Grant Senter - Baylor University
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McGraw Hill Case Study Grant Senter and James Paulsen Baylor University
Identification of the Issues
Sales force Structure
All about numbers and opportunity for revenue
No deep thought process
Created the night before
Lack of real preparation
Relationship is lost
5 minute meetings with professors
Bookstores are checked to be up-to-date
Goal: to get the professor “up to speed” on the latest offerings
Customers are not being appreciated
Sales Process is shorted in an effort to maximize revenue opportunity
Result of a poor training process and incentive structure
The cons of a “generalist geographic approach” often limit the product knowledge the sales representatives have, make it difficult for reps to master broad product lines, and pose a coordination issue. Consequences: Decreased sales Missed opportunities Decrease in customer satisfaction The current structure does not present the level of value that our clients are seeking. McGraw Hill needs to slightly restructure the sales force to ensure that there are resources available to help with McGraw Hill’s broad range of products.
The Candle Problem
Compensation Plans Research:
“Once a task called for even a rudimentary cognitive skill,” a larger reward “led to a poorer performance.”
“In eight of the nine tasks we examined across the three experiments, higher incentives led to a worse performance.”
“We find that financial incentives can result in a negative impact on overall performance.”-Dr. Bernd Irlenbusch, London School of Economics.
The current commission plan only allows for commission to be achieved if one achieves over 95% of quota.
The current plan is contrary to scientific research, does not promote a group mentality, and does not financially incentivize any sales activity under 95%.
“Reps are thrown into the field with barebones training.”- Anonymous Sales Employee
McGraw Hill sales employees are moving from a generalist sales position to a specialist sales position requiring an in-depth knowledge of McGraw Hill’s technology products.
McGraw Hill sales employees are given 2-3 weeks of in-house training led by their manager. This is far below the standard.
Organizations sales training: AT&T-6 months Oxy Chem- 5 months IBM- 9 months Reynolds and Reynolds- 6 months No current E-Learning Modules in place to keep sales representatives up to date on products benefits, features, etc.
Starts with Training
Process: Develop a Relationship
Remove “check ins”
Become less concerned with maximization of revenue opportunities
Require and encourage conversation
Recommended Sales Process
Compensation Plans Sales representatives will no longer have to achieve 95% of quota to receive additional compensation from their 50k base salary. Sales representatives will operate on a straight base salary of 60,000 and will be able to receive bonuses ranging from 1-10% of your current salary. The bonus is based off the group performance of a district manager’s sales team. This includes the product specialist. This method encourages team work, collaboration, and friendly competition amongst groups. The top performing team in each region will receive the 10% bonus off of their base salary.
Sales Training -Sales training will be given more of an emphasis as the new sales training program will be 3 months long for recent undergraduates. Experienced Sales Professionals will have a training process of 2-3 weeks. E-Learning modules will have to be completed quarterly and will cover every aspect of the sales cycle. Sales professionals will be trained on products, the proper sales process, and additional learning
Revenue & Profit
Inform experienced reps of the new policy
January Training of experienced reps at main office
June Experienced reps must have logged second ELearning session
January New recruits begin three month training
June Break down region by district success
March Experienced reps must complete first E-Leaning session
March Conduct ride along, district mangers observe sales reps
June Send directors to the least productive districts. He will train, advise, and advance the process in these districts
March Make sure new sales reps pass certification to enter the field
Increased Revenues: 54 million dollars
2.4 million dollars
Expenses: 2.32 million dollars 56.4 million -2.77 million dollars= Increased Profit: 53.63 million dollars
Savings: Expected Decrease in Turnover1,000,000 Compensation: 300 reps with the bottom 20% not making quota: Currently: 60 x 50,000= 3,000,000
Revenues Training- 30 million dollars (100,000 increase per sales rep) Compensation- 9 million
Sales force structure-15 million dollars ( 50,000 increase per sales rep)
Up front expenses: Training- 5,000,000 18 Product Specialists- 900,000 Implementation- 200,000 Bonuses- 720,000 Total Expenses= 2.77 million
New plan: 60 x 60,000= 3,600,000 60% reps hit quota: Currently: 180 x 70,000= 12,600,000 New plan: 180 x 60,000= 10,800,000 12.6 million – 10.8 million= 1.8 million 10% reps over 100% quota: Currently: 30 x 100,000= 3 million New plan: 30 x 60,000= 1.8 million 3 million – 1.8 million= 1.2 million - 600,000 +1,800,000 + 1,200,000 Total Savings= 2.4 million dollars Impact on Revenues= 1.5 million dollars