Ralph Dickerson knew an adjustment was needed. In more than 20 years with Bright Right Plastics, he had been around for many changes, and as director of sales for the company, he had initiated a number on his own. Now Ralph knew that he had to reevaluate the quota system that had been used at Bright Right for more than 15 years.

The system had been revised years ago to focus the sales force on financial goals, specifically sales volume. At the time, business was slow and senior management had wanted salespeople to drive sales for the company. It had worked as the company prospered and was now enjoying great success. Selling to large hardware stores, the company had built a reputation as a good supplier of quality plastic fittings and joints in the retail plumbing industry. At the same time, many aspects of the business environment had changed since the quota system was last revised. Most notably, foreign competitors had come in offering competitive prices and better service. Several of Bright Right’s old competitors had been driven out of business, and Ralph knew that part of the problem was the quota system in place at the company.

Essentially, the system in place was based on sales volume. As it had evolved the system focused on unit sales. It involved a complex plan that allowed each salesperson to set unit sales goals for every product in the company’s large inventory. Senior management considered quotas a critical element in their strategic planning. At the same time, they were used as motivational tools for the sales force. Each overall quota was set high, but within that the salesperson could develop individual product quotas based on his or her customer’s needs.

The problem, as Ralph saw it, was that customers wanted greater coordination and support from their suppliers. Specifically, customers like Home Depot and Lowe’s wanted salespeople to offer product demonstrations to their own sales force as well as help in arranging displays for the products. Ralph had heard complaints that Bright Right salespeople were less interested in doing these kinds of activities than salespeople from other companies. Unfortunately, he had heard these complaints for several years and was concerned they might be losing business, or soon would be.

He sat in his office pondering his next move. The CEO of the company had set up a meeting for tomorrow to discuss this issue and was looking to Ralph for answers.

Questions

1. What are the advantages and disadvantages of a sales volume–based quota system?

2. What are the advantages and disadvantages of an activity-based quota system?

3. What quota system would you recommend Ralph present to the CEO and why? What challenges would Ralph face in implementing your recommendation?