Business Simulations

Project Background

Our team has just been put in charge of sales for District 1 in the Northern Region within the James C. Quest Enterprises company. After working at a personal selling position, more responsibility has been given and now we are in charge of a sales team. At the start of the two year sales cycle that we will be discussing, we currently have an equal market share with three other firms in the industry. It is now our duty to maximize profitability, by analyzing reports and data to make intelligent, effective decisions. It is our task to set the compensation plans and rates for our five sales people, Bob, Jen, Emily, Kevin, and Katie. We need to set reasonable, yet challenging quotas to maximize productivity. This will result in monetary incentives if the quota is reached. As a manager, there is only so much time that we can supervise our employees, so we must delegate this in a necessary manner. There is the option as well within our power to set contests each quarter to reward the best producers. It is important to administer the proper incentives as rewards in order to fully motivate our sales team. The last variable we will be setting is the ratios of time that each sales person will work with their accounts. There are A, B, and C accounts, where A accounts have the highest potential for sales, and C accounts the lowest. We must take all of these variables into consideration to create the best strategies for James C. Quest Enterprise to ultimately produce the utmost profits.

Strategy and Decision Variables

Our strategy for a majority of the sales cycle was to focus on the financial aspect of the sales people’s compensation. Both Bob and Kevin seemed to be very dependent on their compensation plans. Bob, as a more experienced sales person, has seemed to want more of a base salary and less commission due to the fact that he is more “old school” in his sales style and has less of the risk factor than some of the other people on the team. On the other hand, Kevin is more outgoing and filled with a flamboyant style where he wants the opportunity to shine and seems to always want the highest commission rate. Emily always has the most sales for our firm, and as a result earns the most money. We tend to have her earnings rate in the middle ground between Bob and Kevin, where she has a somewhat high base salary and a middle of the road commission. Jen is much like Bob in the sense she wants less risk and we have found that she is our future Emily in her style of selling. Katie was unlike the other sales people because she is new. At first we began by giving her a lower commission so that we could ensure she would earn a substantial amount of income. As the cycle progressed she improved greatly and proved herself to be able to handle more important accounts. As a result we changed her rates and gave her a lower base salary, thus a higher compensation rate.

Another strategy we implemented was to challenge our sales team by giving them a competitive bonus structure. We generally set the quota at either the industry rate as if they were to earn a 25% market share, or just below, to challenge them to break the industry average. If they earn more than their fellow counterparts in the other firms, then that is when they will be rewarded.

Each quarter has different overall sales potential that needed to be taken into account when setting the compensation rates. For a quarter that had lower sales, we focused more on base salary otherwise they would have earned less income because they would have sold less, thusly earning less commission. Opposite to that, for quarters that had a higher sales earnings potential, we reversed our strategy and gave the sales team more opportunity to earn income with a much higher commission rate. We were careful not to overpay our sales people, because it could be a de-motivator we thought. Also this could create inconsistencies among quarters, because if a sales person had a low productivity in one particular quarter their pay may not reflect that.

Some variables we focused less on and changed very little throughout the sales cycle were the territory rates. We felt it was necessary in order to earn more sales to keep the A accounts for Bob and Emily who earn the most by far much higher than the other three. We want to make sure that we do not neglect the other accounts however, so we used Kevin, Katie, and Jen to still make calls on the B and C accounts to compensate for Bob and Emily. We had the goal from the territory management side to always be the highest frequency of sales calls, which we always ended up doing well. Most teams kept a standard split between there accounts with numbers such as 55%, 30%, and 15% for accounts A, B, and C respectively.

Supervision was very tough for us to figure out. We knew Katie and Jen needed the most supervision, as they were the newest. Although Kevin was also fairly new, we understood that he is more independent in nature and thusly we lowered his supervision amount compared to Jen and Katie. Emily and Bob are in less need of the supervision since they have been working for much longer and thusly would almost be offended if they had someone looking over their shoulder for too long. Our goal was to find the right amount for each person, but Bob and Kevin have continued to show us problems, so we continuously ended up changing their supervision rates: Bob anywhere from 0-15%, and Kevin anywhere from 10-25%.

Sales Representatives Analysis

Bob is the senior most salesperson in the organization. With over 25 years of experience, Bob is very set in his ways and is looking for a stable end to his career with little risk. Our team approached this situation by offering Bob a higher salary with lower commission than some of the younger risk takers, such as Kevin. Bob peaked as high as 40.9% of the markets share (Year 1, Quarter 3) amongst others who are competing in his territory. However these numbers sharply declined in Year 2, particular in Quarter 4, Bob's market share fell to 15.1%. While his base compensation ranked first amongst all the other firms, compensation based on commission ranked fourth. Bob's total compensation therefore ranked last amongst the firms. This could have been the result of not concentrating enough efforts on higher profile accounts. Bob was also given very challenging quotas, many of which he could not meet. Calls to A and B accounts ranked low, however C accounts had a ranking of 1 by the end of Year 2. Bob was given minimal supervision (7%) due to his senior position which was found to be effective. Although he has been around for quite some time, Bob still favored recognition and being in the limelight.