Clearion Software: Sales Management

Presented by Group 8

Agenda

Overview
Questions Key Take Aways

Overview
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

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

Which region would likely yield the most profitable investment of headcount in H1 2006: east, west, federal, or Latin America?
Year Quota H2 2005 (Rev $ in mn) Quota 2006 (Rev $ in mn) % shortfall or surplus in 2005 % growth Quota Headcount H2 2005 Headcount H2 2006 % Headcount Growth 32 38.2 -15% 19% 200 220 10% East West 39.6 45.1 20% 14% 214 242 13% Latin America 2.5 2.8 -10% 14% 19 24 27% Federal 7.0 6.3 -19% -10% 64 72 13%

Revenues/Unit
Region West East Latin America Federal 2005 Achieved 0.19 0.16 0.13 0.11 2006 Targets 0.19 0.17 0.12 0.09

Most Profitable investment of headcount

West Federal Latin America East

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Latin America

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

Even though they had achieved 20% surplus over their quota, they also had a very high headcount. West had utilized maximum shared resources

Headcount increased by highest % growth In spite of shortfall, Quota also increased

Federal

Quota reduced by 10% and headcount increased by 13 %

West

East

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

Ideal scenario

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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East : As-Is

West: As-Is

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 1 2 3 4 Manager West: Hall America: Jacoby Inside Sales: Dreyer Federal: Chapas

Key Issues
If quotas are imposed on your salespeople without an explanation of how they were developed and defined, the result could be resistance

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Latin America: Cheng

East: Garton

Dont penalize successful sales people by pushing their quota out of reach; they may retaliate by selling less

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

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

Not Equitable and Sensible

Create culture of discipline to drive consistent behavior yearround

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

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

Can Jacobys 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

Top Line

Revenues No. of Customers(Market Reach)

Bottom Line
Sales Quota

Net Profits Maintaining healthy PV Ratio

1.Evaluate(Appraising) 2.Control( Expense, Profitability) 3.Plan(Sales Plan, Forecast)

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Developing a Sales Quota-Current Scenario

The quota setting process was subjective instead it should have been based on territory analysis, lifecycles Establish parameters for developing quotas

Add a growth expectation Challenging but realistic in line with SMART format but it was not the case for east region

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

Adapt quotas to market conditions and company revenue plan

Adapt the quotas to each sales rep

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

Get buy-in from your sales team

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Headcount allocation
Current: Salesperson capability based To be: Gross Contribution Margin

Metrics

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

Currently: Market Segment To be: Product and aligned with companys goals to remove inefficiencies

Timing

Focus

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

Data Views

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?

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New Model
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

Adjusted Model
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?

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

Cant quantify the extent an SE or TSM are used by a region Fundamental More dominating and experienced regional manager extract more from TSM Issue: Assigning and SE resources e.g. West Region SE and TSM 1 unit each

More focus on CAMs More Productive Quota attached to CAMs and not to SE and TSM Power to regional managers to spend Underutilization of SE and TSM units will result in

Suggestions
Allocate SE and TSMs 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

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?

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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

Balance Top down approach with bottomup approach based on ground realities
Director, Federal Director, Inside Sales

Director, East Region

Director, West Region

Director, Latin America

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

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?

Establish Parameters

Historical trends Last years revenue Territory analysis

Better sales forecasting Helps understand Industry growth Territory alignment

Better Sales force management Sales Activity Goals Sets Managers Credibility

Add a growth expectation

Realistic Challenging

Assigned job Adapt the quotas to each Market potential sales rep Competition

Differentiate type of sale Helps assign personal quotas

Add Quotas to market conditions Get Buy in from Sales Team

Over assignment

Motivation levels maintained Guide Behaviour

Explain quota Involve sales people Individual meeting

SMART goal establishment Compare reults

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Key Takeaways
Regional Quotas should reflect Territorial conditions Market conditions of region Sales cycle

Hiring

Cycle should start a few months before the Sales quotas are set More Centralized and structured hiring process

Sales Meetings

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

Tackling challenges

Sandbagging- More direct involvement required by Jacoby Lobbying- Better understanding of the market scenario Gaming- More analytical quota setting

THANK YOU
Presented By: Archana Ashar D007 Shivani Bhatia D014 JayKaran Singh Chadha D020 Deeksha Nigam D040 Shwetank Sharma D055

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