Hanover-Bates Chemical Corporation

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Hanover-Bates Chemical Corporation

• Sean Gleason
• Melaina Brown
• Craig Hopkins
  
• Frank Roberts
• Benjamin von Wurmb

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Background

• Leading producer processing chemicals for the
  chemical plating industry
• 40 sales reps (7 districts)
• Compensation
• 33k to 45k
• Benefits- 15 salary
• Commission- .5 sales volume (1 for sales in
  excess of quota)
• Minimal quality difference between firms

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Introduction

• James Sprague- new NE sales manager
• Urged to improve profit performance
• Analyzed poor gross profit
• Used North-Central (District 7) as benchmark
• Hank Carver
• Senior sales rep
• Passed over for Spragues position
• Threatens to quit after perceived insult from
  Sprague

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Statement of Problems

• District Profit Performance Low
• District 3 Gross Profit Quota poor
• Sales efforts misallocated
• Conflict between Carver Sprague
• Carver passed over for DM position
• Carver sees Sprague plan to improve as personal
  attack, not as constructive business strategy
• Spragues credibility qualifications in
  question

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Analysis of Problems

• High quota setting unattainable goals
• No incentive to improve gross profit
• Focus currently on dollar volume
• C accounts lowest returns
• Not capitalizing on potential accounts
• Sprague new, young DM
• Must gain respect of employees
• Improve for entire company

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Doing Less With More

• High costs incurred for account coverage
• Selling Expenses 552,541 in 2001
• Exceeded District 7s expenses by approx. 100k
• Profit of District 7 over 100k more than
  District 3 on 451,500 less sales.

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Assumptions

• Carver is going to retire in 3 years
• No additions to the product line expected
• There is no variation in quality
• Advertising is strictly regulated
• For calculation purposes, list price and gross
  margin will increase at a constant rate, relative
  to the container size

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Alternative 1 Fire Carver

• Advantages
• Eliminate morale problems
• Unload high salary (51,750, without commission)
• Must hire new, trainable associate
• Can mold to new company vision
• Save approx. 13,800 with associate sales rep

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Alternative 1 Fire Carver

• Disadvantages
• Lose most experienced sales rep
• Possibility of mutiny
• Carver was influential
• Create job uncertainty
• Training costs of new rep

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Alternative 2 Fire Sprague

• Positives
• Very experienced
• Increase employee morale motivation
• Negatives
• Maintaining status quo not effective
• Possibly lose customers faithful to Carver
• New reps not familiar with Carvers accounts

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Alternative 3 Refocus Coverage

• Too much emphasis on C accounts
• Small accounts, with low margins
• Sales calls wasted on smaller accounts
• Increase focus to larger accounts
• Push high-margin products

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Alternative 3 Refocus Coverage
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Alternative 3 Refocus Coverage

• Advantages
• Profit potential increases
• Disadvantages
• Lead to alienation of smaller accounts
• Sales force struggle to meet quotas
• Further sales rep problems a possibility

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Alternative 4 - Combination

• Make amends with Carver
• Explain proposed plan
• Use his experience to motivate the team
• Change in compensation plan
• Focus on increased profit performance
• Reward sales of high-margin products accounts
• Initiate new training program

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Alternative 4 - Combination

• Advantages
• Utilizes Carvers knowledge and experience
• Establish trust in Sprague
• Bottom up method to involve Sales Force
• Addresses problem of margin

• Disadvantages
• High cost of training
• Possible disengaging of Carver and Senior Sales
  Representatives

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Summary

• Sprague must reestablish credibility with the
  staff
• Carver should be made to feel like an important
  member of the organization
• The Northeast districts profit performance must
  improve

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Recommendation

• All alternatives were carefully considered
• Three points were kept in mind when evaluating
  the alternatives
• Productivity and Profit
• Sales force moral
• The need to change both sales methods and
  philosophy

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Recommendation Solution 4

• Talk the Talk
• Bottom up Approach
• Get Carver on your side as an opinion leader and
  Mentor
• Seek Carvers help with training and motivating
  the Sales Force

• Walk the Walk
• Use district 7 as a guide to change operating
  procedures
• They spend less and do more
• Restructure quotas with a focus on profit margin
  per product sold
• Implement point system
• 1.0 for ZBX, CBX, NBX
• 1.25 for SPX and BUX
• 1.75 for CHX
• Employee training program fully prepare sales
  force

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Conclusion

• Everything starts with the sale
• Get Carver on your side
• Implement a margin driven quota
• Train your staff to succeed
• We are confident that if Hanover-Bates implements
  solution 4 they will successfully resolve the
  problems they are currently facing

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Johnston
Marshall
Greg W. Marshall Oklahoma State University
Mark W. Johnston Rollins College
The St. Joes Hawks RULE.
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