Managing Within Your Company

CHAPTER 17 MANAGING WITHIN YOUR COMPANY

Outline of Chapter I. Building Internal Partnerships A. The Importance of Internal Partnerships 1. The Role of Sales in Learning Organizations B. Selling Internally II. Company Areas Important to Salespeople A. Manufacturing B. Administration C. Shipping D. Customer Service E. Marketing F. Sales III. Partners in the Sales Organization A. Sales Management 1. Sales Executives a. Size and Organization of the Sales Force b. Forecasting c. Expense Budgets d. Control and Quota Setting e. Compensation and Evaluation B. Field Sales Managers 1. Evaluating Performance 2. Training C. Managing Ethics in Sales 1. Ethics and the Sales Executive 2. Ethics and the Field Sales Manager a. Responding to Unethical Requests D. Salespeople as Partners 1. Geographic Salespeople 2. Account Salespeople 3. Product Specialists 4. Inside Versus Outside E. Sales Teams F. Technology and Teamwork

Instructor’s Manual 15 Teaching Suggestions 1. Begin by asking students what a sales representative represents (Slide 17-2). Many students define sales representative as someone who presents product benefits—the student represents a product. Actually, the dictionary defines representative as one who acts as a delegate or agent for another, meaning another person. Who are those other people that the salesperson represents? Students will say the company, the customer, themselves, and perhaps society. You can take this discussion in two directions. One is to discuss how the salesperson acts as a delegate of society, customers, etc. and what this means in terms of determining what is ethical or not. But the context of this chapter should lead the students to pose the question, "Who in the company does the salesperson represent?" Students, based on reading the chapter, should include manufacturing, administration, shipping, customer service, and management. This should lead to a discussion of how salespeople make promises that other people fulfill ("It will be there Wednesday," "Sure, you can pay over 90 days," and others). Salespeople need to know what they can and cannot promise, but they also have to have confidence in their internal partners to deliver quality service to the customer. You can then explore the concept of roles, role sending, role clarity (and conversely, role ambiguity), and role conflict. Examples such as the following can be used to explore roles. Management wants to clear out the inventory of the Omni-Form fabricator. Accordingly, they have cut prices 10% and added a 5% commission bonus for every Omni-Form you sell. The technicians (the ones who install and fix your company's products, including the Omni-Form) think the Omni-Form is a piece of junk. They told you not to sell it— customers will hate it plus it makes their (the technicians) lives miserable because they have to fix it all the time. A customer's needs are such that you think the Omni-Form is the best product. The technician says to sell them the Maxi-Form but it costs too much. The credit department says it doesn't matter, they can't get credit anyway. Your manager reminds you that you need one more sale this month to make your quota. These examples point out how role conflict occurs. Slides 17-3 through 17-7 cover this topic also. You may also want to get into a brief discussion of the ethics associated with the decisions that the rep must make. Also, it is important to note any long-term ramifications your decisions could have. For example, what will happen in your relationship with service if you sell the Omni-Form? Then you can discuss leadership behaviors, how these affect role clarity and direct salesperson behavior. 2. Forecasting is a difficult topic for students to comprehend because they fail to see the importance of the link between the forecast and later actions at the field level. Personalizing forecasting can help. One way is to ask students what jobs they plan to search for, and what industries they expect to work in when they graduate (Slide 17-8). What are their bases for those expectations? What you should receive is a list of judgmental techniques. Where can they go for more solid information (sources of quantitative forecasts)? They will get into that more in the next chapter but it helps in understanding forecasting now. Then discuss the flexibility they have built into their plans, in case their forecasts are wrong. Pick out some industries that are currently struggling or growing. What would have happened to the students if they had graduated five years ago and forecasted incorrectly that a struggling industry would have thrived? Could they now make the switch easily to a growing industry? The same is true for companies and salespeople. They make decisions based on their forecasts that lock them into certain strategic directions. As time goes on, they may have

16 Selling: Building Partnerships, 5/e difficulty changing their direction. What forecasts do salespeople make? One is total sales for the next period. This forecast is used by sales management. But salespeople also make personal forecasts. That is, they forecast sales potential from various account that they personally use to allocate sales efforts, as we discussed in the last chapter. Therefore, this discussion should emphasize the importance of good forecasting, as well as all of the uses of forecasts. 3. Slide 17-10 illustrates types of quotas and how they can be achieved. This illustration works well to present quotas in greater detail. The K stands for thousands of dollars. Salesperson 1 achieved the right profit margin (30%) but did not sell enough in terms of revenue. Salesperson 2 sold a lot more but did so by cutting prices (and margin, net margin being 23%). Salesperson 2 also did not do a complete job, falling short in selling coop ads and displays and gaining new accounts. Salesperson 3 met each quota. Another method would be to put quotas on each area of performance (use Slide 17-11). Commission could be based on total points earned, while bonuses could be paid on achieving quota in each category. This allows for more prescriptive control (the manager can see exactly where the salesperson falls short), yet allows for the rep to be rewarded for either total performance (total point performance) or complete performance (meeting quota in each category). For example, we don't know why Salesperson 2 did not meet quota. We do know, from looking at Salesperson 3's numbers, that this salesperson did a great job of selling ads and displays to current accounts but did not sell enough new accounts. Thus this person would receive commission at the 100% level, but fail to earn any bonus tied to new account development. Then you could use Slide17-12 (Exhibit 17-3) illustrates how the draw works. Once you have gone through the commission plan differences, ask students why would a company pay a salesperson a salary? Some companies use very little sales management. They pay their reps a straight commission and expect that commission, and the forces of natural selection (the strongest survive) to take care of their management for them. So why would any company pay a salary? a. to compensate for non-selling activities such as situations where a lot of technical expertise and customer support activities are necessary (salary can be used in conjunction with commission—the commission incents the rep to get more sales, the salary compensates for non-selling activities) b. when sales cycles are long (otherwise reps would starve between paychecks) c. when sales results are the result of team efforts d. when other components of the marketing mix are more important in generating sales (the extra incentive of commission would not change sales greatly)

Instructor’s Manual 17 4. In this chapter, we have tried to provide students with methods of responding to ethical situations that involve their manager. You may want to discuss Slides 17-13 and 17-14 (Exhibit 17-5) which lists some of those methods. Provide students with the following scenario: Your manager tells you to recommend the Deluxe model of your product in a particular account. The customer's needs are such that the economy model is best suited. The customer trusts you and has not shopped the competition at all. The customer, being a school system, qualifies for a government discount but your manager told you to charge full price. Then go over each method of responding to unethical requests. What would enable the salesperson to choose a particular strategy? For example, what would make negotiation a particularly good choice? 5. Exhibit 17-7 (also found in Slide 17-16) presents a team selling organization. Your students may have difficulty understanding the differences between team selling and multi-level selling, and between team selling and product based and account-based territories. In team selling, the account manager coordinates all sales activities in the account. Thus the account manager tells the product specialists and the supply specialists when to call on the account, who to call on within the account, what strategy to use, etc. In product based territories, each specialist would prepare a separate strategy and would not necessarily coordinate sales efforts with other salespeople from the same company. A similar concept drives national account marketing. The geographic rep who may call on 150 grocery stores in Arkansas may also call on local WalMarts. But the NAM for WalMart determines what strategy to use with WalMart and coordinates the activities of all geographic reps across the country who have WalMarts in their territory. Or it is possible that the geographic rep may call on all stores in Arkansas but WalMarts, leaving WalMarts entirely in the hands of the account manager. Then use Slide 17-17 (Exhibit 17-8) to present multi-level selling.

18 Selling: Building Partnerships, 5/e Suggested Answers to Questions and Problems 1. It took you four months to find a job and you were almost out of money when you finally landed the position. But today your boss asked you to do something unethical. You aren't sure what the corporate culture is yet because you are brand new. How do you respond? Answers to this question will depend on the individual's usual style of conflict resolution, assertiveness, and other factors. Most students will respond that they would first ask peers in the company whom they trust what the company stand on such actions is, what those peers might do, and other similar questions. Then, based on that information, they would develop a strategy for response that might include negotiation, denial, or other responses. Other students will say that they will try to find a way to do their job without complying with the request but not tell their manager what they are doing. 2. Your largest and most faithful customer wants its order shipped early. You could do that, but it would mean that a new, small account’s order would be delayed. What will you do? The simplest answer is to call the small account and see if they can live with the delay. Otherwise, try to come to another solution (find out why the other account needs it early). If they have to have it early, the big account would take precedence. In another situation, you have an order from an account with the potential to be your biggest. But shipping tells you the product will be delayed one week, and credit refuses to allow the customer to pay COD on the first order, which the customer specifically requested. What will you do? Unlike the first scenario, this one clearly means problems. The rep will have to determine the cause for the delay and resolve that, then convince credit to allow COD. Get a manager involved to take the case to a higher level. What could you have done to prevent these problems from occurring? A rep with closer ties to both departments would be more likely to get what is needed. Further, if the shipping problem is an inventory problem, then a rep with closer ties to shipping would have more current information on inventory, and would have set more realistic expectations with the customer. 3. A company that rents office equipment to businesses pays its salespeople a commission equal to the first month's rent. However, if the customer cancels or fails to pay its bills, the commission is taken back. Is this fair? Why would the company have this plan? Most students will say that this is unfair. The rep did the job by selling it. But the company's perspective is that it can only pay commission on profitable sales. Bad debts cost the company so to encourage salespeople to sell to credit worthy accounts, commissions are reduced when a customer fails to pay. Also, part of the rep's job is customer service. If a customer cancels, then the rep has failed that customer in some way and therefore deserves to lose the commission. 4. What is the role of the geographic salesperson in a national or strategic account? Assume you were a NAM. What would you do to enlist the support of geographic reps? Geographic reps are the implementers of sales strategy, customer service reps, and the eyes and ears of the NAM. They make the calls on local decision makers to present the sales strategy developed by the NAM. The make sure that the product is delivered, installed, and serviced appropriately. And they collect information that is necessary for the NAM to understand the client's needs. A NAM has to understand the compensation plan of the geographic rep so that any strategies will maximize the local rep's earning power. Then the NAM has to effectively

Instructor’s Manual 19 communicate the strategy to the local rep, including an analysis of how the plan will benefit that rep. Regular communication can keep the national account's importance in the mind of the local rep, which should help to secure support. When the local rep sees how the actions of the NAM help that rep achieve his or her own personal goals, then that rep will support the NAM. How would that support differ if you were a product specialist and worked in a team situation? How would you get the support of the account manager? In this situation, it is important for the product specialist to understand the account manager’s compensation plan and how compensation can be positively affected by sales of the product. But the specialist must also make it as easy as possible for the rep to sell the product, either through providing services or materials and training to the account manager. 5. Consider your own experience in group work in school. What makes groups effective? How can you translate what you have learned about group work into managing a sales team? We hope that one thing students learn is that groups are more effective when the members share the same goals, grading is based on team performance, and there is an opportunity for team member feedback. Sales teams are also more effective when goals are shared and compensation plans support cooperation. 6. To what extent should salespeople be allowed to manage themselves? What risks do you take as a sales manager when you allow selfmanagement? How can you minimize those risks? Salespeople should be allowed selfmanagement to the extent that they are willing and able to do so. Regular reports (activity and performance reports) can be used to monitor their performance with little interference from the sales manager as long as results are there. The risks are that the salespeople will do a poor job of selfmanagement and not achieve sales goals or customer service objectives. Or there may be other tasks, such as providing forecasts, that are not completed. These risks are minimized by tracking performance and activities without providing direction unless direction is needed or asked for. 7. Explain how compensation plans can create conflict between salespeople. Compensation plans can reward cooperation or create conflict. For example, if a local rep is fully compensated for working on a national account, then the rep will be more motivated to support the sales efforts of the NAM. But if the compensation plan pays substantially more to the local rep for local accounts, the rep may ignore the NAM. Some companies will pay only small portions to local reps. Or if a rep has an opportunity to sell a product to be installed in another's territory but would receive no commission, then the selling rep may try to get the product installed in his or her own territory, then moved to the other territory. Or the rep may ignore the opportunity altogether because there is no personal benefit, which could result in an upset customer blaming the other rep. 8. Assume your sales manager is working with you to evaluate your performance. As the sales call progresses, your manager begins to take over, ultimately dominating the call. Why might this occur? How would you handle this? The best way to handle this is after the call is over. Ask the manager if he or she thought you were losing control of the call. If so, ask why. If not, then ask the manager to simply observe you in the next call so that he or she can comment on your performance. The sales manager gets excited in front of a customer; the old thrill of the chase is on and before he knows it, he's taken over the call. Often, the manager may not have realized it or wanted to take over. By asking gently to just observe, the salesperson can regain control of later calls.

20 Selling: Building Partnerships, 5/e 9. An experienced salesperson argues against salaries: "I don't like subsidizing poor performers. If you paid us straight commission, we'd know who could make it and who couldn't. Sure, it may take a while to get rid of the deadwood, but after that, sales would skyrocket! Explain why you agree or disagree with that statement. Salaries are appropriate in certain situations: a. to compensate for non-selling activities such as situations where a lot of technical expertise and customer support activities are necessary (salary can be used in conjunction with commission—the commission incents the rep to get more sales, the salary compensates for non-selling activities) b. when sales cycles are long (otherwise reps would starve between paychecks)< c. when sales results are the result of team efforts d. when other components of the marketing mix are more important in generating sales (the extra incentive of commission would not change sales greatly) But if significant selling effort was required and results could be matched with specific salespeople, then the rep is right. A straight commission plan may be more effective. If heavy customer service after the sale is also required, it may be more effective to have one commission only salesforce seek new accounts and another salaried salesforce handle current accounts. 10. How would you respond if you felt you were making as many calls as possible during the workweek, yet your manager demanded that you make more? The manager's reasoning is that if you make more, you sell more. The answer will vary from student to student as it is a question of how they would respond, rather than how should they respond. In discussion, probe such possibilities as feeling pushed to lie about the number of calls made, avoiding the manager as much as possible, and other strategies that don't change the number of calls made. In order to increase the number of calls, ask them to consider the impact of cutting calls short to get more in, making calls in high density areas with low potential, and other such choices. Another strategy is to change the manager's thinking. Ask the manager to work with you, and show you how to make more calls while also educating the manager as to why you are making the number and type of calls you make now. Then the two of you can work together to reach a common solution. How would your response change if you were not meeting your sales quota? If you were selling twice your sales quota? The answers obvious to the students are that you a) do what the manager says if you make your quota and b) don't change a thing if you are making twice the quota. Other elements to consider when making a choice are the quality of your working relationship with your manager, the type of commission structure you are on, your work experience, and other such factors. In discussion, students have to be led to understand how these factors will influence a decision in how to respond to the sales manager.

Instructor’s Manual 21 Suggested Answers to Case Problems Case 17-1: Flow Master Controls 1. Evaluate the district’s performance. Draw conclusions (where are we doing well? Doing poorly?) but don’t fix anything yet. Justify your conclusions. Just using Table 2, it is clear that the Digital Master is not getting sold at the expense of the Flow Master, which is oversold. However, looking at Table 4, the district is averaging 27 sales calls on the Digital Master compared to 18.6 on the Flow Master. So more effort is being made without results. 2. Compare Foreman and Greber performance. What are some possible explanations for the poor Digital Master sales? Both reps are making more than enough calls, compared to quota. Foreman has put more effort into the Digital Master, at the expense of making Flow Master calls. However, Foreman overachieved the point quota. If we take the district quota and divide by 10, we see that each rep was supposed to sell 5 Flow Masters, which Foreman and Greber both oversold. Clearly the Digital Master is not experiencing market acceptance and the Flow Meter is a much easier sale, especially for Foreman. 3. The VP of sales says it is a compensation problem. How would you fix it? Focusing on compensation is not the correct solution, because reps are making the calls on the Digital Master and are not making quota on Flow Master calls. However, should a compensation change be required by the VP, a shift that separates the point values of Digital Masters and Flow Master would be appropriate. 4. The company is planning to create a new position, called product specialist. This salesperson will work with territory managers and will have a sales quota for Digital Masters only. The product specialist will work with one sales team (8 to 12 salespeople) and once a rep has identified a Digital Master prospect, the rep will bring in the product specialist. How should the compensation plan be adjusted? Why? Assuming that the points are as high as they can go, then the rep will need to be paid fewer points, and the product specialist will receive the rest. So a product specialist could get 3 points and the rep 2, for example. The student should keep in mind that the specialist will need to earn a level commensurate with the rep, and with fewer points available (no Flow Master, etc.), the product specialist will need more salary. 5. The VP of sales managed to get the product specialist idea approved by the CEO even though the CEO argued that the salespeople were just too lazy to make the effort to sell the Digital Master. Lower the compensation on it to the territory reps and everyone will sell the Flow Master at its lower price, the CEO says. The best way to get more Digital Masters is to cut compensation on Flow Masters to 20 points. What do you think should be done? Why? Again, the issue is not compensation or effort. Looking at Table 4, it is clear that the reps are making calls trying to sell the Digital Masters. Therefore, the student should suggest looking at pricing options, the sales strategy, and other factors that would influence performance.

22 Selling: Building Partnerships, 5/e Case 17-2: Structural Steel Industries 1. Who was primarily responsible for the Laredo project mistake? Who else was responsible? Why? In most organizations, the salesperson will take much of the blame for what occurred. That is because it was not made clear that the specs called for domestic steel. A strong case can be made that the project manager and the engineer should have known that domestic steel is required for federal projects but it was still up the salesperson to make sure the order was turned in properly. Plus the salesperson is the one directly responsible to the customer. 2. What can be done to prevent these problems in the future, and who should make those corrections? The salesperson should include any spec sheets from a customer's RFP, as well as participate in meetings between the project manager and the engineer. Also, the salesperson should receive copies of any communication between the account (either the contractor or architect) and SSI. However, it should be noted that the relationships between the different areas are not conducive to effective communication. Angela should take extra efforts to repair the relationships with Mary, Charlie, Manuel, and Mark. 3. Identify the managers that would be involved in a project and discuss what their priorities would be. For example, the engineer would more interested in the design itself. Project manager: interested in an easy project with no complications; something that will go smoothly, with costs easy to predict accurately. Wants plenty of time to get job scheduled and completed. Engineer: interested in the design itself. Would enjoy challenging designs, motivated by the work itself. Manufacturing: interested in highly repetitive work or work similar to previous jobs that minimizes manufacturing costs—long runs, low costs. Concerned with manufacturing quality. Shipping: to keep shipping and inventory costs down, prefers constant flow of inventory through the plant. Evaluated on basis of cost control. Controller: keeping costs down and profits up. Wants accurate projection of costs so that jobs can be bid profitably, yet competitively. Salespeople: want to keep prices down so more jobs can be won. Interested in overall quality. Evaluated on basis of sales and profits by company, but price/value by customer.

Instructor’s Manual 23 EXERCISE 17-1 SALES FORCE STRUCTURES Your assignment is to locate and interview the sales managers of two sales organizations. One organization should be large, the other should be small. The purpose of the interviews is to explore the sales forces' structures; how many salespeople are managed by one manager, what types of territories do they have, how many regional, district, and field sales managers are there, and so forth. Ask about previous structures, how the company changed over time and why. How does the structure reflect the company's strategy?

You can pair up to conduct the interview, but write your papers individually. You can use, as a format to your paper, comparisons and contrasts between the two companies.

24 Selling: Building Partnerships, 5/e EXERCISE 17-2 ROLE PLAY EXERCISE This exercise is designed for two students to work together. Both students should receive the following information: Your company, Isoderm, manufactures and markets test equipment that is used to determine skin problems. You are a relatively new salesperson, having just completed the company's sales training program only one month ago. You've noticed a bottleneck in shipping that seems to affect delivery of orders. In training, you learned that the company's policy is for customers to receive products within 5 working days of placing the order but it is taking 8 days. You've just closed a big order on the condition that it arrive in 4 days.

In the role play, you will take turns playing the shipping manager. Your objective as salesperson is to secure 4 day shipment.

Instructor’s Manual 25 Shipping Manager A: You are to play the role of an expressive (high assertiveness, high responsiveness). You have been under a lot of pressure from people in sales to reduce the turnaround time. But several problems are causing the backlog, including poor turnaround on paperwork from the order entry department, product backlogs from manufacturing, and a high absenteeism rate among your workers because of a new policy reducing their benefits. You've had all you can stand of salespeople butting into your business. If asked needs payoff questions after being asked about the problems and their implications, say you could use some help for about 4 hours tomorrow, plus the salesperson could use a copy of the order to pick the merchandise and prepare it for shipment before receiving the paperwork from order entry.

26 Selling: Building Partnerships, 5/e Shipping Manager B: You are an amiable social style and don't understand you are being blamed for the slow turnaround. You know customer service is important. Your guys are working as hard as they possibly can; it is just that sales are so strong that you don't have enough people to get things turned around quickly enough. In fact, today is Friday and you've got half the staff working Saturday and the other half on Sunday in order to get things out. Ask the rep lots of questions about his or her background, how they like the company, etc. Insurance won't allow you to let the rep work in the warehouse; it takes special coverage and a special physical exam because of all of the heavy lifting that they have to do. But you do need more people working in the warehouse. No one in management is willing to listen to you, though.

Instructor’s Manual 27