Case Summary: Stalwart Industrial Products is a manufacturer and seller of a wide variety of industrial tools that they sell to numerous resellers and end users.
The company was founded in 1935 and prides itself on producing quality tools that last for a very long time. Stalwart’s national sales manager, Tom Beesman, has been well regarded as a successful leader since taking over his position three years ago that has helped to guide the sales force to a great deal of success.But, now Tom has two problems that are causing him massive headaches. The first problem is that one of his star salespeople, Charlie Davidson, is starting to perform below the expectations that he established for himself.
Davidson has worked for Stalwart for three years and he hit 112 percent of his quota his first year and 119 percent of his quota the second year. He did this by prospecting and meeting with customers 14 hours a day during the week and writing proposals and doing reports on weekends.He was on pace to exceed quota again this year, but after having his first child two months ago, he’s down to 50 to 60 hours a week and his sales are reflecting this. Tom had hoped to make Davidson a member of the management team, but in casual conversation with him, Davidson indicated he wanted to remain in sales because that’s where the big money is.
That’s a problem for Tom because Davidson is still getting the same hefty salary while working fewer hours. Tom needs the old, energetic Davidson back but he doesn’t know how to get him.The second problem facing Tom is the use of the company website to accept orders. The company recently decided to do this this as part of an aggressive new growth strategy and the sales force is not at all happy about it.
This is because while the salespeople can earn commissions on current customers who order through the web site, they can’t receive commissions on any new web customers in their territories. The company president views the web site as an additional and valuable sales rep. The salespeople, however, view it as completion and as a result, productivity and morale are both down.And Tom is stuck in the middle as he needs to appease his boss, the company president, and he needs to makes his salespeople happy.
Statement of the Problem: Tom is dealing with lower productivity out of his top salesperson, Charlie Davidson, while also dealing with a disgruntled sales force because of the company’s new strategy to accept orders through its web site. Secondary Problems: While not necessarily having to deal with any additional problems, both of these issues are very delicate scenarios for Tom.Davidson is, or at least was, Tom’s go to sales rep and having him back is of the utmost importance for him and the company so Tom doesn’t want to do anything that could push Davidson away. And the web site issue really has Tom between a rock and a hard place.
If his boss, the company president, or his sales force feels Tom favored one over the other, it could lead to a very uncomfortable work environment for Tom. Response to the Case Questions: 1. For the Davidson situation, Tom might be best served by instituting a combination plan, salary plus incentives, for Davidson’s compensation package.With a new baby, Davidson likely would not be happy about a reduction in salary and Tom wants him back to his old self.
If Tom is able to provide Davidson with a compensation package that will allow him to a reasonable base salary to provide Davidson some flexibility to care for his new child while also giving him incentive with commission and possibly bonuses for exceeding quota again, that should hopefully give Davidson extra motivation to reach his quota as usual.New babies are expensive so Davidson should be motivated to get commissions and reach his bonuses and thus, make Tom happy since the old Charlie Davidson is back. 2. When dealing with the web site situation, Tom has to appease his boss who views the website as a very valuable tool and his sales force who view it as competition that is affecting their earning ability.
Therefore, eliminating the web site is not an option as it came from upstairs and it is a valuable tool for the company. So Tom needs to find a way to appease his sales force.In order to make up for their lost commissions from the web site, Tom can do one of two things. He can change the reward system to include a fixed salary amount to make up for those lost commissions on top of the sales force’s normal commissions.
Or, since the company president stated that he views the web site as an additional rep, Tom could institute a team compensation package that includes the web site as a member of the sales force the salespersons are in fact gaining some level of compensation from the web site.Recommendation: Based on the facts of the case and the possible solutions, I feel like Tom has 2 main courses of action to undertake to solve his problems. To bring back the old Charlie Davidson, Tom needs to provide him with a new financial package that provides him with flexibility to care for his new child while also providing him with motivation to reach his quota and maximize his earning potential. The type of financial package needed would include a base salary and then commission plus bonuses for exceeding quota as he had every previous year Davidson had been with the company.
The base salary will provide Davidson with a known income to provide for his child if he ever needs to take a little time off while the commission plus bonuses will motivate Davidson to reach quota and earn even more for his family. Secondly, to appease his boss who is the company president while appeasing his salespeople with regards to the web site situation, Tom can do one of two things. He can either change the reward system to include base salaries to make up for lost commissions due to the website or institute a team compensation package with the web site included as a rep.Because a base salary for an unknown number of lost commissions could prove difficult to determine, as long as the company president approves, the best course of action would be to institute a team compensation package that includes the web site as a rep, which the company president himself called it.
This appeases everyone as the company president still has web site gaining customers while the salespeople now profit off the web site’s sales as well.