Reward distribution at Atomic Sales Pvt Ltd.

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Synopsis

Atomic Sales Pvt Ltd (ASPL), a Pan India Company is involved in the manufacture and sale of branded
Soyabean nuggets. To keep the sales team motivated, the company conducts an Annual Sales meet. It is an
opportunity for the sales team to move out of their comfort zone. This meet enables them to interact,
review business plans and acquire new skills and capabilities. The highlight of this meet is the zone-wise
reward, which is the dream of any Sales manager and a challenge for every company. It is the VP-Sales,
Rahul Chavan’s dilemma to decide how to split this bonus among four zones. Based on the discussions of the
previous annual meet, Chavan developed a performance metrics, which he believed would account for each
zone contribution, in a transparent and justifiable manner.

__________________________________________________________________________________

“It should be a fair deal, a fair deal!!” Rahul was repeating this closing line of the board meeting aloud to
himself.
Rahul Chavan, Vice-President (VP)- Sales, of Atomic Sales Pvt Ltd. (ASPL) was sitting in his office, on a Friday
afternoon, with a cup of his favourite masala chai. 2 He was thinking about his upcoming meeting with zonal
sales managers, to discuss and review the annual sales performance and a announce a bonus.
This annual sales performance review, was becoming a nightmare for Rahul. He felt there is so much data to
look at, better to focus on a relevant one. Last Thursday he created a summary sheet on performance
indicators (refer exhibit-1) and communicated it to the four zonal sales managers - Ashish (North), Manideep
(South), Abhipsha (East) and Pragya (West) (refer exhibit-2) so they could come prepared to discuss the
analysis in the meeting scheduled next Monday.
In the last board meeting the company announced a bonus of INR 1.0 million to be distributed amongst the
four zones, based on their performance . Rahul was contemplating if one zone turns in with a game changing
performance, would the situation give rise to a strong and defensive reaction from other zonal managers.
Company

Atomic Sales Pvt Ltd (ASPL), a Pan India Company, was involved in the manufacture and sale of branded
Soyabean nuggets. It generated annual revenue of INR 40 million 3 in the last financial year. The Company
was set up in the early 70’s to extract oil from soya beans. This yielded a clumpy semi-solid by-product
known as soya meal. This raw soya meal was further processed to generate a protein enriched supplement
for human consumption while the residue was sold as animal feed.

Three decades later, and after a number of entrepreneurial thinking along its journey, ASPL pushed for an
innovative move with a related diversification. In June 2005, the soya meal was converted into ‘Soyabean
nuggets’ and positioned in the ready to cook segment. Until then, this ready-to-cook segment was
predominantly ruled by the large global brands in the instant noodles category. For ASPL, leveraging the
‘protein enriched’ tag in their Soyabean nuggets proved to be advantageous for the brand, to get a quick
foot hold and sustain it in this highly competitive segment.

The soyabean division of ASPL had initially started with an encouraging revenue growth in the first couple of
years justifying the company’s foray into this area of related diversification. But this was followed by a dip
for a few years before showing a stable trend over the last five years (refer Exhibit-3). Seeing this business
1
Case written by Dr. Suranjan Das, Professor, SPJIMR, 2016
2
Is a flavoured tea beverage made by brewing black tea with a mixture of aromatic spices and herbs and mixed with
milk and sugar.
3
US $1.00 = INR 69.39 as on June 8, 2019. The INR 40 million translates to US$ 576,452.00 as on date.

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trend for soyabean nuggets and increase in its profit margin, the Company decided to plough back 20% of
the profit after tax, for motivation of the sales force and in the development of dealers who are their key
channel partners.

Current situation

Like the famous saying ‘Success does not come easily”; the strategy of motivating the sales force that was in
practice since 2011, was facing certain challenges. Every year the Company organised an annual sales meet,
with the following objectives

 Review last year’s performance

 Set-up targets and criteria for next year
 Incorporate the above changes
 Share best practices of the zones
 Declare zone-wise distribution of bonus

The distribution of the bonus was jointly approved by the VP-Sales and the Board members. This year the
bonus amount announced was INR 1.0 million, 10% of average on profit earned in the past two years.

Previously, the distribution of the bonus was done based on revenue only. Zones having high performance
dealers continued to earn major chunk of rewards and recognitions; this had become demotivating for some
of the zones which was dealing with tougher and more dispersed markets. For last couple of years the zonal
managers were insisting on a broader set of criteria for assessment. They expected such a mechanism, which
would deepen the vendor relationship and would also impact long term profitability for the Company.

Rahul’s Dilemma

Two years ago, when Rahul took-over as VP-Sales, he had made a promise to the zonal heads that the
performance measure in the days to come would not be unidirectional. He was aware of the zonal
manager’s understanding of their own markets, the growing dealer power at local levels & their prevailing
market contexts, all of which can be harnessed to come up with performance measures that are more suited
to the ground reality.

Rahul felt we needed to respect every dealer; that each dealer has come on board after careful scrutiny and
due diligence by the company. Now if there was any seeming lapse in the performance of any dealer, that
dealer could not be ignored and certainly not thrown out. Instead Rahul believed such a dealer should be
identified and strongly supported by his team.

His challenge now was, how to bring in multiple perspectives in assessment of dealers which would also be
both motivating and exciting for the zonal managers to implement. While zonal revenue is an important
criteria for deciding on zone performance, Rahul felt this alone could not be the dominant one like it used to
be all these years. He believed the criteria also needed to address diversity of dealer performance across
zones based on the varied markets they face. However, in doing so Rahul felt, too diverse a performance of
dealers within a zone also need to be favourably looked at against any high overall performance of the zone,
else it may not be fair to that zone.

Diversity across dealers, according to him, can arise due to customer’s food habits across zones, difference
between dealers themselves within the zone, extent of local pressure on dealers from competitive products,
and motivation of dealers. Rahul thought that in doing so, one has to be careful. Using relative performance
to rank dealers can infuse bias in favour of a dealer which in turn can compromise the results, unless it is
settled in a holistic way. Alongside, he opined that one also needs to celebrate the success of the top
performers in every zone.

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Rahul also wondered if there is any possible lack of attention given by zonal offices especially to weaker
dealers. His thoughts circled on the intensity of effort a zonal manager can provide away from his or her
mainstream performers, so as to identify and nurture the weaker dealers.

While all this was going on in his mind, he also felt he could look at all the above criteria without any special
bias towards one, thereby agreeing to have a balanced view, at least for this year.

Last week, Rahul had asked for dealer-wise sales revenue data from the four zones. This data was complied
zone-wise by his assistant, and it was lying on his table (refer exhibit-4, also in the Excel file). He kept
thinking hard on the potential ways of distributing the bonus. He was wondering how the data in the
summary sheet can be used to create a metrics for performance evaluation. As he was glancing through the
data, the vibration of his cell phone shook him up.

It was a message from Pragya Tripathi of West zone. “Can I talk to you for a minute, on the meeting next
Monday?”

Assignment Questions

1. What is the challenge Rahul is facing?

2. How would the managers analyse their zone’s performance and prepare a firm pitch for a larger
share of the bonus? (you may use exhibit-1)
3. How should Rahul divide the annual bonus amongst the four zones?

__________________________________________________________________________________

Exibhit-1

Summary sheet - for annual sales of Soyabean Nuggets (2015-16)

Volume in ‘000 packet4

ZONE
Manager’s name
Maximum
Minimum
Range
Mean
Median
Mode
Q1
Q3
Standard deviation
Skewness

Number of dealers
Total Sales

4
1 packet = 1000 gms

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Exhibit -2 ASPL – Sales team; Soyabean nuggets division

Vice President Sales (VP Sales) : Rahul Chavan, joined ASPL as VP Sales, 2 years ago. He is
known for successful execution of sales and marketing campaigns and is an excellent
leader. Shortly after he joined, he implemented strategic changes in marketing plans, sales
forecast and introduced new performance goals. He took efforts to identify strengths and
weakness of his sales managers, mentored them on a daily basis to build a good team.

Ashish Arora, Zonal Sales Head - North, is well known as an active sales manager who has
worked very closely with every member of his sales team. He joined the company 4 years
ago and has turned North Zone into a key performer, under Rahul’s guidance.
Understanding and motivating the under-performing dealers was not an easy proposition
for him, but his careful and bold steps brought about a dramatic change in the zonal
performance, which was a laggard until around 3 years ago.

Manideep Vinjam, Zonal Sales Head - South, who just joined a year ago, is well known for
his performance in times of sales pressure, and is an empathetic and instrumental manager
who loves to guide his sales team to success. In the first year itself he has shown how he
was instrumental in supporting and motivating under-performing dealers in his territory.
He also mentioned he has plans to on-board a few new dealers for the next financial year.

Abiphsa Jana, Zonal Sales Head - East, joined the company 3 years ago. She has been
popular with her sales team and also worked closely with the dealers of her zone. She was
however tough with her team of dealers and always kept them on the edge in terms of
market assessment. Any under-performing dealer used to face potential threat of being
ousted, if it did not shape up soon.

Pragya Tripathi, Zonal Sales Head - West, has been associated with sales for almost 15
years, and got promoted as Sales Head 2 years ago. She is a go getter and is well versed
with the local market. The West zone market is highly competitive and volatile, and hence
always challenging for a sales head. Sales in this zone had always been minimum, but due
to her efforts, there had been an marked improvement over the previous years.

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Exhibit – 3 : Annual sales revenue of ASPL’s Soyabean nuggets

45.0
40.1
40.0 38.4

35.0
revenue in INR million

31.4
30.0 27.6
24.7
25.0

20.0
15.0
15.0 13.3 14.0
12.4
11.5

10.0
'06-'07 '07-'08 '08-'09 '09-'10 '10-'11 '11-'12 '12-'13 '13-'14 '14-'15 '15-'16
Years ------>

Source : ASPL – Soyabean nuggets division

Exhibit – 4 : Annual ASPL’s Soyabean nuggets sales data (2015-16) in ‘000 pkts 5

North South East West

316 206 180 109
375 264 240 199
362 155 370 250
395 235 7 204
: : : :
: : : :
: : : :
: : : :

Source: ASPL provided data in excel sheet : Annual sales data_soyabean nuggets_2015-16.xlsx

5
1 packet = 1000 gms