Stalwart Industrial Products is a manufacturer and seller of various industrial tools. They distribute these tools to multiple resellers and end users.
Established in 1935, Stalwart is a company that specializes in producing long-lasting tools. Over the past three years, Tom Beesman, the national sales manager at Stalwart, has gained great admiration for his exceptional leadership skills. Under his guidance, the sales team has accomplished remarkable triumphs. Nevertheless, Tom currently confronts two significant challenges. Firstly, Charlie Davidson, one of his most valued salespersons, is failing to fulfill the lofty standards he had set for himself.
Davidson has been employed by Stalwart for three years. In his first year, he achieved 112 percent of his quota, and in his second year, he surpassed it by reaching 119 percent. To achieve these results, Davidson worked long hours prospecting and meeting with customers on weekdays and spent weekends writing proposals and reports. However, due to the recent birth of his child, Davidson’s ability to exceed his quota this year has been impacted. He now works between 50 to 60 hours per week, leading to a decline in sales performance. Despite this setback, Davidson prefers to remain in sales because of the potential for higher earnings over being promoted to the management team as originally intended by Tom.
Tom is facing two problems. The first one is that Davidson is still receiving a high salary despite working fewer hours, which is a concern. Tom wants Davidson to be as energetic as before, but doesn’t know how to achieve that. The second problem is related to the company’s decision to use the website for order acceptance. This decision is part of an ambitious growth strategy, but it has caused dissatisfaction among the sales force.
The reason for this situation is that salespeople cannot earn commissions on new customers who order through the website within their specific territories, even though they can earn commissions on orders from existing customers. While the company president sees the website as an extra and valuable sales representative, the salespeople perceive it as competition. Consequently, both productivity and morale have decreased. Tom finds himself in a difficult position, as he must satisfy both his boss, the company president, and keep his salespeople satisfied.
Statement of the Problem: Tom is faced with a decrease in productivity from his top salesperson, Charlie Davidson, as well as a dissatisfied sales force due to the company’s new strategy of accepting orders through its website. Additionally, both of these problems are delicate situations for Tom to handle. Davidson has always been Tom’s trusted sales representative, so it is crucial for Tom and the company to retain him. Furthermore, the issue with the website puts Tom in a difficult situation.
If Tom’s boss, the company president, or his sales force believe that Tom showed favoritism towards one person, it could create an uncomfortable work environment for him. As a response to the Davidson situation, it might be most beneficial for Tom to implement a combination plan for Davidson’s compensation package. This plan would include both a salary and incentives. Considering that Davidson recently had a baby, reducing his salary would likely not be well-received, and Tom wants him to return to his previous level of performance.
If Tom can provide Davidson with a compensation package that includes a reasonable base salary, giving him flexibility to care for his new child, as well as commission and bonuses for exceeding quota, this should motivate Davidson to reach his quota. The added financial pressure of having a new baby will likely drive Davidson to work harder for commissions and bonuses, ultimately making Tom happy by bringing back the old Charlie Davidson.
In addition to dealing with the web site situation, Tom must satisfy both his boss, who values the website as a valuable tool, and his sales force, who see it as competition affecting their earning potential.
Despite being a valuable tool for the company, eliminating the website is not an option as it originated from high-ranking individuals. Hence, Tom must find a solution to satisfy his sales force. To compensate for their lost commissions from the website, Tom has two options. He can modify the reward system by incorporating a fixed salary amount in addition to the sales force’s regular commissions.
Alternatively, the web site could be considered as part of the sales force, enabling Tom to implement a team compensation package. This would ensure that the salespersons benefit financially from the web site. In light of the case facts and potential solutions, I recommend that Tom takes two main actions to address his problems. To reinstate the old Charlie Davidson, Tom should offer him a new financial package that allows for flexibility in caring for his child while also providing motivation to achieve his sales targets and maximize earnings. This package should include a base salary, commission, and bonuses for surpassing quotas, similar to Davidson’s previous years at the company.
The base salary will ensure that Davidson has a stable income to support his child, should he require time off. Additionally, the commission and bonuses will serve as incentives for Davidson to meet his targets and earn even more for his family. To address both his boss, who is the company president, and the salespeople’s concerns about the website situation, Tom has two options. He can either modify the reward system to incorporate base salaries as compensation for lost commissions caused by the website, or he can implement a team compensation package that includes the website as a representative. Determining a base salary to compensate for the uncertain number of commissions lost may be challenging, so the preferable approach would be to establish a team compensation package, which the company president himself has referred to as including the website.
This satisfies everyone since the company president continues to have a website that attracts customers, while the salespeople also benefit from the sales made through the website.