Executive summary: This case was about issues that Ken Winston, the regional office manager Campbell and Bailyn’s Boston Office faced with as a result of the two recent changes in organizational structure and performance management system to react to the dynamic of the industry and market. The issues created by these two changes were process complication, limitation in competitive advantages, and discouragement on internal collaboration. We recommend Winston to engage KAT and sales specialist team, define measureable goals to each individual, set up one common organizational goal and make it as part of the performance assessment and hold more company events to encourage collaboration and relationship.
With this solution, Winston will be able to ease the process, build stronger sales team, maintain market share, gain sales, maintain profit and create good and healthy working environment within the organization.
Campbell and Bailyn (C & B), found in the early 1900s and based in New York, was one of the five largest investment bank in the worlds.
The firm has good reputation and was doing well in all segments of the investment banking industry. Within the firm, the bond division, which had been the fastest growing unit, had eight regional sales offices around the world. After New York, the Boston office was the largest. Due to the size and the revenue volume, Boston sales group was often used as a bellwether not only for new products but also for management ideas. Ken Winston, the office head, had a long history and profound experience in bond sales, was appointed in 2003 to be the Boston regional manager with the belief by the senior manager to be the supporter and coach to build and grow the local sales team.
During the past 10 years, the banking industry changed dramatically. More players came. More products were created to cope with different demands in the market place. It was harder to sell to maintain volume. It was required more bandwidth and better understanding on a more complicated debt instrument to survive. In addition, margin was shrunk due to entrance of low-service, low-price brokers.
For those higher-margin products, it was required deep knowledge and expertise to market and make the sale. In early 2007, the financial crisis and the meltdown in the mortgage-backed securities market directly impacted to the sales force in the C & B and Boston office. Winston had to make two strategic changes in order to maintain the sales growth and operate more effectively. The first move was to create the “key account team” KAT. Legacy, the five generalists in the taxable bond division sold the entire product line and managed their own list of customers. Winston had combined these generalists and assigned each of them to a specialty sub-segment of the firm’s product offerings. The goal was to enhance the sales team expertise on product details and focus each individual on just one area with in-depth knowledge. Changing from maintaining their sales on customer wise to product wise, they shared their customers, for the first time. For the past several months, there are certain number of customers enjoyed this new change as they see the new sales team more invaluable. Yet there were customers unhappy and perceived it as more complication. Also, some sales people found it complicated themselves on those large and multiproduct trades given the number of people that needed to be involved. Another bigger concern of Winston was the limitation on the natural salesmanship of his people due to this specialization.
The second change was to implement new performance management system, called “multisource” appraisal. The performance review was no longer the combination of sales volume and own manager assessments. It was then a mixture of several factors which included peer review and feedback from traders, product manager, researchers, sales, profits and manager observations. This change aimed to better the collaborations between regional sales force and cross functional teams as well as encourage the sales team to improve gross margin and profit. After the several months of change, there was an up-tick in profit margin. However, there was a risk of losing sales volume with gross margin focus. Besides, the sales team expressed their frustration. They recognized the potential of being scrutinized by other functions as part of their performance management review Below was the Boston office structure before and after the change Before After
Preparing for the annual year-end meeting, Winston had to present on these new two changes. Observing customer reactions, hearing comments directly from his sales team, he knew clearly the strength and weakness of the new changes. The new KAT team formation did provide value to some customer, yet, it created confusion, more work and complication at both customer end and C & B sales team end. Customer had to deal with multi people instead of a single contact point. More people were required to be involved in large deal. More calls and meeting were needed. The decision of introducing the KAT team had missed the engagement and input from the specialist team who were experts on specialty product. Fair process believed engagement not only communicated management’s respect for individual and their ideas but also encouraged refutation sharpened everyone’s thinking and built collective wisdom (6). There were lack of collaborations and a smooth process within the organization. In addition, the sales team spent more time in house to figure out the new process and fulfill its requirements rather than spent time to meet and entertain customers which was used to be key part of their job and potential source of generating more deals and sales. They lost their connection with customer. Callahan, who was appointed as the nominal head of KAT team, received comments from one of his major accounts, Ashland Capital, expressed the concern on the reducing engaging between the sales and customer since the change was in place. Moreover, the fact that each individual was given a specialty limited his/her natural salesmanship.
This specialization might also lead to a siloed organization structure which was definitely not the strategy. Michael Goold and Andrew Campbell stated that in formulating a strategy and organizational design, a company had to address two factors which were identifying the right market and defining the right methodology to gain the an advantage over competitors in those market (6). Many companies ended up with impeding the market strategy rather than furthering it while doing the organizational design changes. One of the failures was to create divisions among units that make it difficult to operate and increase competitive advantages (6). As the members of the KAT team could not sell other product lines outside their assigned specialty, it was difficult for them to expand their customer base. This was not helpful to compete with other competitors. With new compensation system, the organization faced the risk of losing volume sales as well as creating an inner warfare among the team members and unhealthy working environment between cross functional teams.
Since the performance was based on profit, the sales team would rather choose to close a small deal with high gross margin rather than large deal with moderate margin. Peer feedback was part of the review narrowed the information sharing between coworkers. People were more conservative. This failed the purpose of bridging the knowledge gap between sales and product. Besides, since inside relationship and performance were then important, the sales people cared less about their clients and ignore the element of customer service that was a prior differentiator. The new KAT team and performance management system created process complication for both customer and sales people, risk of losing sales volume, risk of losing competitive advantages, and failure to foster the sales team expertise and build an effective operation process within the organization. These issues had to be fixed in order to win customer satisfaction, gain market share and build a well-organized and well-functional organization.
Solution #1: Merge key account team and specialist team
Team up KAT and specialist into one small team. Move sales specialist from specialist team to be pair with each KAT member to create team for product specialization. Table below shows the new suggested structure.
This combination will create more energy and synergy for each specialty sub segments product. KAT team will receive additional supports from sales specialist especially specialist can provide insight in term of how to handle deal from product specialization perspective. It also allows sales KAT team to have more time and bandwidth to target new customer and maintain relationship with key customer accounts. Sales specialist will have an opportunity to deal with bigger accounts which helps them to better their account managing skill and build relationship with major customers. Cons:
Changes after changes will create more confusion to both customer and internal team. KAT member and sales specialist will need to spend a lot of time together in order to understand both side and become team. This change requires an absolute support and alignment between the two teams which is hard to guarantee. Just like every merger, it may run into the risk of having resistance from inside. Sales specialist may not be willing to provide support to KAT because it creates more work for them. They will have to spend time and effort to learn about the new major accounts. If this change does not come with clear direction and well-defined implementation plan, it may make the situation worse. Solution #2: Add more resource to KAT and increase engagement from both team and customer Hire more people to provide the team more support and help. One sub segment product can have one main specialist and one helper. Implement regular inspection and feedback sessions from both the team and major clients. Pros:
With the helper, the main KAT specialist like Callahan, Jenifer, and John can spend more time on customer relationship building and find new customers. Regular feedback within internal team and from customer side will ensure smooth process and customer satisfaction Cons:
Hard to find the right bond sales people. At that time of the economics, it was difficult to recruit bond sales people. This type of job required very unique skill set and characteristics. Candidates had to be outgoing, extremely self-motivated and street smart. Take time for new members to learn and adopt the new environment. It would be a while before these new people, if they can be found, can be on board and helpful. This is not a good timing as these issues need be immediately addressed Solution #3: Multi approaches
Engage specialist to support KAT member in term of process. Improve the performance management system by defining more measurable goals for each individual. Add one common team goal to encourage collaboration and information sharing. Hold more internal events to build the teamwork environment and bridge the gap of internal relationship. Pros
With the help of sales specialist, KAT member can reduce some time on the process and administrative work to spend time on building relationships with their clients above and beyond the details of the job. Measurable goals for each individual will reduce the risk of inner warfare. Weigh the sales volume and sales profit equally will boost the sales volume again. Common team goal will present the threat of sales member keep information for herself/himself because he/she is afraid of others will take the chance and perform better. If 20% of the compensation will be depended on the whole organization financial performance, the sales people will help each other, sharing information and customer relationship so that they can all earn this metric. This is a great methodology to inspire people to contribute to one common goal. Additional internal events such as summer outing, weekend retreat, team informal get together help to bring people together. They can talk, share and reduce the resistance between employee when it comes to time of asking for help or support from each other. Cons
Challenge of getting support from sales specialist. They can refuse due to lack of bandwidth. This may very well happen because supporting KAT is not one of their performance metrics. Winston will need to work very closely with his team on defining those measureable goals in order to prevent confusion. Employee needs to understand clearly the details of their goals, the benefit on achieving them and how to get there. Additional events add cost to expense. If the employee can not get the benefit from them, it is just wasting time, money and efforts. 4. Recommended solution:
This solution is a combination of several approaches to tackle those different issues caused by the new two changes. Support from sales specialist will better the business process and ease the workload for both KAT and customer. Loss of sales volume and inner warfare are addressed by defined measurable goals. Setting one common goal as part of individual performance metrics establishes win-win situation. It builds the connection among all sales people and prevents the risk of loss sales due to self-performance competition. In addition, this step will solve the issue of limitation on salesmanship when converting to sell on specialization. The sales people can still discuss and work with customer on other product line and then pass the opportunity on to the right person. Again, one member win also means the whole team wins. Winston needs to work closely with both KAT and sales specialist team to ensure the willingness to support from the sales specialist team. He needs to make sure both side can see the benefit and agree on the future path. Individual goals for each member have to be a compromised. Each of employees needs to agree on goals set up for them. Winston also needs to communicate clearly on the goal and approach.
There should be also an action plan for each member set up between Winston and each team member clearly defined how and what to reach the goals. The important factors of this change are good decision making on what needs to be done and good implementation plan on how to get it done. Paul Rogers and Marcia stated that decisions that drive the business execution are as crucial as strategic decisions (8). Making sure the organization operates effectively is as important as wining more customers and beating competitors. How organization is run will determine how many sales it can get and how well it can sustain and grow. Lastly, company events are best practice, create family-like working environments and foster the company culture. According to Rob Goffee and Garet Jones, some of the best ways to increase sociability within organization are to hold employee gatherings inside and outside office (147). It is important to make sure these events enjoyable so that they can create own positive, self-reinforcing dynamic.
Hold meeting to communicate the new plan to whole bond sales division. There will need to be a formal meeting to announce the plan, as well as communicate what employee may expect from the manager and what manager will expect from the employee Schedule individual meeting with each of KAT team member to set up measurable individual goals Set up the common company goal and formally announce it the whole team After the first meeting, schedule one on one meeting to follow up. One on one meeting is very important since it keep the connection between manager and employee. Also, it keep track with employee status and also provide chance for both to raise and hear feedback from each other Identify event calendar and publicly communicate. Determine major company event days such as summer outing, end of year party, etc… and put it up as company calendar.