of

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final selling. 2nd salesman is more beneficial to company as he performs to get more sales as compared to 1st salesman. More return on investment is for 2nd salesman. There is no solution suggested for such situation in proposed plan. Probable solution: EuroChamps sales and other stages proportion should be closely monitored by the senior managers and periodical review should be in place for the solution of this issue. Senior managers increased responsibilities: As per the proposed compensation plan, EuroChamps were required to get recognition from superiors 10 times per day. This makes the job tedious for the senior managers. This plan would face lot of resistance from these managers. Even few group leaders complained that monitoring EuroChamps on daily basis and tallying points adds to lot of paper work and consumer their time. While it was not possible to train the salespeople to use spreadsheet function of computerized reporting system. Probable solutions: 1. Leadership of senior managers: This plans success very well depends on the fact that managers show interest in daily responsibilities. It has multiple advantages. He would be able to closely monitor all the EuroChamps working under him. So he would definitely be in a better position to monitor the sales of EuroChamps on regular basis, their performance on daily basis, guide poor performer, and work on better customer relationships by giving tips to them for critical incidents. It would be easier for EuroChamps to handle the customers. If they are coached properly from respective managers, then it would come out to be effective step to increase the sales and also reduce the attrition.

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EuroChamps would also gain from learning they get through conversation with manager who has good field experience. So it would enhance their personality as a whole.

Some managers had opined that new system would shift EuroChamps focus from making sales to earning points and it might reward non-performers with substantial points but no-end results. It is a mammoth task to go in to details whether EuroChamp has put substantial selling efforts or not. This can be done through daily inspection or observation of senior managers.

Senior managers compensation should be closely linked with performance of the EuroChamps.

2. Training to senior managers: First, senior managers should be trained about how to make the tedious task of going through activity report forms by concentrating only on the essential observations. They should be taught as to how morale and performance of the EuroChamps can be increased by their active involvement with them on daily basis and how their role, accountability and initiative to get involved with the EuroChamps can be crucial to achieve the increased number of sales. Senior managers should also be explained about the purpose and intention of executing such initiative of reporting to them very clearly. If they would understand the greater impact, they would work harder towards involvement with salespeople. Expected outcomes: Employee retention: It would reduce attrition of EuroChamps with the involvement of seniors. And also it would increase job satisfaction. Senior manager involvement: It would correctly identify the minute obstacles in the selling process as manager is involved. It would reduce peer pressure as they are aware about daily progress of the EuroChamps. Sales volume: It would increase sales closure rates with proper tips from manager. As this was one of the issues raised for proposing the new plan.

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 Contribution: With better performance of the EuroChamps, companys sales revenues will also increase.

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