Conflicting Accounts Over the past two years, operating margin and net profit margin for the global sales and marketing team had declined precipitously along with market share. During the same period, group morale also dropped, with employee satisfaction declining by nearly half. In order to better understand the group's weaknesses and the challenges they faced, Wilde's next step was to meet with the three senior executives. He was by far the youngest person at the meeting. Market, Compensation, or Brand Changes He tried to determine whether the group's problems were internal or external. He asked the three leaders, "Can the team do better? What's stopping them from doing better?" Brown, a Jamaican national working in Kingston, began by blaming the group's recent failures on the market. "The recent increase in the price of base oil has been pressuring our margins. When we raised our prices to compensate, our volumes decreased," he argued. Lars, an expat from Barbados, vehemently disagreed, "It has nothing to do with our prices or the price of oil. It's our brand! The recent changes to our brand have done nothing but confuse customers. That's why we have seen a decline in revenue." Lars continued with an accusatory tone, "And once this past year, planned volumes from St. Vincent and Grenada failed to come in, causing performance to suffer again, not to mention the relationships with our other partners." Brown shook his head and ignored Lars. Changing the subject, he said, "We also have the issue of compensation the structure recently changed. Eighty percent of our salaries are fixed and the remaining twenty percent is variable." Brown explained that the variable portion was based on volume and revenue and was not linked to earnings or margins. Thus, when prices went up, salespeople were able to make their revenue targets selling less volume. Yet the cost of goods sold was increasing, which further squeezed the margins. Everyone shifted in their seats. Clearly, changing compensation yet again was not a conversation they wanted to broach. Target Setting Greene, a member of the leadership, interjected, "Let's not bring up compensation again. We all know that target-setting is at the root of all this. Setting regional targets from the top-down hasn't worked for years." He explained that global directors broke worldwide sales targets down into regions, then regional managers further divided the regional target among constituent countries. Greene recalled a target setting meeting in which the business manager for the USA 5 refused the responsibility that came with managing the largest country in the region. He told the group the general market was doing poorly and that his country team had recently lost two major accounts, so he could not take the largest portion of the regional sales target, as was expected. Other country managers also frequently made conservative estimates when setting their own goals, downplaying their true ability. As a result, unclaimed parts of the regional goal got passed on to new markets that were not yet online or to countries that were not represented at the meeting. "It seems like no one is willing to take responsibility for their targets. Everyone is playing it safe, because they don't want to miss their targets. How can we accurately set goals if we don't truly know what each country is capable of?" Greene asked the others. Wilde worried about their staunch disagreements and lack of optimism. In Cayman, however, Wilde had been on teams that thrived despite the changing market, the new variable pay scale, and the challenges of the target-setting process. He had transformed his team from a collection of individuals into a cohesive and successful group, and he was tempted to prove to the TT Technologies executives that he could do it again with a bigger and more diverse team. Wilde believed in the TT Technologies brand and had confidence in its ability to sell. But Dean's advice still made Wilde question his ability to succeed in the role. How could he make sure that he would not end up in Dean's shoes?

Conflicting Accounts Over the past two years, operating margin and net profit margin for the global sales and marketing team had declined precipitously along with market share. During the same period, group morale also dropped, with employee satisfaction declining by nearly half. In order to better understand the group's weaknesses and the challenges they faced, Wilde's next step was to meet with the three senior executives. He was by far the youngest person at the meeting. Market, Compensation, or Brand Changes He tried to determine whether the group's problems were internal or external. He asked the three leaders, "Can the team do better? What's stopping them from doing better?" Brown, a Jamaican national working in Kingston, began by blaming the group's recent failures on the market. "The recent increase in the price of base oil has been pressuring our margins. When we raised our prices to compensate, our volumes decreased," he argued. Lars, an expat from Barbados, vehemently disagreed, "It has nothing to do with our prices or the price of oil. It's our brand! The recent changes to our brand have done nothing but confuse customers. That's why we have seen a decline in revenue." Lars continued with an accusatory tone, "And once this past year, planned volumes from St. Vincent and Grenada failed to come in, causing performance to suffer again, not to mention the relationships with our other partners." Brown shook his head and ignored Lars. Changing the subject, he said, "We also have the issue of compensation the structure recently changed. Eighty percent of our salaries are fixed and the remaining twenty percent is variable." Brown explained that the variable portion was based on volume and revenue and was not linked to earnings or margins. Thus, when prices went up, salespeople were able to make their revenue targets selling less volume. Yet the cost of goods sold was increasing, which further squeezed the margins. Everyone shifted in their seats. Clearly, changing compensation yet again was not a conversation they wanted to broach. Target Setting Greene, a member of the leadership, interjected, "Let's not bring up compensation again. We all know that target-setting is at the root of all this. Setting regional targets from the top-down hasn't worked for years." He explained that global directors broke worldwide sales targets down into regions, then regional managers further divided the regional target among constituent countries. Greene recalled a target setting meeting in which the business manager for the USA 5 refused the responsibility that came with managing the largest country in the region. He told the group the general market was doing poorly and that his country team had recently lost two major accounts, so he could not take the largest portion of the regional sales target, as was expected. Other country managers also frequently made conservative estimates when setting their own goals, downplaying their true ability. As a result, unclaimed parts of the regional goal got passed on to new markets that were not yet online or to countries that were not represented at the meeting. "It seems like no one is willing to take responsibility for their targets. Everyone is playing it safe, because they don't want to miss their targets. How can we accurately set goals if we don't truly know what each country is capable of?" Greene asked the others. Wilde worried about their staunch disagreements and lack of optimism. In Cayman, however, Wilde had been on teams that thrived despite the changing market, the new variable pay scale, and the challenges of the target-setting process. He had transformed his team from a collection of individuals into a cohesive and successful group, and he was tempted to prove to the TT Technologies executives that he could do it again with a bigger and more diverse team. Wilde believed in the TT Technologies brand and had confidence in its ability to sell. But Dean's advice still made Wilde question his ability to succeed in the role. How could he make sure that he would not end up in Dean's shoes?

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Transcribed Image Text:Conflicting Accounts Over the past two years, operating margin and net profit margin for the global sales and marketing team had declined precipitously along with market share. During the same period, group morale also dropped, with employee satisfaction declining by nearly half. In order to better understand the group's weaknesses and the challenges they faced, Wilde's next step was to meet with the three senior executives. He was by far the youngest person at the meeting. Market, Compensation, or Brand Changes He tried to determine whether the group's problems were internal or external. He asked the three leaders, "Can the team do better? What's stopping them from doing better?" Brown, a Jamaican national working in Kingston, began by blaming the group's recent failures on the market. "The recent increase in the price of base oil has been pressuring our margins. When we raised our prices to compensate, our volumes decreased," he argued. Lars, an expat from Barbados, vehemently disagreed, "It has nothing to do with our prices or the price of oil. It's our brand! The recent changes to our brand have done nothing but confuse customers. That's why we have seen a decline in revenue." Lars continued with an accusatory tone, "And once this past year, planned volumes from St. Vincent and Grenada failed to come in, causing performance to suffer again, not to mention the relationships with our other partners." Brown shook his head and ignored Lars. Changing the subject, he said, "We also have the issue of compensation the structure recently changed. Eighty percent of our salaries are fixed and the remaining twenty percent is variable." Brown explained that the variable portion was based on volume and revenue and was not linked to earnings or margins. Thus, when prices went up, salespeople were able to make their revenue targets selling less volume. Yet the cost of goods sold was increasing, which further squeezed the margins. Everyone shifted in their seats. Clearly, changing compensation yet again was not a conversation they wanted to broach. Target Setting Greene, a member of the leadership, interjected, "Let's not bring up compensation again. We all know that target-setting is at the root of all this. Setting regional targets from the top-down hasn't worked for years." He explained that global directors broke worldwide sales targets down into regions, then regional managers further divided the regional target among constituent countries. Greene recalled a target setting meeting in which the business manager for the USA 5 refused the responsibility that came with managing the largest country in the region. He told the group the general market was doing poorly and that his country team had recently lost two major accounts, so he could not take the largest portion of the regional sales target, as was expected. Other country managers also frequently made conservative estimates when setting their own goals, downplaying their true ability. As a result, unclaimed parts of the regional goal got passed on to new markets that were not yet online or to countries that were not represented at the meeting. "It seems like no one is willing to take responsibility for their targets. Everyone is playing it safe, because they don't want to miss their targets. How can we accurately set goals if we don't truly know what each country is capable of?" Greene asked the others. Wilde worried about their staunch disagreements and lack of optimism. In Cayman, however, Wilde had been on teams that thrived despite the changing market, the new variable pay scale, and the challenges of the target-setting process. He had transformed his team from a collection of individuals into a cohesive and successful group, and he was tempted to prove to the TT Technologies executives that he could do it again with a bigger and more diverse team. Wilde believed in the TT Technologies brand and had confidence in its ability to sell. But Dean's advice still made Wilde question his ability to succeed in the role. How could he make sure that he would not end up in Dean's shoes?

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