/National Pharma Limited

In August 2006, executives of National Pharma received a number of letters from irate customers
who complained about the termination of the services of one of their medical representatives,
Vipen Malhotra. Customer reactions of this nature were extremely rare. National’s reputation in
the industry for enlightened management practices appeared to be in question.

The sales vice-president decided to look into the Malhotra case in detail to determine whether
Malhotra’s discharge was a “management failure” and, if so, what could be done about correcting
the situation. Accordingly, the sales vice-president collected all the data in company files that
pertained to the Malhotra case, including managers’ comments that allegedly gave insight into
Malhotra’s feelings toward company management personnel.

Background information
National was a major manufacturer of prescription drugs for the medical and dental professions.
Reputable drug wholesalers and medical shops carried all its products for resale to the general
public by prescription or to hospitals and physicians. National competed with such firms as
Alembic, Abbott, Cipla, Glaxo, and Merck among others. National’s sales in 2005-6 exceeded Rs.
240 crores.

National fielded a sales force of over 500 medical representatives (MR) who called regularly on
hospital personnel, doctors, and dentists to describe the National line and to persuade them to use
and prescribe National drugs. A typical National MR was responsible for about 200 physicians
and hospital accounts within an assigned geographic territory and he or she was expected to make
between 6-9 doctor or hospital calls per day.

Most National MRs were pharmacy school graduates. Some of them had a few years experience
as registered pharmacists in retail medical shops. Each new National MR received a month’s
training in product characteristics and selling or detailing skills at the company’s Mumbai HQ. In
addition, both new and experienced MRs received regular on-the-job training from the 35 area
sales managers. A National MR could expect between 10-15 days of these ‘field visits’ in a year
from his area sales manager, depending on his or her experience and performance. All National
MRs returned regularly to Mumbai HQ for continued training throughout their careers.

National’s executives considered these MRs second to none in the business. 60% of the MRs had
10 or more years with the company. 25% had fewer than 5 years. About half, were aged 40 or
more, and 25% were under 30. Senior executives were also gratified that turnover in the sales
force was much lower than the industry’s average. Only about 8% were lost each year from quits,
discharges, retirements and deaths.

National MRs were salaried and received an annual bonus based on corporate performance. In
2005, a MR’s total earnings ranged from Rs. 1,20,000/- to Rs. 3,60,000/-. The corporate bonus
typically amounted to an additional 15% of these totals. In addition, each MR was provided with
a company motorcycle, generous fringe benefits, and reimbursement for all normal business
expenses.

Every National MR was evaluated in terms of both sales volume and improvements in his or her
relationships with customers. Quotas were established yearly for each of the dozen or so major
product categories to stimulate proper concentration of detailing efforts. Every National MR

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received a formal performance evaluation from his or her area sales manager once a year and
informal evaluations whenever necessary.

Almost all of the 35 National area sales managers had been chosen from among the sales force
for leadership, administrative ability and selling activities. Evaluated chiefly on ability to develop
personnel, each was expected to spend 3-4 days per week on field visits with his MRs. The
individual area sales managers reported to one of the 6 zone managers, who reported in turn to the
sales vice president.

Vipen Malhotra
In June 1994, Vipen Malhotra, the 32-year-old supervisor in a major wholesale medical shop in
Bhayander, Mumbai, had submitted his application to National for employment as an MR.
Malhotra presented a good academic record and a history of successful medical shop experience
since his graduation from a top flight pharmacy college in 1988. Malhotra had grown up in
Bhayander and had married a woman from the same area in 1989. In 1994, the couple owned
their own home in this suburb, where they were active in community and temple affairs. They had
two children.

Malhotra had explained that he had been considering joining National for over a year. He knew
several National MRs and had talked with them about the job. Since the earliest days of his
training in pharmacy, Malhotra had considered National one of the finest firms in the industry.
After a few rewarding but unexciting years in retail pharmacy, he had decided to become a MR.
His first territorial preference was Mumbai, although neither he nor his wife felt that moving to
another part of the country would deter his joining National. Malhotra also had expressed interest
in being considered for an international assignment in the future, as he had visited almost every
major European port during his years in the navy.

A National MR who knew Malhotra quite well had arranged for him to meet Pankaj Roy, the area
sales manager in West Mumbai. Roy had been impressed with Malhotra. He rated him highly in
sincerity, aggressiveness, attitude, enthusiasm, learning ability, judgment, character, affability and
appearance. His personal references were outstanding. In a note to his zone manager, Roy had
said: “I am quite hopeful that we will be able to obtain the services of Vipen Malhotra. I have
every reason to believe that he will develop into an excellent salesman.”

Working with Pankaj Roy

About a month after the interview with Roy, Malhotra joined the National sales force and was
assigned Dahisar/Virar territory, which greatly pleased the Malhotra family. Although his new
salary level of Rs. 1,40,000/- a year was below his current salary at the medical shop, he believed
that his earnings potential with National would be considerably greater in the long run. Malhotra
had an advantage in that he knew personally many of the physicians and hospital personnel whom
he would be calling on.

Malhotra’s initial field training went smoothly. Roy was certain that he had made an excellent
decision in hiring Malhotra. Malhotra quickly grasped all facets of the job, including product
characteristics and basic selling skills. He was exceptionally well received by physicians, office
receptionists, and hospital personnel. MRs under ASM Roy also welcomed him cordially.

The only characteristics that caused Roy even momentary concern were Malhotra’s seeming lack
of attention to organization, planning and follow-up of his work and his tendency to question the
logic of some of the company’s major promotion programs. But since these attitudes were not
unusual with beginning sales people, Roy wrote these off to inexperience.

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After four months on the job, Malhotra joined a group of other recently employed MRs at
National HQ for a month long sales training program. The new MRs studied customer
preferences, product characteristics, and sales promotion practices, as well as the pharmaceutical
industry and National’s competition. Top National executives lectured on corporate history,
policy, philosophy and goals. In addition, the MRs had ample opportunity to share their problems
and experiences with other MRs during social get-togethers. The training department’s report on
Malhotra was excellent.

Shortly after Malhotra’s return to the territory, Roy spent a couple of days in the field with him.
Although it was apparent to Roy that Malhotra had benefited greatly from the HQ training
program, Roy was disappointed with Malhotra’s seeming indifference to work organization.
Malhotra gave little advance thought to the physicians he hoped to see and worse; he had no
definite plan or approach once in the physician’s office. On each call, his attitude was ‘catch as
catch can’. His approach to hospitals was much the same. He also displayed more interest in
developing his own promotion programs than in following the plans outlined at the area sales
meetings. He tended to ‘second guess’ the scheduled promotion program by deciding himself
what products to promote.

Roy also thought that by this time Malhotra should have better records of physicians and should
have known more about their backgrounds, practices, hospital affiliations, and product
preferences. Malhotra also tended to prejudge his customers’ interests. His sample bag was
cluttered and poorly organized, and he often did not have the appropriate promotion literature to
accompany the product being discussed. Material kept in his motorcycle and at home was in no
better shape.

Roy reminded Malhotra that serendipity was not the pattern of a successful salesman. He pointed
out that Malhotra ought to change these bad habits early in his career. Roy also suggested that
Malhotra should do less ‘visiting’ during his hospital calls and use this valuable time for more
sales presentations.

Nevertheless, a good number of Malhotra’s physicians had increased their National prescriptions
in recent months, indicating Malhotra’s ability to influence physicians favorably. There was also
an increase in the number of physicians buying National products for their office use. Malhotra’s
hospital sales were also showing gains.

In January 1995, Malhotra’s salary was increased to Rs. 1,50,000/-, a level even with that on his
previous job. Malhotra seemed to be becoming increasingly more comfortable with his physician
and hospital accounts, and sales through out his territory were growing steadily. Roy continued to
stress the need for better planning, follow-through, and responsiveness to direction. He reiterated
that Malhotra could do much better with his good customer rapport if he were better organized
and he pressed harder for commitments to adopt National products.

In July 1995, near the end of his first year, following another two days with Roy, Malhotra
received his first formal performance review. As on all previous occasions, Roy instructed
Malhotra about ways to improve his performance. Roy did most of the talking and there was little
discussion. From the interview, Roy gained a clear impression that Malhotra had found his
suggestions helpful and would try to do better.

Roy drew up a written appraisal to be reviewed by the zone manager and the sales vice president.

On the favorable side of the report, Roy had this to say:

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 - A hard worker – loyal and dedicated
- Well received by physicians and hospital personnel
- Anxious to do well
- Appreciates and follows instructions and suggestions
- Cooperative and helpful with fellow MRs

These were the notations made on the adverse side:

- Should overcome the tendency to prejudge customers and promotion programs
- Should be more responsive to management directives
- Should give more attention to planning and organization of work

Malhotra’s overall work performance was recorded as BELOW STANDARD.

In January 1996, Malhotra’s salary was increased to Rs. 1,60,000/-. In July 1996, his second year-
end performance review resembled the first: Work performance – BELOW STANDARD, attitude
– STANDARD

At this time, the zone manager and the sales vice president took note of these performance reports
and asked Roy for his assessment of Malhotra’s potential. Roy replied that Malhotra was making
substantial progress and that he expected him to overcome his deficiencies in the near future.

In January 1997, Malhotra’s salary was raised to Rs. 1,70,000/- and in July 1997, as Roy had
predicted, Malhotra’s progress review indicated substantial improvement. His overall
performance was now STANDARD. The only areas still needing improvement were planning and
organization.

The July 1998 performance appraisal report was even better. Malhotra’s efforts to improve his
call planning and overall organization had impressed Roy to the point that he now rated this
aspect of the job as COMPLETELY SATISFACTORY. Roy also indicated that Malhotra’s
attitude could not be better and that he had made great strides in overcoming his tendency to
prejudge management, customers, and promotion programs. Malhotra’s judgment and
responsiveness to supervision were EXCELLENT. His overall rating was ABOVE AVERAGE. In
January 1999, Malhotra earned a salary of Rs. 2, 00,000/-.

Working with Prakash Kulkarni

In March 1999, Roy was transferred to another area. A new area sales manager, Prakash Kulkarni,
an experienced and highly regarded supervisor, replaced him.

Kulkarni’s initial field visits with Malhotra went well. Kulkarni was impressed with Malhotra’s
customer rapport and acceptance throughout his territory. Kulkarni frequently heard doctors refer
to Malhotra as one of the best MRs in the area. A prescription audit of several of the larger
medical shops in Malhotra’s territory confirmed an impressive share of prescriptions for all major
National products.

In July 1999, Malhotra’s first performance review under Kulkarni recorded SATISFACTORY
ratings across the board, with the exception of planning and records keeping.

In the same month, on the occasion of Malhotra’s 5 th anniversary with National, the company’s
president sent Malhotra a personal letter congratulating him on his important anniversary and
expressing ‘sincere gratitude for your fine contributions during your first five years with
National.”

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Over the next three years with Prakash Kulkarni, Malhotra’s performance remained
SATISFACTORY. And he was given steady salary increases. In 2001, he was given the added
responsibility of overseeing a distributor. Kulkarni suspected, however, that while Malhotra
considered this activity interesting, he found the attendant work with the distributor, a bit time
consuming.

July 2002: His salary reached Rs. 2,40,000/-. His final progress review with Kulkarni, in July
2002, a few months before Kulkarni too was transferred to another area, was the best yet.
Kulkarni recorded:
- Outstanding reception in physician offices and medical shops is a great asset
- Most gratifying improvement in medical shop sales
- Good acceptance by fellow MRs.
- Contributions at area sales meetings greatly appreciated
- Excellent attitude and company loyalty

Malhotra’s overall work performance was recorded as WELL ABOVE AVERAGE

His attitude was graded as WELL ABOVE AVERAGE

Working with Ved Mehta

In September 2002, Malhotra began reporting to Ved Mehta, who was gaining a reputation in the
company as a bright, young, energetic manager with a lot of new ideas about how to increase
sales. Malhotra appeared to find Mehta’s emphasis on ‘team work’ stimulating.

At first, Mehta was complimentary about Malhotra. Like previous area sales managers, Mehta
was quick to observe Malhotra’s excellent rapport with virtually everyone in his territory.
According to Mehta, however, Malhotra was not using this selling asset to its fullest advantage.
Mehta pointed out more opportunities for increased sales than previous supervisors had ever
mentioned.

First, Mehta expressed dissatisfaction with Malhotra’s record in establishment of new product
with physicians. Second, he criticized Malhotra’s poor penetration with dentists – a facet of
Malhotra’s job that previous supervisors had not noted. Mehta asserted that an improved attitude
and better organization and planning, and follow up would remedy Malhotra’s performance.
Mehta outlined some sales goals for Malhotra to reach within next six months.

During the next four months, Mehta made several specific suggestions to Malhotra. Mehta
advocated ‘pinpoint’ detailing, that is, presenting one or two items of particular interest to each
physician depending on his or her type of practice, rather than ‘rambling on’ about five or six
products. Mehta also talked about ‘getting the doctor involved’ during the detail call.

Mehta also announced that the disorder in Malhotra’s detail bag and motorcycle was deplorable.
Mehta could not understand how any MR could operate effectively with working tools in this
kind of disarray. Malhotra’s lack of an organized record and filing system was also beyond
Mehta’s comprehension.

During this four-month period, Mehta spent five different days with Malhotra in various parts of
his territory. On each of these field visits, Mehta expressed interest in seeing a specific physician.
On one such visit, Malhotra informed him that the doctor was never in on that day. On his return
to the zone office, Mehta discovered that Malhotra’s doctor call record showed that he had seen

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the physician in question regularly during the past two years on various days of the week –
including the day in question.

During his next visit, Mehta called Malhotra’s attention to this discrepancy. Mehta referred to the
gravity of falsifying reports and reminded Malhotra that company policy provided for dismissal
in such situations. Malhotra explained that, although this physician did not have office hours on
that particular day, she did occasionally see MRs in the morning while catching up on her
paperwork. Malhotra had sometimes taken advantage of this opportunity and had then ‘saved’ the
call report slip for days when he had not been able to meet his doctor call quota. Malhotra stated
that he would never do so again and that his future record keeping would be flawless. Mehta
confirmed that nothing less would be acceptable. “Rules are rules and that is the way it is going to
be,” Mehta added.

In January 2003, Mehta and Malhotra had a lengthy discussion. Mehta notified Malhotra that he
would no salary increase that year. Mehta cited several specific incidents in which Malhotra’s
poor attitude, careless organization, and inattention to planning and follow-up had been directly
responsible for missed sales opportunities. Many of the sales goals that Mehta had set four
months ago had not been met. Malhotra’s new product placement was seriously deficient. His
sales from special promotions to retails and hospitals ranked in the lower half in the area sales.
Mehta closed the discussion by challenging Malhotra’s attitude towards management directives
and company sales objectives.

Most of this lengthy discussion was carefully committed to paper. An apparently stunned
Malhotra signed a statement confirming that he was now on PROBATION and that failure to
improve within 90 days would lead to dismissal.

At the end of the probationary period, after spending several days with Malhotra in the field,
Mehta informed Malhotra that his intense efforts to measure up to Mehta’s expectations during
the past three months had paid off. The most dramatic changes were his newly organized detail
bag. He ‘spruced up’ records. His reporting accuracy was unquestioned. Mehta also
complimented Malhotra for his detailing approach changing from rambling discussions to pin
point presentations. Malhotra was also now sticking to the promotion schedule as outlined by the
HQ and ratified at area sales meetings. His increased effectiveness in medical shop selling was
confirmed by recent special orders. Several new product goals had been reached in selected
hospitals. Accordingly, Malhotra was removed from PROBATION and his performance was now
recorded as SATISFACTORY on all counts.

In January 2004, Malhotra was given a salary increase to Rs. 2,50,000/- and in July his
performance, according to Mehta, was still SATISFACTORY on all counts. He also received a
personal letter from the president of the company congratulating him on his 10 years of ‘fine and
loyal service’. There was another change in area sales manager.

Working with Promod Kashyap

The new area sales manager was a much newer and younger man than Mehta. This was Promod
Kashyap’s first supervisory assignment. He had been with the company half as long as Malhotra
but had established himself as a competent detailer and promising management candidate.

According to Kashyap, his first few visits with Malhotra were pleasant and uneventful. Kashyap
had access to Malhotra’s complete file and felt thoroughly familiar with his background and the
obstacles to his development. The two men frequently talked about Malhotra’s ‘ups and downs’

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with previous area sales managers. It seemed to Kashyap that Malhotra appreciated these
opportunities to discuss the problems of previous years.

Kashyap found Malhotra’s performance generally satisfactory, especially in view of his earlier
problems. Kashyap was impressed with Malhotra’s customer rapport, as previous supervisors had
been. Kashyap talked with Malhotra about the progress he had made in planning, organization,
following direction and effective use of time granted him by physicians. Kashyap also
commended Malhotra’s attainment of sales goals.

However, Kashyap still questioned the slow acceptance of new products among Malhotra’s
customers. He indicated that physician sales in general were not what they should be. He also felt
that Malhotra could follow area sales and HQ directives more promptly and that his organization
was still deficient – his records of hospital and wholesaler personnel were inadequate. The
samples and promotional literature in his bag were disordered. Kashyap recommended a salary
increase of Rs. 6000/- for Malhotra for January 2005.

Later in April 2005, Kashyap made some substantial additions to Malhotra’s file. In a carefully
detailed letter to his zone manager, Kashyap outlined several of the points that he and Malhotra
talked about on many previous occasions. Specific instances of Malhotra’s failure to comply with
Kashyap’s suggestions were itemized.

By July, Malhotra’s overall performance had slipped. He was notified during his annual review
that his rating had gone from SATISFACTORY to COMPLETELY UNSATISFACTORY.
Kashyap closed with an admonition that Malhotra’s performance would now have to reach an
acceptable level with in 90 days. Once again, Malhotra was on PROBATION.

Malhotra was instructed to submit to Kashyap’s office a written plan outlining his intended
approach to extricating himself from this current status. Although Kashyap provided the basic
outline for this ‘master plan’, Malhotra had only to fill in the details – which he found easy to do,
since he merely needed to agree with Kashyap’s ideas on how the job should be done.

Working with Sanat Kumar

Promod Kashyap being transferred to another area in September prevented his following through
with Malhotra. The new area sales manager, Sanat Kumar, whose background was comparable to
Kashyap’s, was only able to spend two days in the field with Malhotra before he too was
reassigned in March 2006.

In view of his brief exposure to Malhotra, Kumar made no change in the file, although he
confirmed some of the observations made by the previous four supervisors. Although he did not
discuss Malhotra’s probationary status in detail, Kumar implied that the time limit set by Kashyap
was no longer valid. While Malhotra received no salary increase in 2006, at least the probationary
status had ‘evaporated’.

Working with Partha Ghosh

2006 was Malhotra’s 12th year with National and he had his 6 th supervisor in April, Partha Ghosh.
Ghosh was also younger than Malhotra, but he had been a supervisor a year or so longer than the
previous two area sales managers.

Malhotra had not had salary increase during the year. Yet his present base salary plus annual
bonus and other allowances and benefits, placed him in an income bracket enjoyed by few of his
pharmacy school contemporaries, who were still working in wholesale and retail stores.

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Before his first meeting with Malhotra, Ghosh went over Malhotra’s sizeable personal history
folder in detail. Ghosh also assured the zone manager that with proper guidance Malhotra could
be remodeled into an above average performer. In view of the complex history of the Malhotra
case, Ghosh took considerable time writing a detailed narrative report to use a discussion guide in
his interview with Malhotra.

Ghosh began by summarizing all of Malhotra’s deficiencies as seen by earlier supervisors. He

pointed out that the record was not good and that the time was fast approaching when substandard
performance could no longer be tolerated. Ghosh then turned to a long list of ‘survival’
procedures that would save Malhotra’s career and his job. Malhotra would have to improve his
sincerity, company loyalty, job interest, enthusiasm, cooperation, work habits and deference to
supervision. Nothing but complete success could prevent dismissal.

Ghosh set no time limit for the necessary turnabout. Instead, he instructed Malhotra to call him at
an appointed time each week to discuss his adherence to the outline and to review his daily
progress. Ghosh’s program also included a weekly reading assignment of technical and
promotional literatures, designed to Malhotra establish new products. Malhotra was also required
to fill out questionnaires on each of his major hospital. These were forms designed to give
Malhotra the market intelligence he needed for improving his hospital sales.

Malhotra agreed to every point in the step-by-step program. Ghosh required that he sign each
page of the master plan to indicate his complete understanding of what had to be done as well as
of the consequences of failure. The interview lasted four hours.

By now, the zone manager had also been transferred. The new manager, Peter Fernandez, was a
seasoned field executive with an excellent reputation within the company. Ghosh and Fernandez
carefully reviewed the blueprint for Malhotra’s rehabilitation. Fernandez approved of the program
and asked that Ghosh submit to the zone office periodic reports on Malhotra’s progress.

Subsequent weeks did not go well for Malhotra. He got off to a bad start with late phone calls and
written reports. He began to fall behind schedule in reading assignments and in collecting the
required market data for his files. Sales volume within his territory was unchanged.

In Ghosh’s judgment, Malhotra appeared moody, unfriendly, indifferent, and lethargic. He had
less and less to say, and offered fewer and fewer explanations about his failures on each
subsequent weekly report. Ghosh’s field visits fell far short in eliciting the kind of response that
Ghosh had hoped for. Even reminders that time was running out for the dismissal decision no
longer appeared to have any stimulating effect on Malhotra. The only attitude that seemed
constant was his professed fondness for his company and job and his desire to do better.

By July, after several interim conferences, Fernandez and Ghosh agreed that time had run out.
Malhotra should be separated from the company. Ghosh arranged a hotel meeting with Malhotra.
The discussion was short and centered on the well-documented facts that Malhotra had been
given ample opportunity to succeed and that in view of his long history of failure he had no
alternative but to resign.

According to Ghosh, Malhotra accepted the ultimatum with surprisingly little resistance or
comment. He told Ghosh that he understood why the job was no longer for him. Ghosh felt that
Malhotra was relieved that it was all over. He expressed gratitude for all the help he had received
through the years and he said he would always have a warm spot in his heart for National and his

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colleagues. At age 44, he now planned to return to the same medical shop from which his sales
career had been launched 12 years ago.

Ghosh reported to Fernandez that the dismissal session had gone exceptionally well and that
Malhotra completely understood and agreed with the decision and was leaving the company with
no ill will. The only touchy spot in the entire session was Malhotra’s request to talk over the
decision with his family. Ghosh pointed out that the conditions of his employment were no longer
negotiable and that no point would be served in his discussing the situation with anyone.
Malhotra also understood that his entire case had been reviewed many times with the zone
manager and corporate HQ. The decision was irreversible.

The Aftermath
A week later, Malhotra called the National zone office for an appointment with Fernandez. He
said he had been treated unfairly and that he would like to talk over several other circumstances
regarding Ghosh’s handling of his case and well as Ghosh’s overall management of his area.
Fernandez replied that he was thoroughly familiar with every detail of Malhotra’s history and that
he was in complete agreement with Ghosh’s action. He saw no reason to meet with Malhotra.

During the following week, the president of National received a lengthy and thoughtful letter
from a prominent physician in Malhotra’s territory. The doctor expressed disappointment and
chagrin over Malhotra’s dismissal. He was stunned that a MR of Malhotra’s reputation and
standing could be dismissed so abruptly and for such arbitrary and flimsy reasons. He also cited
‘irregularities’ in some of the current management and promotion practices in the area. He
wondered what was happening to the long-standing ethical policies that had given National such
a fine reputation among physicians, pharmacists and hospitals.

The president promptly replied that he was requesting an immediate investigation and that the
zone manager Fernandez would contact him. A meeting between the two was quickly arranged.

Fernandez attempted to explain to the doctor the long history of Malhotra’s unsatisfactory
performance, poor attitude, and reluctance to improve. He also related the abundant patience and
help that had been given to Malhotra by each of area managers. He reiterated the long and
thoughtful managerial consideration that preceded Malhotra’s dismissal. He also reminded the
doctor that Malhotra had completely agreed with the decision.

The doctor was not satisfied. The explanation failed to tally with his and other physicians’
impression of Malhotra as an outstanding MR. The doctor asserted that many other physicians
and pharmacists in the area were talking about Malhotra’s dismissal, expressing similar surprise
and concern. Since the doctor was not satisfied with the explanation, he again wrote to the
president to tell him so.

In the meantime, the area sales and zone offices received several similar letters and calls from
other physicians and pharmacists. The sales vice president also heard from several doctors and
medical shops throughout Malhotra’s territory.

The main them was the same – surprise, disbelief and perplexity over the abrupt and unexplained
dismissal of one of the finest and most helpful career MR in the area.

The central question seemed to be – “How could this possibly happen to a man like Vipen
Malhotra in a company like National?”