Summary

Clearion Software was a leading software solutions provider for large

enterprises and governments
Revenues were $297 million in 2005 and $180 million in 2004
Mark Jacoby had missed his target for the first time in his 6 year career at
Clearion and was highly motivated to turn things around
He wanted to reevaluate his strategies in 3 key areas which were:
Setting Quotas
Allocating Headcount
Assigning territories

Jacoby implemented a new model which concentrated on revenues
earned per unit where units where clearly defined
Through 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 2005
Exceeded his quota by 30% for
the last 3 performance periods
Allocated 28 new headcounts which is a manageable 13%
Hall was already utilizing the most
resources and used his headcount
more efficiently than his peers



West
Federal
Latin America
East
Most Profitable investment of
headcount
Revenues/Unit
Region 2005
Achieved
2006
Targets
West 0.19 0.19
East 0.16 0.17
Latin
America
0.13 0.12
Federal 0.11 0.09
b) 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 profitable
Promising leads were not followed up properly because of a lack of time
and resources
Territory 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)


Rank Name
Reason
1 Hall Most revenues/unit and overall revenue in second half
of 2005
Exceeded his quota by 30% for the last 3 performance
periods
2 Jacoby Missed his target by only 1% in 2005
Knee jerk reactions of his new policies will help him in
achieving his target
3 Dreyer Not enough information
4 Chapas Federal missed its target by 19% in the second half of
2005
Lowered growth %(-10%) for first half of 2006
5 Cheng Latin America had performed poorly(-10%) in second
half of 2005 and it would be difficult to grow at 14%
6 Garton Eastern region missed its quota in second half of 2005
by 15%
Allocated lowest % increase in units
Jacobys 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.