McGraw Hill Case Study

Grant Senter and James Paulsen

Baylor University

Identification of the Issues

Sales Process

Sales force Structure

Compensation

Sales Training

Sales Process

Campus Plan

All about numbers and opportunity for revenue

No deep thought process

Created the night before

Lack of real preparation

Relationship is lost

No Desire

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

Bottom Line:

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

Buyer Process

Salesforce 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 salesMissed 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.

Issues:

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%.

Sales Training

“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.

Recommendations

Sales Force:

Sales Process

Starts with Training

Process: Develop a Relationship

Remove “check ins”

Become less concerned with maximization of revenue opportunities

Require and encourage conversation

Cascading Campaign:

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

Turnover Revenue & Profit

Implementation Process

January

Inform experienced reps of the new policy

January

Training of experienced reps at

main office

JanuaryNew recruits begin three

month training

MarchExperienced reps must complete first E-Leaning

session

MarchConduct ride along,

district mangers observe sales reps

March

Make sure new sales reps pass certification to enter the field

JuneExperienced reps must have logged second E-

Learning session

JuneBreak down region by

district success

JuneSend directors to the

least productive districts. He will train, advise, and advance the process in these

districts

Financials: Increased Revenues: 54 million dollars

Savings: 2.4 million dollars

Expenses: 2.32 million dollars

56.4 million -2.77 million dollars=

Increased Profit: 53.63 million dollars

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

Savings:Expected Decrease in Turnover- 1,000,000

Compensation:

300 reps with the bottom 20% not making quota: Currently: 60 x 50,000= 3,000,000 New plan: 60 x 60,000= 3,600,000

60% reps hit quota: Currently: 180 x 70,000= 12,600,000New 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+ 1,200,000Total Savings= 2.4 million dollars Impact on Revenues= 1.5 million dollars