Clearion Software: Sales Management

Presented by Group 8
Agenda
 Overview
 Questions
 Key Take Aways

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Overview
Clearion Software founded in 1996 was a software solution
provider for large enterprises and government

Clearion was a market leader in SLA niche market with a

little direct competition

Market opportunity in this segment existed only by scaling the

sales organization and having a first mover advantage

The protagonist of the case is Mark Jacoby, who is the VP

of the Americas sales organization.

After missing his quota for the first time in his career at
Clearion, he needed to revaluate his strategies for setting
quotas, allocating headcount, and assigning territories

Jacoby proposed a new model called a unit size model in

which headcounts were treated as units and sales
managers accountable for activities like shared resources,
costs 3
1) How equitable and sensible were the specific headcount and
quota allocations given out by Jacoby in January 2006?

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Which region would likely yield the most profitable investment of
headcount in H1 2006: east, west, federal, or Latin America?

Year East West Latin America Federal

Revenues/Unit
Quota H2 2005 (Rev 32 39.6 2.5 7.0
$ in mn) Region 2005 2006
Achieved Targets
Quota 2006 (Rev $ 38.2 45.1 2.8 6.3
West 0.19 0.19
in mn)
% shortfall or -15% 20% -10% -19% East 0.16 0.17
surplus in 2005
Latin 0.13 0.12
% growth Quota 19% 14% 14% -10% America
Federal 0.11 0.09
Headcount H2 2005 200 214 19 64

Headcount H2 2006 220 242 24 72 Most Profitable investment of

headcount
% Headcount 10% 13% 27% 13%
Growth West

In spite of East Even though Headcount Quota reduced

West
East

Federal
Latin America

not achieving
2005 targets;
they had
achieved 20%
increased by
highest %
by 10% and
headcount
Federal
highest surplus over growth increased by 13
increment in their quota, they In spite of %
quota for 2006 + also had a very shortfall, Quota
least increment high headcount. also increased Latin America
in headcount West had utilized
maximum
shared
resources East 5
Should the east and west regions be equally profitable (i.e., achieve
the same revenues per unit)?

East –west equally East territory was re Surplus over targets in

Ideal scenario

East : As-Is

West: As-Is
profitable divided. Sales persons H2 2005. But were the
would be de motivated H2 2005 targets were
Larger Quota with correct? Did the West
Targeting same smaller territory region have more
customer Profile potential than targets
East had not met their actually set?
targets. Their quota was
further increased and West utilized maximum
least headcount growth. shared resources. More
experience sales
Already difficult goal persons selling for
made even more West.
difficult

As per current allocations, east and west will not be

equally profitable. There is motivation issue here and
clear unfairness in allocation of quotas and
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headcounts.
Force-rank Jacoby, Garton, Hall, Cheng, Chapas, and Dreyer in order
of their likelihood to achieve their target, from 1 (most likely to
achieve goal) to 6 (least likely to achieve goal).

Rank Manager
1 West: Hall
2 America: Jacoby
3 Inside Sales: Dreyer
4 Federal: Chapas
5 Latin America: Cheng
6 East: Garton
Key Issues
If quotas are imposed on your
salespeople without an explanation of
how they were developed and defined,
the result could be resistance
Don’t penalize successful sales people
by pushing their quota out of reach; they
may retaliate by selling less

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 How equitable and sensible were the specific headcount and quota
allocations given out by Jacoby in January 2006?
What was needed?

• Focus on what is achievable with reasonable effort

• Look at the territories and determine the areas that have the
best opportunity to succeed
Not Equitable and
Sensible • Logical quota based on research and fact (Geography,
historical achievement, market research, competitors’ actual
sales, etc.)

• Consider ‘stretch goals’ - additional bonuses, incentives

• Create culture of discipline to drive consistent behavior year-

round

• Understand that everyone has different levels of drive,

ambition, motivation

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 Can Jacoby’s model for allocating headcount and quotas equitably
account for realistic new hire productivity levels and still accelerate
hiring times?

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 Can Jacoby’s model for allocating headcount and quotas equitably
account for realistic new hire productivity levels and still accelerate
hiring times?
• Allocating Headcount and Quotas equitably increases pressure on
New Hires

• New Hires should initially be assessed on Activity based

outputs(Hiring CAMs was expensive)

• Hiring decisions ought to be well in advance and at corporate level

based on the company strategy for the next Half/Year and external
conditions

• Headcount based quote might decease the hiring times and make
managers accountable for the Hiring process

• However, it might result in a sub-standard sales force

Hiring needs to be centrally controlled in due consultation with Regions 10

Should quotas be based on profitability (and not revenues) if managers
will be judged on their contributions to profitability?

Quotas should be based on both Top line & Bottom line

• Revenues
Top Line • No. of Customers(Market Reach)

• Net Profits
Bottom Line • Maintaining healthy PV Ratio

Sales
Quota
1.Evaluate(Appraising)
2.Control( Expense, Profitability)
3.Plan(Sales Plan, Forecast)

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Developing a Sales Quota-Current
Scenario

The quota setting Adapt quotas to

process was Add a growth market conditions
expectation Jacoby was placed
subjective instead and company
n an adversarial
revenue plan
it should have situation and
been based on Challenging but managers had no Carryover sales
territory analysis, realistic in line with incentive to work
‘SMART’ format
was not used and
lifecycles collaboratively
but it was not the make mangers
Establish accountable to
case for east Adapt the quotas to Get buy-in from
parameters for
developing quotas region each sales rep SEs and TSMs your sales team

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 Headcount allocation
Current:

Metrics
Currently:

Data Views
Salesperson Growth
capability
based To be:
To be: Gross Target/Goal
Contribution to fair a fair
Margin relative
valuation and
consistency

Currently: Currently: Semi

Timing
Focus
Market annually
Segment To be: Annually
To be: Product so that forecast
and aligned includes
with carryover sales
company’s to address
goals to growing
remove needs
inefficiencies

• The shared resources should be adjusted in accordance with the sales

targets of the relationship managers
• Penalties to be imposed for excessive use of resources
• Focus on efficiency when accounting for compensation
• Carryover sales to be accounted
• Central hiring team after the quotas have been set will improve the time lag 13
 What areas, if any, of Jacoby.s model and processes for allocating
headcount and quotas needed to be adjusted?

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New Model
Optimize for profitability
Improve understanding of
spending allocations
Merge decisions about
headcount and quota allocations
Empower managers to participate
in the decision process
Accelerate hiring times
Make managers assume the cost
of TSMs and SEs
Adjusted Model
Selling budget to be enforced to build in
efficiencies and reduce costs instead of
unitization method
Exhaustive Pipeline analysis
Aggressive sizing strategy was not in line
the profits and revenues because although
their was a dip in the target for Federal
region the headcount was actually increased
Carryover Sales to be accounted for:
Quantitative method of forecasting that takes
into account cyclical changes, seasonal
variations and trends or long term changes
Separate hiring agency that collaborates with
the team of Davitian and based on the quotas
assign an equitable mix of TSEs, SMs and
CAMs(to avoid an all CAM organisation
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Assume for the moment that Jacoby believes that his sales
organization would be most efficient at roughly the fixed ratio of one
CAM to one TSM and one SE. What do you think of his new policy of
giving regional managers the power to spend units in any manner
they choose? How would you amend, if at all?

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Power to regional managers to spend units in any manner
they choose

• Can’t quantify the extent an SE or TSM are used by a region

Fundamental • More dominating and experienced regional manager extract more from TSM
Issue: Assigning and SE resources e.g. West Region
SE and TSM 1 unit
each

• More focus on CAMs

• More Productive
• Quota attached to CAMs and not to SE and TSM
Power to regional
managers to spend • Underutilization of SE and TSM
units will result in
Suggestions

Allocate SE and TSM’s Head counts in proportion of their region wise

utilization

A new Sales person should not have the same head count as an old
sales person in the same role

Account reallocation in case of territory redesign should reflect in the

Quota setting
Jacoby received a $92 million goal from Davitian representing the Americas share of the
overall corporate goal. The case does not provide any information as to how that
corporate goal was established. Who do you think should be involved, and what
processes should be employed in this goal setting? What are the issues that a company
should consider in establishing the corporate sales goal? For each of the issues, how
does this affect the various constituencies?

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Who do you think should be involved, and what processes should be
employed in this goal setting?

Corporate Team
Colin Davitian,
SVP, Worldwide
Balance Top down
sales
approach with bottom-
up approach based on
Marc Jacoby VP
Americas ground realities

Director, East Director, West Director, Latin Director, Inside

Director, Federal
Region Region America Sales

This facilitates the VP to negotiate with

SVP should explain how the assigned
corporate goal aligns with the overall
financial goals of the company.
VP should present the sales potential of
SVP and justify his sales quotas
his region on the basis of proper
convincingly to his subordinate sales
feedback from his sales managers.
managers
What are the issues that a company should consider in
establishing the corporate sales goal? For each of the issues,
how does this affect the various constituencies?

• Historical trends Better sales forecasting

Establish • Last year’s revenue Helps understand Industry growth
Parameters
• Territory analysis Territory alignment

Better Sales force management

Add a growth • Realistic
Sales Activity Goals
expectation • Challenging
Sets Manager’s Credibility

Adapt the • Assigned job

Differentiate type of sale
quotas to each • Market potential
Helps assign personal quotas
sales rep • Competition

Add Quotas to Motivation levels maintained

market • Over assignment
Guide Behaviour
conditions

Get Buy in • Explain quota

SMART goal establishment
from Sales • Involve sales people
Compare reults 21
Team • Individual meeting
Key Takeaways
Regional Quotas should reflect • Market conditions of region
Territorial conditions • Sales cycle

• Cycle should start a few months before the Sales quotas

Hiring are set
• More Centralized and structured hiring process

• Outline the process to set quotas

Sales Meetings • Involve sales people in the information gathering and
decision making process

• Sandbagging- More direct involvement required by

Jacoby
Tackling challenges
• Lobbying- Better understanding of the market scenario
• Gaming- More analytical quota setting
THANK YOU

Presented By:
Archana Ashar D007
Shivani Bhatia D014
JayKaran Singh Chadha D020
Deeksha Nigam D040
Shwetank Sharma D055

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