Sales Force Management and Global Customers

Developing an equitable and functional compensation plan is extremely challenging in international operations. This challenge is especially acute when a company operates in a number of countries, when it has individuals who work in a number of countries, or when the sales force is composed of expatriate and local personnel.

In this activity, the importance of the well$-$designed compensation plan is highlighted by a scenario from IBM's relationship with Ford.

The salesperson is a company's most direct tie to the customer; in the eyes of most customers, the salesperson is the company. As presenter of company offerings and gatherer of customer information, the sales representative is the final link in the culmination of a company's marketing and sales efforts.

Growing global competition, coupled with the dynamic and complex nature of international business, increases both the need and the means for closer ties with both customers and suppliers.

Here we focus on the various considerations in designing an international sales force, with specific focus on expatriates, local nationals, and third$-$country nationals.

Read the case below and answer the questions that follow.

Did IBM really need a major overhaul to its sales compensation plan? For proof, just ask Kevin Tucker. Tucker, an IBM global account manager dedicated to Ford Motor Company, closed a $$7$ million sale with the automotive giant's European operations. Ford wanted Tucker and his team of IBM representatives to install networking systems in its engineering facilities. The systems would run the applications that design the company's automobiles.

Ford's installation required help from an IBM sales executive in Germany, the project's headquarters. So Tucker, whose office sits in Ford's Dearborn, Michigan, headquarters, sent an e$-$mail requesting the executive's assistance. And that's when things turned ugly. Although the rep in Germany did not turn his back on the project, his initial reaction was less than enthusiastic. Ford wanted the systems installed throughout Europe, yet the compensation plan for IBM's Germany$-$based reps rewarded only the systems that were installed in that country. With $80$ percent of the work scheduled outside of Germany, the executive was left wondering: Where's the payoff? Tucker and other IBM sales incentive managers wasted three weeks discussing ways to maximize the rep's incentive. Energy that could have been focused on the customer was wasted on a pay plan. "Ford was world$-$centric, we were country$-$centric," Tucker says. "The team in Germany was asking, 'Kevin, how can you make us whole?$\text{'}"$

They were not the only salespeople asking that question at IBM. Tucker's predicament represents just one of many problems that were rooted in IBM's $"$$$72$ billion" sales incentive plan$$a plan that had been obviously put on the back burner as the company giant tinkered with its vision.

Bob Wylie, manager of incentive strategies for IBM Canada, says, "There was the attitude that if it's outside my territory and outside my measurements, I don't get paid for it$,$ and I don't get involved. What's in my pay plan defines what I do$."$ Not the best setup for a company that operates in $170$ countries.

Apparently, IBM has solved many of these problems. Ford signed contracts for more than $$300$ million with IBM to create almost all of the car company's software, including Internet and e$-$commerce applications in Europe and North America. And IBM continues its impressive sales force coverage in burgeoning new markets like India, where it now employs more than $50,000$ professionals who are generating almost $$1$ billion in revenues.

Sources: Michele Marchetti, "Gamble: IBM Replaced Its Outdated Compensation Plan with a Worldwide Framework. Is It Paying Off?" Sales & Marketing Management, July $1996,$ pp$.6569$; "Ford Motor and IBM," The Wall Street Journal Europe, January $13,1999,$ p$.$ UK$5$A; "IBM Aims at $$1-$b India Revenue by Year$-$End," Business Line $($The Hindu$),$ December $9,2007.$

This case highlights the importance of a well$-$designed