Slide 1

SummaryClearion Software was a leading software solutions provider for large enterprises and governmentsRevenues were $297 million in 2005 and $180 million in 2004Mark Jacoby had missed his target for the first time in his 6 year career at Clearion and was highly motivated to turn things aroundHe wanted to reevaluate his strategies in 3 key areas which were:Setting QuotasAllocating HeadcountAssigning territories

Jacoby implemented a new model which concentrated on revenues earned per unit where units where clearly definedThrough these he wanted to get rid of sandbagging, lobbying and gaming and get a better understanding as to which area was more productive Q1. How equitable and sensible were the specific headcount and quota allocations given out by Jacoby in January 2006? In preparing your response, please consider each of the following:

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

West will make the most profitable investment of headcount in H1 2006 because:

Mr Steve Hall had generated the most revenues/unit and overall revenue in second half of 2005Exceeded his quota by 30% for the last 3 performance periodsAllocated 28 new headcounts which is a manageable 13%Hall was already utilizing the most resources and used his headcount more efficiently than his peers

Most Profitable investment of headcount Revenues/UnitRegion2005 Achieved2006 TargetsWest0.190.19East0.160.17Latin America0.130.12Federal0.110.09b) Should the east and west regions be equally profitable (i.e., achieve the same revenues per unit)?

Yes they should be equally profitable because the customers they were pursuing were similar and were targeting the same customer profile to those of the Western region . This was not happening because:

The Director of Easter Region, Jerry Garton, had been sandbagging, lobbying and gaming more than any other regional directors which could be a reason for Eastern region being less profitablePromising leads were not followed up properly because of a lack of time and resourcesTerritory management was not done properly and Garton had to create a third region, the midatlantic region, to add to the existing regions

c) 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)

RankNameReason1HallMost revenues/unit and overall revenue in second half of 2005Exceeded his quota by 30% for the last 3 performance periods2JacobyMissed his target by only 1% in 2005Knee jerk reactions of his new policies will help him in achieving his target3DreyerNot enough information4ChapasFederal missed its target by 19% in the second half of 2005Lowered growth %(-10%) for first half of 20065ChengLatin America had performed poorly(-10%) in second half of 2005 and it would be difficult to grow at 14%6GartonEastern region missed its quota in second half of 2005 by 15%Allocated lowest % increase in unitsJacobys decision was not equitable and sensible because:

Such a big overhaul not required in such a big year when the last years target was narrowly missed(1%)

Look at the territories and determine the areas that have the best opportunity to succeed

Logical quota based on research and fact (Geography, historical achievement, market research, competitors actual sales, etc.)

Understand that everyone has different levels of drive, ambition, motivation

Q2) Can Jacobys 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 who should be given time to blend into the company culture gradually.

This new model might reduce hiring times and make managers accountable for the hiring process but might also result in sub-standard sales force.

Q3) Should quotas be based on profitability (and not revenues) if managers will be judged on their contributions to profitability?

Q4) What areas, if any, of Jacobys model and processes for allocating headcount and quotas needed to be adjusted?

The areas that needed to be justified are:

When a new person is hired, his performance is not at the same level as an experienced employees. Then how could a new hire be measured at the same productivity rate as a more mature headcount?The new system gives directors every incentive to hire experienced CAMs who have hit quotas before. The incentive to hire SEs and TSMs for junior roles which need training will be left empty. How would the new system stop managers from hiring only CAMs and not SEs and TSMs?The new model gives revenue earned per unit whereas the focus of Davitian was to be more efficient and profitable. How would he ensure that more revenue per unit would necessarily contribute to the bottomline?The basis of allocating increased headcount of 27% to Latin America is not clear

Q5) 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?

The reason for selecting CAM in place of TSM or SE would be that CAMs are more experienced and have handled pressure situations before whereas the TSMs or SEs would have to be trained on quotas and other features and then they would be up to speed. The new policy gives regional managers a lot of freedom in terms of the resources they choose and due to the above reason it is evident that given a choice the managers would choose CAMs.

One way to tackle the problem of hiring only CAMs would be if another factor is added in the policy where each manager would necessarily need to train a certain number of TSMs or SEs. This would compel the managers to take a certain number of people in this group.