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Management planning and control

Houston Fearless 76 case

Valeriya Alexandrova

on 4 January 2013

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Transcript of Management planning and control

Group #3 Houston Fearless 76, Inc Company's poor performance problems Evaluation and Solutions - decrease in sales
- little effort to develop new markets
- poor performance in expanding firm's existing markets
- mismatch between co's objective and sales force incentive
- sales forecast are inconsistent
- late introduction of digital production
-sales/operations frictions
-no industry performance benchmarks
- no internal sales force (dealers and reps)
- weaknesses in existing sales incentive plan - All salespeople, with the exception of a new salesperson who was in negotiations, were paid a base salary ($40-$60k) plus commissions.

- Commission= % of sales, measured as revenue from when items shipped within the salespersons territory

- Commission rate differed on a negotiated basis with consideration to market conditions and product characteristics. Existing sales incentive plan 1) Commissions are based on sales rather than product profitability

2) Different compensation structures for different products

3) Inconsistent sales forecasts

4) The incentive wasn't introduced properly (Assistant forgot about bonus and was surprised when she got it) Why are the managers unhappy? Objective: Commission based on product gross margins – encourage salespeople to focus their efforts where company profit potential was greatest.

Three elements:
(1)Commission based on product gross margin, but with no commissions paid until gross exceeded 70% of forecast;
(2)A bonus paid on forecast accuracy;
(3)A bonus paid on achievement of individual management-by-objectives MBO targets.
a.Adding a significant number of new customers
b.Co-ordinating well with production
c.Keeping annual travel expenses below forecasts. New incentive plan Evaluation:
1) Step in the right direction as its moving towards the alignment of the rewards control system with the overall organisation objectives.
2) Little mention of involvement of salespeople/ sales manager in creation and implementation of this new commission programme.
3)Sales target settings and attainability
4) Measurement and inclusion of sales where products have no margin Reason for changes - open new markets
-sell in more profitable markets
-more lead time for better operational planning Solutions:
1) strategy reconsideration
2) structure along geographical lines
3) include salespersons in changes
4) quantify the MBO targets
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