1) What are the problem facing Pat Waller?
Pat Waller is the one who recently hired as sales manager of the San Francisco region’s chain division. The major problems facing by him are high turnover and continue with sales increase.
According to the case, on average a sales representative had been with the San Francisco division of Valley Winery only for 7 months which contribute to the approximately 100 per cent turnover rate in sale force on the division and also 50 new sales representative are hired each year. Besides that, the turnover problem led to a series of conclusions where the costs of recruiting and training approached $30,000 per year representative. The $30,000 figure does not include opportunity costs associated with lost sales resulting from not having accounts called on and these cost also do not include the time it would take for a new representative to adequately develop rapport with the account. Therefore, training cost issue is in nature the side-effect of the high turnover rate of the sale persons in the division and without the high turnover rate, this problem could be much mitigated though it still concerns the management at the same time.
Waller faces the future problems of declining sales and sagging profits that are likely to occur unless the turnover problem can be resolved. There are other problems that will concern Waller. The case hints at a potential sex discrimination problem. The San Francisco division, like other Valley divisions, has three distinct sales groups. The second group, which calls on hotels, restaurants, resorts, and motels, is predominantly female. Their salary is in the $39,532 to $36,233 range and opportunities for advancement into management are pretty much nonexistent. The sales group calling on the chains is predominantly male and earns salaries in the $45,563 to $52,263 range. Promotions to sales management typically come from this group.
2) What are the causes of the problems facing Waller?
From the case, we can see that the sales representative work under high pressure. One of the major competitiveness behind Valley Wineries success is its aggressive sale which takes the form of push strategy by setting quota for the sale reps. As a matter of fact, in many industries in particular retail industry, quota setting is normal and in usual compensations could be linked to performance measured based on the quota realization. But the reason which it could become a problem is when the quotes become too far away from the sales reps’ reach such as the goals are in general considered as very difficult or even impossible to achieve. From the above chart showing the realization of the quotes by 8 sale reps in three product lines which are Cool Valley, Santo Rey and Valley Wines, termination became usual when the sale reps could not achieve the quota for a certain number of months, usually 3 months, and also from the reflections collected from the sale staffs, the quota are truly difficult even when the sale seemed to be good enough. When efforts are paid but quota is not fulfilled, it is normal and understandable that the sale staff would become discouraged and would choose to quit the job even though they are not terminated.
In this case also, there are lacks of Professional Behaviour from sales representatives. The aggressive displayed by sales reps in the wine and liquor industry, especially Valley sales reps, who have been accused of relocating competitive displays and products to obtain the best space for Valley wines. Sales representatives from other wineries dislike the competitive spirit that shown by Valley reps, who have also been accused of such tactics as spraying hair spray on competitive displays and bottles so that they will gather dust and so discourages sales. There are also lying about numbers where they pumping up the numbers meant a salesperson would claim a 50 case display had been installed when the store manager or wine clerk would only order a 25 to 30 case display. The display would only look like a 50 case display where center boxes in the display would be empty.
Based on this case, it shows that hiring process has a high cost. Mike Wehner, personnel manager for the San Francisco division, was responsible for hiring all personnel for the division, including warehouse workers, truck drivers, office personnel and the sales force. Wehner used a variety of methods to attract sales candidates include of recruiting fresh graduates, newspaper advertisements and also posting job notice on selected job search Web site that usually produced 10 hires per year. They also use of six local employment agencies where the fees of approximately $3,000 per hired individual, resulted in 15 to 20 new reps per year. The hiring process takes long time where there are three interviews and a day in the field with an experienced salesperson.
Carl Roman had been very concerned with the chain store sale performance in the San Francisco area for some time. Less than six months later, Roman introduced yet another modification reflecting the importance of key customers, which were classified as major accounts. Sales reps calling on major accounts represented the entire Valley line of wines and distilled spirits. The San Francisco division is responsible for sales to all of the major grocery headquarters, such as Safeway, Albertson’s and Cala Foods. It is difficult for the sales representatives to adapt such a fast change.
3) What should Pat Waller take to resolve his problem?
Based on the case, Pat Waller should require more freedom and less pressure to the sales representative. He needs to hire somebody to manage the software system in the company to control the turnover. Therefore, Waller should motivate the sales representative with more confidence level towards the company’s turnover. Besides, Waller should give assessment to the high level management and get feedback from them about the turnover. Pat Waller should give training sessions to the sales representative to control the turnover.
From the problem that causes by lack of real sales goals, the way to prevent the problem is to make a simple transaction to make it more understandable. Then, the transaction must can be measurable that make the amount are properly recorded. The goal must achieve the benchmark to get the acceptable quotas for the sales representative. Plus, it must get the realistic goal and it must base on time that required.
The other problem is the continuous changes on sales organization structure, then it become the problem that need the resolving such as do the observation and analysis before appoint the worker. Waller should do organization structure based on the experience of the worker; the more experience person should lead the team. To decide the accurate structure, all in the organization of sales should have their own experience and knowledge about the sales. The important things is avoid changing the organizational structure too fast because it can make the work cannot run smoothly and make other people confusing to deal with.
The hiring process has a high cost and it burdens the company, so Waller need to change the ways while do the hiring process. Waller can change the ways on hiring process such as change the characteristics that are looking for. Then, if now the process took too long time but now Waller should make it short and it also can save cost. To make it short such as delete the step that not too important or combined it become one step for the hiring process. When the time can make a short period and the step are properly plan for that process, it can cut the high cost and also make more saving for other expenses that more important.
Courtney from Study Moose
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