mcgraw hill case study
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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 - PowerPoint PPT PresentationTRANSCRIPT
McGraw Hill Case Study
Grant Senter and James PaulsenBaylor 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 dollarsSavings: 2.4 million dollarsExpenses: 2.32 million dollars56.4 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- 5,000,00018 Product Specialists- 900,000 Implementation- 200,000Bonuses- 720,000Total 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