Hanover-Bates Case

Question 1:

Evaluate the performance of the northeast district in comparison with the other Hanover-Bates sales districts.

Using the figures in the case study:

a. Analyse are the weak and strong points spots in the northeast district’s performance and your suggestions as to why they are weak / strong points?

Outcome-based performance measures are usually divided into three categories: sales results, profitability indices, and sales efforts ((Hair et al. 2009, p.429)

As for the sales results, the northeast district achieved a relatively high sales volume of 6,812k, which was the third highest in the company. However, the actual sales still failed to meet its quotas of 7,300k by 6.68%, which is the worst in all departments.

Regarding the profitability, the actual gross profit of northeast district only ranked the fifth in seven departments. The department performed below its expectation (quota) by 15.14%, which is again the worst in all departments. With only 2478k of gross profit, the northeast department performed markedly below the average gross profit of all departments, however, its quota indicated that the department should be in the leading class of the company’s 7 districts. The northeast ended up with such a poor profitability mainly due to its incentive policy – a policy that only emphasised the sales volume but neglected the actual profit behind every sales transaction, by tying the commissions strictly to the sales volume only. In this way, the salespeople’s aim is basically to increase the sales volume at all costs, even at the expense of sacrificing profitability because they do not pay for low profitability, instead, they get paid for high sales.

As for sales efforts, we can conclude a main picture from case exhibit 5-5&5-6 and Appendix Two, the northeast district has a total of 6466 calls to its all 3 types of accounts, which is substantially higher than that North-central has (4947 calls). However, its average sales per call is $1053.51 per call, while on the other hand the North-central has an average sales volume per call of $1255.31. More specifically, North-central department has a performance significantly superior to the Northeast mainly on 2 aspects: type B and type C accounts. Hence,Northeast’s effort on middle and small accounts needs to be improved, not in number of calls but in quality of each call.

In summary, after analyzing and comparing the financial statements for Hanover Bates Chemical Corporation in 2000, there are some of problems in northeast district. Especially, compared with north-central district which is the most profitable district, the northeast district has been underperforming.

b. Analyse the behaviour-based performance issues that are identified? (Note: these can be both positive and negative and are not restricted to just the northeast district.)

According to framework of the sales management process, the sales manager should make some activities of monitoring, evaluation, behavior-based control and outcome-based control for better sales (Wilkinson 2009).

Based on the figures in Appendix One, it illustrates some districts especially northeast district operates higher selling expense but made lower profit (Spiro, Rich& Stanton 2008). That means those districts spent too much money to cover their market. And it also suggests scheduling of the company was not good and this is a poor territory management.

As seen in the Framework model poor evaluation and monitoring has an effect on the behavior-based performance of salespeople (Wilkinson 2010). In the case, there were four districts which takes a large proportion in company cannot be able to meet their gross profit quotas and sale quotas. And sales territory design can directly influence sales representatives’ performance (Babakus et al 1996, p347). As for the higher sales volume can bring more commission to the sales representatives. Thus, it has a bad impact on salespeople’s incentive to make more profit. They may sacrifice the product’s price to achieved their sales quota because of poor evaluation and monitoring (Anderson and Oliver 1987, p76)

The conversion rate in Appendices Three is the percentage of the outlets calls made from active accounts. As for the conversion rate of both northeast and north- central is very low in ACCOUNT A & B, and they do an effectiveness selling to ACCOUNT C which is the smallest account. Therefore, they are poor performance at contacting major customers and persuading those customers to purchase more products. (Hair et al. 2009, p.430)

Question 2:

Examine the appointment of Jim Sprague to the Sales Manager position.

Use data from the case, extended research and relevant models to support your answer:

a. Analyse his suitability for the role.

There are three points that Jim Sprague could be suitable for this position.

1. According to Framework of the Sales Management Process. (Wilkinson, 2012) Jim is very clear about sales manager duty and responsibilities. Compare to salespeople, the sales manger should focus on management rather than sales. In the case, the northeast district’s sales quota and actual sales are the third highest in the company but lack of gross profit performance. Hence, “he concluded that poor results in this area reflected misallocated sales efforts either in terms of customer focus or the mix of product line items sold (Spiro,Rich,& Stanton,2008).”

2. Jim understands the outcome-based performance measures is essential for assessing the sales force effectiveness and efficiency (Hair et al. 2009, p.389). He plans to use District 7 as a benchmark and compare his district with it’s figure. Based on these figure, he wants to make a positive change in his district’s selling system.

3. Jim is very young, and can be easy trained and molded with the new company’s task. Also he can keep working hard in this position for many years. Thus, the national sale manager can avoid lacking of qualified replacement.

b. Discuss his readiness for the role.

1. To be a sales manager, Jim need manager training. As Jim was used to be salespeople, this is his first time to be a manager in the sales team. He should be training in those parts (Sales Coaching for improved Performance, 2010): setting team goals, recruiting and selecting team, coaching, sales performance management, leadership and motivation, time management and industry knowledge and trends. Such as setting a clear-cut goal to all members. Those training can