MIT15 387S15 Lecture8

15.
387 Technology Sales and Sales Management
NetApp
The Day-to-Day of A District Manager
© 2014 MIT Entrepreneurship Center

1
15.387 Technology Sales and Sales Management
The Environment
What does the “world” look like at the time of the case?

2
Ground Zero of the Dot Com Collapse

3
NTAP Stock Price
$148.63
$9.39

4
Image removed due to copyright restrictions.
The District Manager

Who is Jim Wilson, and what does his world look like?
- Compensation, Organization, Levers of Control

5
Where Jim “Lives”: Org Chart

Dan
Warmenhoeven
Tom Mendoza
Head of Global
Sales Marketing Services
Head of
Americas Sales EMEA AP/J
Whitney Tomlin
Alice Minelli
South Silicon Downtown San Where the

Jim Wilson Valley District Francisco
rubber meets
the road – any
Todd
DeSchutes Victoria Knapp Patty Thompson William Frank Brian Smith Big Chasen size company

6
How Jim “Eats”: Comp Plan

Base Salary $150,000
Base + Variable (OTE) $300,000
10% Above Target ($35M) $330,000
10% Below Target ($29M) $285,000

Term
50% Below Target ($16M) inat
$225,000
ed
7
The Essence of Jim’s World
“Patch”
(Accounts)
“Bag” Team
(Products) (Reps)
$$$
Number

8
The Essence of Jim’s World

“Patch”
(Accounts)
“Bag” Team
(Products) (Reps)
$$$
Number

9
What Should Jim Do?

July 26, 2002
April 29, 2002
Q1 Q2 Q3 Q4
DeSchutes Fire??
Thompson Thompson
o (maybe…)
e
Knapp
Smith– May 11
Chasen– May 10
$32M
Frank Fire??
Engel
New Hires??
With the people? With the accounts? With the quota?

10
The District Manager’s Team

What’s going on, and how do we fix it?
- Managing The Team, Managing Up, Priorities

11
Managing Down: The Team

Build the team
Improve individual performance
Replace poor performers
Map team to accounts: coverage model
Stay on top of the business
Sell what’s on the truck

12
Stay On Top of The Business

Options?
Replay what your reps tell you
• Jim Wilson: “I expected themto always give
me the straight scoop – especially when news
was not good.”
Inspect closely and apply “judgment”
Figure it out for yourself by going directly
to the largest opportunities
Why is this hard?

13
Sell What’s On The Truck:
New Products
Dilbert comic removed due to copyright restrictions.
Why is it hard to get reps to focus on new

products – options for a DM?
14
New Products
Why is this hard to do?
Value prop is less clear
Harder work to evangelize new product
Incentives not aligned
• Company benefits from sales of new product, but rep is
disproportionately rewarded for sales of existing product in
terms of return on effort
What can the DM do?
Change compensation plan? Not likely.
Intrinsic rewards (appreciation, recognition, security,
belonging, encouragement)
Coach on selling process to increase response
Mobilize resources in support of new products
• Sales engineers
15
Mapping Accounts to Reps

Strategies?
Best on best – agree?
Spread the wealth/pain?
Considerations?
Why is this hard?

16
Mapping Accounts to Reps

Strategies
Geographic proximity – coverage
Vertical market affiliation – talk the talk
Advantaged relationships – I know a guy
Type – farming vs. hunting
The big problem with “best reps on

biggest opportunities”
Performance concentration over time
17
Improving Individual
Performance
Would you ever put a rep on an
improvement plan? Why or why not?
What do you think of the NetApp

improvement plan?
18
Improvement Plans
Why put a rep on an improvement plan?
Signal of inadequate performance; makes it easy
to terminate rep for cause
• Don’t you already have cause? Low sales! Out you go!!
Way of rationing management attention
Motivation
Why not? Why might you hesitate to put

someone on a program?
Branded as a low performer; leads to self-fulfilling
prophecy
19
Replacing Poor Performers

What are the issues?
When would you, when wouldn’t you?
Who, specifically, in this case?

DeSchutes?
Frank?
Thompson?

20
The Math of Rep Replacement

What are costs of keeping marginal rep?
Poor district performance puts DM’s job in jeopardy!
Culture of success is undermined
Opportunity cost of having a great rep in place
Opportunity cost of DM’s time; could be spending it to help
improve the performance of another rep
What’s the break even on replacement?

Assume marginal rep is doing 60% of quota
Assume you can hire instantly; productivity curve for new rep
is 0%, 50%, 100%, 100%
Keep marginal rep: .6Q .6Q .6Q .6Q = 2.4Q
Hire a new rep: 0Q .5Q 1Q 1Q = 2.5Q
Break even in fourth quarter after hiring new rep
• If marginal rep is at 80%, takes until sixth quarter to B/E!

21
Managing Up: The Company

Dan
Warmenhoeven
Tom Mendoza
Head of Global
Sales Marketing Services
Head of
Americas Sales EMEA AP/J
Whitney Tomlin
Alice Minelli
South Silicon Downtown San

Jim Wilson Valley District Francisco
Todd DeSchutes Victoria Knapp Patty Thompson William Frank Brian Smith Bing Chasen

22
How Hard Is It To Work This?
“Patch”
(Accounts)
“Bag” “Headcount”
(Products) (Team)
$$$
Number

23
First Things First

What does Jim HAVE to do?
- 3 Actions to Initiate by Friday

24
What could Jim Wilson do?

1. Lead from the front/know the business
Meet with biggest opportunities personally
Prioritize leads and direct closing activity
2. Change his management “system”:

Require attendance at meetings
Stop the “I only get involved when reps ask for help”
– know your team – not all the same
Inspect the business personally/periodically
3. Understand the game – have a game plan

Make the number first
Make it pretty second (right mix of new products,
balanced productivity)
25
Going into the year

Rep Q1 Q2 Q3 Q4 Total
DeSchutes 1.8 2.0 2.3 2.9 9.0
Thompson 1.3 1.4 1.7 2.1 6.5
Knapp 1.3 1.4 1.7 2.1 6.5
Smith 0.8 0.9 1.0 1.3 4.0
Chasen 0.8 0.9 1.0 1.3 4.0
Frank 0.8 0.9 1.0 1.3 4.0
Total 5.8 7.5 8.7 11.0 34.0

26
One month into the year

DeSchutes 1.8 2.0 2.3 2.9 9.0
Thompson 1.3 X 1.7 2.1 5.1
Knapp 1.3 1.4 1.7 2.1 6.5
Smith 0.8 X X X X
Chasen 0.8 X X X X
Frank 0.8 0.9 1.0 1.3 4.0
Engel 1.3 1.4 1.7 2.1 6.5
Total 8.1 5.7 8.5 10.4 31.0

27
Two down, Two to Go?

DeSchutes 1.8 2.0 2.3 2.9 9.0
Thompson 1.3 X 1.7 2.1 5.1
Knapp 1.3 1.4 1.7 2.1 6.5
Smith 0.8 X X X X
Chasen 0.8 X X X X
Frank 0.8 0.9 1.0 1.3 4.0
Engel 1.3 1.4 1.7 2.1 6.5
Total 8.1 5.7 8.5 10.4 31.0

28
Q2-Q4 2003 North SV District

Rep Q2 Q3 Q4 Total
DeSchutes 2.0 2.3 2.9 9.0
Thompson 1.3 1.7 2.1 6.5
Knapp 1.4 1.7 2.1 6.5
Frank 0.9 1.0 1.3 4.0
Engel 1.4 1.7 2.1 6.5
Total 5.7 8.5 10.4 31.0
Wilson
7.5 8.8 10.9 34.0
(Buffer)
Co plan 7.1 8.4 10.4 32.4

29

Rep Q2 Q3 Q4 Total
DeSchutes 2.0 2.3 2.9 9.0
Thompson X (1.3) 1.7 2.1 5.2
Knapp 2.0 1.7 2.1 7.1
Frank 0.9 1.0 1.3 4.0
Engel 2.0 1.7 2.1 7.1
Total 6.9 (0.2) 8.5 10.4 32.2
Wilson
7.5 8.8 10.9 34.0
(Buffer)
Co plan 7.1 8.4 10.4 32.4

30

Rep Q2 Q3 Q4 Total
DeSchutes 2.0 2.3 2.9 9.0
Thompson X 1.7 2.1 6.5
Knapp 2.0 1.7 2.1 6.5
Frank 0.9 1.0 0.0 2.7
Engel 2.0 1.7 2.1 6.5
TBH 0 0 1.0 1.0
TBH
Hiring
0
Freeze
0 1.0 1.0
Total 6.9 (0.2) 8.5 11.2 33.0
Wilson
(Buffer) 7.5 8.8 10.9 34.0
Co plan 7.1 8.4 10.4 32.4

31
What Would I Do?

Piece it together and make the number
1. Get help with DeSchutes, but don’t shoot him (if
you even can)
2. Try to save Thompson’s Q2 by covering
personally
Stay really close to her during the 60 day sabbatical
3. Redistribute Smith’s and Chasen’s producing
accounts between Engel, DeSchutes, Thompson,
Knapp and yourself (Wilson)
Try to get someone hired to replace Smith
4. Get Frank mapped to the farming accounts that fit
his personality/skills
Try to get someone hired to hunt the other ones
32
Warmenhoven
Tom Mendoza
First Line Sales Management Head of Global

Marketing Services
Sales
Head of
Americas EMEA AP/J
Sales
Whitney Tomlin
One of the
Alice Minelli
hardest jobs in
the company
South Silicon Downtown San and
Jim Wilson Valley District Francisco One of the
most critical
Todd Patty jobs in the
DeSchutes Victoria Knapp Thompson William Frank Brian Smith Bing Chasen
company

33
Key Takeaways
First line sales management is where “the rubber meets the
road”
Managing individual contributors with a number to make
• Building a team, managing egos/issues/aspirations
• Let the hunters hunt and let the farmers farm
Translating corporate goals and objectives into sales
• New product introduction
The value of performance improvement plans in sales is unclear

Set territory, establish quota, train and coach
Underperforming reps must ultimately be replaced – you are

only as good as your team and you cannot do it all
There is a very real cost to rep replacement which is measured

by the time it takes for new reps to ramp
Consider the math versus “the number”

34
15.387 - Technology Sales and

Sales Management
“The District Manager”

35
What to do with DeSchutes?

Reasons for firing?
Crossed the line from customer advocacy to
taking advantage of NetApp
Insubordinate (went over the head of DM and RD)
Devious (agreed to apply new price; then wrote
unofficial letter promising old discount)
Financial. Only getting 7% gross margins on
these sales! Losing money!
Reasons against firing?
Pragmatic. Hes your #1 rep!
Chemistry. What does this do to the morale of this
dwindling sales district?
36
MIT OpenCourseWare
http://ocw.mit.edu
15.387 Entrepreneurial Sales

Spring 2015
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15.

387 Technology Sales and Sales Management

The Day-to-Day of A District Manager

© 2014 MIT Entrepreneurship Center

© 2014 MIT Entrepreneurship Center

Ground Zero of the Dot Com Collapse

© 2014 MIT Entrepreneurship Center

NTAP Stock Price

© 2014 MIT Entrepreneurship Center

Image removed due to copyright restrictions.

The District Manager

© 2014 MIT Entrepreneurship Center

Where Jim “Lives”: Org Chart

South Silicon Downtown San Where the

© 2014 MIT Entrepreneurship Center

How Jim “Eats”: Comp Plan

Base + Variable (OTE) $300,000

10% Above Target ($35M) $330,000

10% Below Target ($29M) $285,000

The Essence of Jim’s World

© 2014 MIT Entrepreneurship Center

The Essence of Jim’s World

© 2014 MIT Entrepreneurship Center

What Should Jim Do?

With the people? With the accounts? With the quota?

© 2014 MIT Entrepreneurship Center

Image removed due to copyright restrictions.

The District Manager’s Team

© 2014 MIT Entrepreneurship Center

Managing Down: The Team

© 2014 MIT Entrepreneurship Center

Stay On Top of The Business

Why is this hard?

Dilbert comic removed due to copyright restrictions.

Why is it hard to get reps to focus on new

Mapping Accounts to Reps

Why is this hard?

© 2014 MIT Entrepreneurship Center

Mapping Accounts to Reps

The big problem with “best reps on

What do you think of the NetApp

Why not? Why might you hesitate to put

Replacing Poor Performers

When would you, when wouldn’t you?

Who, specifically, in this case?

© 2014 MIT Entrepreneurship Center

The Math of Rep Replacement

What’s the break even on replacement?

© 2014 MIT Entrepreneurship Center

Managing Up: The Company

South Silicon Downtown San

© 2014 MIT Entrepreneurship Center

How Hard Is It To Work This?

© 2014 MIT Entrepreneurship Center

Image removed due to copyright restrictions.

First Things First

© 2014 MIT Entrepreneurship Center

What could Jim Wilson do?

2. Change his management “system”: