SCENARIO TWO (BUSINESS OPERATIONS)

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Scenario Two - Analysis and Take away
Pulse Beverages has employed Sales Managers to promote the sales of Aqua Orange in India. The bonus of the Sales
Manager is currently calculated based on performance against the sales targets set.

Part 1
Pulse Beverages compensates its Sales Managers with bonuses, based in their sales performance for each quarter
which is based on attainment.

Solution 1.1
Payout

Attainment
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Solution 1.2

Manager Name City Q3-2020 Goal Net Volume of Attainment (%) Payout (%)
(SU) Sale (SU)

Rahul S Gangtok 235,000 957,165 407.3042553 383.56

Kirti S Coimbatore 160,000 180,405 112.753125 133.150

Vishwa P Mumbai 190,000 179,125 94.2763158 79.945

Kalpana K Amritsar 200,000 182,280 91.14 68.990

Ram S Chandigarh 225,000 196,635 87.3933333 58.475

Kirti S Goa 145,000 125,150 86.3103448 55.775

Taran S Durgapur 170,000 137,595 80.9382353 42.325

Abhishek S Hyderabad 250,000 170,650 68.26 19.130

Rakesh S Agra 170,000 100,360 59.0352941 14.515

Ankit J Chennai 180,000 98,530 54.74 12.365

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 The equation used here is y - y1 = m(x - x1) Attainment (%) Payout (%) Slope (m)

For 50-70 (Rakesh, Abhishek and Ankit), y = (x-30)/2 50-70 20 0.5

For 80-90 (Ram, Taran and Kirti Goa), y = (2.5x - 160) 80-90 65 2.5

For 90-100 (Kalpana and Vishwa P), y = (3.5x-250) 90-100 100 3.5

100-150 230 2.6

For 100-150 (Kirti Coimbatore), y= (13x - 800)/ 5
275-500 433 0.533
For 275-500 (Rahul), y= (8x + 2495)/15

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Solution 1.2

a) Sales Manager Rahul S from Gangtok has the highest payout of 383.56% (44.18% of total payout).

b) The Sales Managers who are at bottom 3 of total payout are Ankit J (12.365%), Rakesh S (14.515%) and
Abhishek S (19.130%).
The total payout of the bottom 3 Sales Managers is 46.010%.

Solution 1.3

Given the Annual Target Pay is $1000000

Total spend of the company for incentives for a year = Total Payout of all Sales Managers * Annual Target Pay
Total spend of the company for incentives for a Quater = Total Payout of all Sales Managers * (Annual Target Pay/4)
The total spend of the company for incentives for Q3’20 = 868.230 * ($1000000/4) = $2,170,575

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Part 2: The current incentive system is subjective and has resulted in dissatisfaction among the Sales Managers.As per the Sales Lead at
Pulse Beverages sales growth is the most important performance metric. ZS is asked to look into this and identify reasons for Sales
Managers’ concerns.

Sales Manager City Sales Volume Sales Volume Sales Volume Sales Growth Sales Growth
in Q1’20 (SU) in Q2’20 in Q3’20 (SU) in Q2’20 in Q3’20
(SU)

Rakesh S Agra 7526.5 16809 100360 1.23330897496 4.970610982

Kalpana K Amritsar 11664.5 23003.5 182280 0.972094818 6.924011563

Ram S Chandigarh 14902.5 29748 196635 0.996175138 5.610024203

Ankit J Chennai 7627.5 19946.5 98530 1.615077024 3.939713734

Kirti S Coimbatore 14534 31192 180405 1.146140085 4.783694537

Taran S Durgapur 11229.5 24263 137595 1.160648292 4.670980505

Rahul S Gangtok 11744.5 33314 957165 1.836561795 27.73161434

Kirti S Goa 12475.5 25106.5 125150 1.01246443 3.984764902

Abhishek S Hyderabad 12776 28226 170650 1.209298685 5.045844257

Vishwa P Mumbai 20783 31765.5 179125 0.528436703 4.638979396

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 Solution 2.1
Observations related to previous two quarters are :-
1. The Sales volume for all Sales Managers has increased in Q2 over Q1.
2. With few exceptions, all Sales Managers have Sales Growth Rate of around 1 in Q2’20.

The bonus of Q3’20 can be related to previous quarter by using Sales Growth Rate as a metric for calculation of payout.

The most important performance metric is Sales Growth and not Manager Name Growth Rate Q2’20 Growth Rate Q3’20
Sales Volume.
Sales Growth Rate give much fair insights than Sales Volume Rakesh S 1.23330897496 4.970610982
based incentives.The discrepancy occurring in Sales volume
based incentive (where a Manager with lower Sales Growth Kalpana K 0.972094818 6.924011563
gets higher payout) is corrected on using Sales Growth Rate
Ram S 0.996175138 5.610024203
based incentives.
Ankit J 1.615077024 3.939713734

Kirti S 1.146140085 4.783694537

Growth 0% 49.9 50% 70% 80% 90% 100 150 200 225
Rate 0% % % % % Taran S 1.160648292 4.670980505

Payout 0% 0% 10% 20% 40% 65% 100 230 280 190

Rahul S 1.836561795 27.73161434
% % % %
Kirti S 1.01246443 3.984764902

Abhishek S 1.209298685 5.045844257

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Vishwa P 0.528436703 4.638979396
 Solution 2.2

If Pulse Beverages is able to provide a National Forecast of sales for the Nation, common approach to set
targets for for the sales manager after this forecast will be as follows:-
1. On acquiring the national forecast of sales for the nation,with the help of previous data of sales we are
gonna calculate the basis growth %.
2. Then this operating plan (basis growth %) is to be provided to the regional managers on the basis of value
or volume.
3. On the basis of this plan (by value or volume) the regional manager should provide targets to the sales
manager under them in their region.The regional manager can provide the targets quarterly or monthly as
the plan suggests.The basis of target providing is explained in the successive slides.
4. The sales manager will then distribute these targets among the sales officer/distributor and the sales
manager should also set the sales target Beat-wise or Outlet-wise.

A flow chart explaining the above points is formed on next slide.

Continued to next page

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 Flow Chart for Sales Target Structure

Sales
ASM-wise Manager /
Region-wise
Quaterly Value Distributor Beat-wise
Value and Salesman-wise
and Volume wise Monthly Outlet-wise
Volume Plan
Targets Value/Volume
Targets

Annual
Operating
Plan (Basis
Growth%)

Sales
ASM-wise Manager /
Brand-wise Brand Level
Quaterly Brand Distributor
Value and ECO, Drop Size
Value and wise Brand
Volume Plan etc.
Volume Targets ECO Targets,
Drop Size

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 Sales Target Setting Process

Our approach to set target on the basis of national forecast is as Region Level Target
follows:-

1. The basis growth we calculated from the forecast is provided

by the org. to the regional managers.
2. These target are then provided to sales manager. ASM Level Target

3. Now according to our approach the sales manager should not

directly provide the target to the sales officer/distributer but
should calculate the opportunity by location with the help of Sales Officer Level Target
past data (i.e sales leads and opportunities at outlet or beat
level ) and sales officer under his region.

4. Once the sales manager has all the leads,opportunity,leads to Salesman Level Target
opportunity conversion ratio,sales of past etc. he should
define the sales target to meet up the national forecast of
sales.
Beat Level Target
5. He should also be able to compare the target proposed by
opportunities with the target provided by organisation and
should be able to make the sales officer understand it so that
he buys into the target and drives the results. Outlet Level Target
.

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 PROS AND CONS

PROS :-

1. National forecasting of sales for a nation would provide ease of target setting for managers and to
complete the targets as well
2. Our approach of target setting would allow the higher ups to get a deep involvement on root level and
will be able to provide opportunity based targets rather than only sales target from basic approach.
3. Our approach also enhances the professional connection between the sales chain and might also
increase the ethical values rather than just completing the targets.

CONS :-

4. Forecasting of sales would inhibit the scope of extra growth as on setting the sales target and meeting
them up would add up to a certain growth proposed by the organisation itself.
5. If we just set up the targets with the basic approaches then the lower unit (i.e SO/Distributor ) will just
work only to complete goals and meet targets. Thus no enhancement in professional connection and
ethical values for the organisation.

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 Solution 2.3

Given the data captured for Chennai for Q3’20 is only 85% of the actual data.

So we calculate the actual Sales data for Q3’20 (in SU) using unitary
method = (98530 * 100) / 85 = 115918

Using the actual Sales data, the attainment = 64.4%

The cutoff for Chennai for Q3’20 = 17.2%

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Part 3
ZS associates have designed a Monthly scorecard that would communicate monthly performance of Sales Manager.

Solution 3.1
A performance report addresses the outcome of an activity or the work of an individual. So the Performance Report which we have
developed is solely based on Key Performance Indicator (KPI). A KPI is a measurable value that demonstrates how effectively a
representative is achieving key business objectives.

The KPI’s with their weightage which we have chosen for the performance report are as follows :-

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From the dataset provided for the performance report, we extracted multiple columns like Manager ID, Manager Name, Net Volumes etc.
and calculated target based on the past data to be compared with the actual present data for providing monthly performance i.e
Achievement in our model.below is the data of a single manager from our whole dataset to explain the target setting and performance
calculation.

Note: The provided dataset doesn’t give details about revenue for an organisation these data are readily available so these data
(Revenue and Productivity). These data will help the organisation to calculate the MOnthly Performance more accurately. We are
calculating performance on basis of applicable weightage.

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 This graph
provides details
This pie chart
about the
provides
overall
detail about
achievement of
the weightage
the sales
on which the
manager for the
KPI is divided.
desired duration
i.e july-
september in
our case.

This curve Indicates the

shows the top
achievement of performers for
particular sales the selected
manager i.e duration on
Ram S in this the basis of
case with the overall
desired duration performance
i.e july- score i.e
september in achievement
our case. from report.

This thermometer bar indicates the overall performance(calculated

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 Manager Monthly Summary
Our performance report also delivers the sales managers monthly summary based on their achievements..Below is the summary which comes handy
to directly check out the performance month wise and choose out the top performers.

MANAGER ID MANAGER NAME CUMULATIVE JUL AUG SEPT

10011 Rakesh S 49.86% 84.58% 47.64% 15.28%

10012 Kalpana K 60.00% 95.83% 31.96% 52.00%

10013 Ram S 63.75% 94.00% 28.00% 67.38%

10018 Ankit J 61.43% 75.10% 47.58% 61.87%

10019 Kirti S 61.04% 100.00% 39.23% 44.00%

10014 Taran S 63.47% 86.66% 33.26% 68.00%

10015 Rahul S 58.96% 100.00% 28.53% 21.44%

10016 Kirti S 61.80% 90.29% 33.26% 60.00%

10020 Abhishek S 58.95% 90.09% 19.33% 67.15%

10017 Vishwa P 58.84% 100.00% 32.95% 39.53%

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 KPI Monthly Summary

Our performance report also provides a KPI monthly summary which provides details about the overall achievements on all
sales managers in that particular KPI which comes handy for the organisation to forecast their future goals and selection of
other KPI if needed.

SL No. KPI CUMULATIVE JUL AUG SEPT

1 Sales Volume 100.00% 73.20% 87.33% 100%

2 Sales Growth 100% 9% 28% 45.61%

3 Revenue per sales NA NA NA NA

4 Productivity NA NA NA NA

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 Solution 3.2)

The quality checks which would be performed to ensure the data is accurate are :-
1. Sorting Data on basis of city : Two Sales Manager have the name Kirti S which may lead to
uncertainity if the data was sorted on name.
2. Using constraints : Constraints are set on the basis of range of average values. Conditional
Formatting is used to point out abnormal data. In Part 1, Sales Manager Rahul S abnormally high
Quantity Purchased data on 15-7-20 leading to skewed results. This abnormally high data can be a
result of technical error.
3. Checking for incomplete/missing data records
4. Checking for multiple entries/ Duplicate
5. Cleaning Unnecessary data records

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 Solution 3.3)

The old sales compensation plan was a goal-based plan in which goals were set based on sales volume trend since no competitive or
therapeutic class data was available. This ultimately penalized good performers and rewarded poor performers—those who were
growing were expected to continue their trend with an additional slight increase and those who were flat or declining were only given the
slight increase. A convex payout curve was used with a step increase in bonus at 100% attainment. Payouts accelerated above 100%.
Goal-based plan also lead to heavy sale in Q3 but almost no sales in Q1 and Q2.

Switching from goal based plan and come to rank based plan based on growth would be fair and profitable.
Following reasons might support our statement:-
1. In rank based plan by growth the sales would happen upon the interest of sales manager as well as the company interest,as it will
be profitable and beneficial for both.
2. Rank based plan would create an atmosphere of healthy competition among the managers which will mostly result in increment of
overall sales.

MODIFICATION :-
3. Provide bonuses for the top three performers in the rank based plan .
4. Rank calculation in rank based system should involve multiple performance criteria rather than just calculating the achievements
by sales done.

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 Objective Questions:-

1)
a)The manager who has the highest payout is Rahul S(386.56%).

b)The total payout of bottom 3 sales manager is 46.01%.

2)
a)The total spend of the company for incentives for Q3’20 is $2,170,575

3)
a)The updated Q3’20 payout for the sales manager for Chennai is 17.2%

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