-7- UV0309 Schmidt replied, somewhat tentatively, "I thought this store was too rich for our blood. Besides, its growth rate has peaked out, and it already carries a line competitive with ours." Rhoads was now considering four alternatives: 1. Take Schmidt to dinner and afterwards give him a stern lecture about his performance and what he would have to do to shape up. 2. Same as option 1, but place him on 90-day probation as well. 3. Recall him to Charlottesville for additional intensive training. 4. Terminate his services. The Problem of the "Missing Salesman" Paul Irons had been a Battlefield agent for two and a half years. Before joining Battlefield, he had been a furniture buyer for a department store in Philadelphia, Pennsylvania. The president of Battlefield had asked him to leave that position to become Battlefield's agent in New England, a territory then producing almost no sales volume for Battlefield. Because of the extensive sales- development work required in the six New England states, Irons was given a "guaranteed draw" of $8,000 a month against his commissions. Irons was an exceptionally handsome man, and he had a reputation for "walking the straight and narrow path" and for being a very religious and family-centered man. He did not drink, smoke, or swear. He was 35 years old, a college graduate, and the father of five children. Shortly after taking over as national sales manager in July 2000, Rhoads received a telephone call from Irons, whom he had not yet met. Irons told Rhoads that marital difficulties were detracting from his job performance, and he asked Rhoads to be patient with him for a few weeks until he could resolve some of his personal problems. In late August, during a routine review of sales trends by accounts, Rhoads was alarmed by the situation with Irons's largest account. He detected that that store, one of the largest and most prominent in New England, showed a steady decline in Battlefield sales during the past year. Rhoads's 2000 sales projection indicated a $250,000 decrease in this account from the actual 1999 sales volume. In September, Rhoads and Irons visited this store together and had a long discussion with the buyer, Ken Smith, about the Battlefield line. Smith, indicated that he was attempting to work his way out of an extremely heavy inventory position on some of his other lines and that, as soon as he had cleared up this problem, he would focus his attention on the Battlefield line. Smith readily admitted that he had been letting floor display and retail-training efforts on the Battlefield line go by the board while he concentrated on moving out his overstocked lines. 1.Would you recommend any changes in the company's policies or practices? If so what? Analyze items below and feel to add others. Territory-assignment criteria Quota administration. Selection criteria Compensation policy. Supervision and control -8- UV0309 During the conversation with Smith, Rhoads sensed that there was a very warm business relationship between Smith and Irons, but he also recognized that Irons had not been devoting enough time to this account. At the conclusion of the discussion, Rhoads asked to meet Sharon Pelham, the store's general manager. Smith told him that Pelham was tied up for the day and that there was no real need to meet with her now, in view of the accord just reached among the three of them regarding future sales activities with the Battlefield line. That evening Rhoads and Irons dined together, and Irons talked about some of his personal problems. He confided to Rhoads that his wife had taken the children, moved back to Philadelphia, and was suing him for divorce. She had made a number of charges against his accounts at department and clothing stores, and, even though Irons had closed those accounts, he was in serious financial difficulty. Rhoads, however, had uncovered the fact that, despite Irons's marital and financial problems, he had enrolled in a body-building course in an expensive health club and was spending many hours each week involved in weight-lifting and similar activities. In addition, Rhoads noticed that Irons had had several drinks before and during dinner and that he had used profanity. But Rhoads made no comment about Irons's behavior or offered any advice about his personal problems. Irons promised to follow Ken Smith's activities closely and to keep Rhoads advised of his progress. Late in October, Rhoads received a letter from Ken Smith informing him that the store was dropping the Battlefield line and expanding its account with a competitive line. Rhoads was dismayed at what he believed to be Smith's duplicity. Not only was he annoyed with himself for having been taken in, but he was also upset that Irons apparently had failed to grasp the urgency of the situation. When contacted, Irons had no explanation and expressed similar shock and frustration. During November, it became increasingly difficult to contact Irons. Memos went unanswered, telephone contact was nil, and telegrams were returned for lack of an address. It turned out that Irons had moved from his home in Marblehead, Massachusetts, and his telephone had been disconnected. Rhoads made occasional contact with Irons only after long and tedious persistence. When Rhoads complained, Irons indicated that the situation was temporary-he would soon find a permanent residence. In the meantime, he gave Rhoads a post office box number to which his monthly checks could be mailed. When he tried to use that box as a channel of communication, however, Rhoads discovered that Irons used the box only at the beginning of the month for the explicit purpose of collecting his checks. In December, the situation deteriorated further. The Battlefield controller received several calls from the telephone company inquiring about Irons's current address. It seemed that he owed the company more than $1,900. A similar inquiry came from American Express, which was attempting to collect $2,500 from Irons. Two substantial Battlefield customers called Rhoads to find out why Irons had not visited them in more than a month. Then a Battlefield agent ran across Irons in New York City one weekend and called Rhoads to let him know that Irons was drinking, had given up religion completely, and was becoming increasingly infatuated with his physical appearance. -5- UV0309 Late in September 2000, Rhoads interviewed James Schmidt, a 28-year-old sales representative for a major manufacturer of drapery and upholstery fabrics. One of Battlefield's important customers on the West Coast had referred Schmidt to Battlefield's president and had suggested Battlefield to Schmidt as a company that offered a fine opportunity to advance into management. Although Schmidt was happy with his current employer, he agreed to consider a change. Subsequently, Rhoads, during his first business trip to San Francisco, California, had dinner with Schmidt and had been so favorably impressed that he invited Schmidt to come to Charlottesville to meet the rest of the Battlefield management team. A week later, Schmidt made the trip to Charlottesville and impressed everyone he met. He had a BA in marketing from a West Coast university, where he had also played varsity football. His academic record was excellent. Like Rhoads, he was a reserve officer in the air force. Rhoads talked Schmidt into leaving his present employer and accepting a position as a management trainee at $100,000 a year, $13,000 more than his current earnings. The president of Battlefield concurred wholeheartedly with the decision to give Schmidt management-trainee status. Schmidt appeared to fit perfectly into the president's plan to provide his fast-growing company with future executives. From Rhoads's point of view, Schmidt's four years of experience selling fabrics to department, furniture, and specialty stores offered Battlefield the perfect opportunity to improve distribution quality in one of the poorest-performing territories, at a cost substantially below the 5% commission rate. Schmidt, his wife, and their two children found a house in Dallas, Texas, and Schmidt reported to Charlottesville for a two-week training period. He seemed to grasp the features of the Battlefield line rapidly, and he showed quick understanding and appreciation of the company's way of doing business. On December 1, Schmidt took over the Texas-Oklahoma territory. One week later, he sent Rhoads a long memorandum, dated December 3, that contained a complete market analysis of Dallas. In that memo, Schmidt named the account that he believed Battlefield should be doing business with. Several days later, Schmidt advised Rhoads by letter that he had "pitched" this account and that "they are all fired up about taking us on." Rhoads became concerned at this point over (1) the reliability of a "market survey" conducted in two days, and (2) Schmidt's violation of company policy in committing Battlefield to a prospective account without prior approval from the national sales manager. Rhoads decided for the time being to say nothing to Schmidt that might curb his enthusiasm. He contented himself with sending Schmidt a list of the seven Dallas stores with which Battlefield was currently doing business. Schmidt was instructed to evaluate each of those stores with a view to determining jointly with Rhoads the best distribution pattern. Furthermore, he instructed Schmidt to take no further action on the prospective account until the two of them had decided which dealers to The Problem of the Oversized Territory Frank O'Brien had been a furniture salesman for almost 40 years and an agent for Battlefield for more than 25 of those years, selling the Battlefield line to retailers in Florida, Alabama, and Georgia. In 2000, he produced $6.1 million in sales from 165 dealers with most of that revenue coming from Florida. In addition to his considerable income from Battlefield, O'Brien had a 40% interest in an automobile dealership run by his younger brother in Tampa, Florida. Rhoads estimated O'Brien's age as 68. One of Rhoads's first steps upon assuming his responsibilities as national sales manager had been to develop measures of potential sales volume for each territory based on Sales Management magazine's Index of Buying Power. Those data were adjusted to reflect the number of family units with incomes of more than $60,000 and to accommodate a geographical "preference index for contemporary furniture. Rhoads then advised each agent of the "quota" or share of potential sales assigned to his or her territory. According to Rhoads's calculations, O'Brien's territorial quota should have been $7.2 million, or $1.1 million above the sales he had realized in 2000. Rhoads was concerned that O'Brien did not seem to be working his territory to its full potential and also that O'Brien had been reluctant to follow the new Battlefield strategy of "program selling" to selected accounts. According to Rhoads, O'Brien still preferred to sell "stocks of furniture to all his furniture dealer friends"-firms whose images and business practices were inconsistent with Battlefield's policy of choosing only the best outlets to represent the firm. Rhoads believed that the problems in O'Brien's territory should be considered in the context of another problem: the uneven distribution of accounts within a neighboring territory. The Carolinas were currently in the territory of Bob Milton, who also handled Virginia and was eager to concentrate on the latter state. Consequently, Battlefield's penetration and distribution were superficial in the Carolinas. (Virginia was home base not only for Battlefield but also for many other major furniture manufacturers.) Penetration and distribution were also spotty in Georgia and Alabama, states within O'Brien's territory. Rhoads felt that creating a new sales territory would help resolve these difficulties. Georgia and Alabama could be split off from O'Brien's territory and joined to the Carolinas, which were part of Milton's territory. Rhoads believed this grouping of states to be the most natural one, and he believed that current sales volumes in those states could double under the new scheme. The territory would be assigned to a new agent, Arley Baldwin. -4- UV0309 Rhoads's proposal met with the full agreement of the president of Battlefield, who in fact, had hired Baldwin a man of outstanding credentials that included 12 years of retail furniture store management experience. The president offered only this caveat: Take it easy with O'Brien. He is the oldest and most respected man on the sales force. He is practically idolized by many people in the industry. I don't want him feeling that we don't treat people right. Remember this, too: the only man on our sales force who produces more sales than Frank is a man Frank picked out for us himself. Rhoads estimated that the loss of Georgia and Alabama would reduce O'Brien's sales volume by about $1,300,000 in 2001. Rhoads did not believe that the loss of income would upset O'Brien as much as the loss of prestige. He knew that O'Brien was sensitive about his age ("the only time you'll see me slow down is when I drop dead") and proud of the volume of business that he brought in ("if I were five years younger, I'd still be number one"). During the remainder of 2000, Rhoads had had several meetings with O'Brien. He had spent two days with him on the road visiting some of his dealers, and he had dined with O'Brien's family (including the eight grandchildren) at O'Brien's home in Tampa. Although Rhoads had never broached the subject of splitting the territory, O'Brien had sensed the possibility. On the last occasion that they had had drinks together, at a Christmas party at the Charlottesville plant, O'Brien had given Rhoads "a million reasons" for leaving him alone, including the observation that Baldwin, whom he had just met, "couldn't sell a bone to a hungry dog." O'Brien's parting comment: "I like you, young fella, but don't ever fool around with my wife or my territoryand not necessarily in that order." Rhoads was considering the three alternatives: 1. Make the change. Inform O'Brien and place Baldwin in the territory. 2. Same as option 1. But ask O'Brien to "train" Baldwin and give him a 1 percent override on all of Baldwin's sales in Georgia and Alabama for the next two years. 3. Do nothing until O'Brien retires. The Problem of the "Hiring Mistake" One of Rhoads's first assignments had been to hire an agent to fill a territory becoming vacant through the voluntary retirement of 66-year-old Frank Gorman. "Old Frank," as he was known to everyone, had been second only to Frank O'Brien in experience and company longevity. His territory, Texas and Oklahoma, included some 50 accounts and produced $2.1 million in sales in 1999, approximately half of the territory's potential sales, according to Rhoads's calculations. Gorman had given notice several months before Rhoads had joined Battlefield, stating that he desired to retire as soon as a replacement could be hired. -9- UV0309 Throughout December, Rhoads continued to send memos to Irons, indicating his displeasure with the way Irons was servicing his territory and failing to maintain adequate communication. Many of those memos went unanswered. Rhoads became more and more concerned. Except for the previously mentioned complete loss of Irons's largest account, however, sales volume in Irons's territory was continuing to grow rapidly. It appeared to Rhoads that Irons's 2000 sales performance, despite the loss of this major account, would exceed his quota and, for the first time, enable him to cover his draw. Irons did not show up at the Battlefield Christmas party, and Rhoads heard a rumor from another Battlefield agent that Irons had taken another job. During the first week of January, Rhoads flew to Boston, Massachusetts, to visit several of Irons's accounts himself. On his first call to a relatively new account that Irons had opened the previous March, Rhoads found out that there was good rapport between the buyer and Irons, as well as evidence that Irons's visits had been fairly frequent and regular. On his second and third calls, however, Rhoads discovered that, although Irons's rapport was still excellent, neither buyer had seen him for six weeks. After visiting two more accounts in Hartford, Connecticut, Rhoads concluded that Irons was still working his territory, albeit less regularly than before, and that no evidence supported the accusation that Irons had taken another job. In New Haven, Connecticut, while visiting the second and last customer he had planned to call on in that city before returning to Charlottesville, Rhoads ran into Irons, who was flabbergasted to see him. Rhoads and Irons made one more call together, took a dealer out to dinner, and then returned to Rhoads's motel room to talk. Irons made a lengthy plea for patience while he worked out his personal and financial problems, which were taking longer to straighten out than he had originally thought. Rhoads was now considering the following alternatives: 1. Indicate complete support of Irons in his predicament and allow him to work out his personal problems at his own pace, as long as sales volume does not suffer in his territory. 2. Same as option 1, but offer advice on Irons's personal and financial problems as a way of underlining the company's concern for his wellbeing. One example that came readily to Rhoads's mind was Irons's need for a bank loan to consolidate his debts and allow him to stretch out his payments. 3. Place Irons on 90-day probation, with the condition that his frequency of account coverage would have to be increased, communications improved, and call reports submitted weekly on all sales activities. 4. Terminate his services. -6- UV0309 drop. Rhoads indicated that he would visit Schmidt toward the end of the month. Schmidt sent no more memos, and Rhoads assumed that Schmidt was doing fine. As he had promised, Rhoads made arrangements with Schmidt later that month and started off on a three-day trip through Texas, visiting dealers. During that trip Rhoads began to detect in Schmidt's business acumen and personality some basic problems that had previously escaped his notice. First of all, Schmidt's knowledge of the Battlefield product line was not as extensive as it had appeared during the training period. His inability to handle dealer questions was obvious. Rhoads began to feel that perhaps he ought not to have assumed that an agent of Schmidt's age and background would not need extensive trainingalthough no such training was available within the company's present programs. Second, Rhoads now found Schmidt's sense of humor singularly inappropriate. One dealer was particularly offended by Schmidt's gratuitous impersonation of President Bush. What had seemed "easygoing" in Charlottesville now struck Rhoads as flippant in Houston. Third, Rhoads sensed a definite coolness toward Schmidt on the part of store personnel in Battlefield's major Houston account. The furniture buyer, one of the most respected men in the industry, seemed uncomfortable in Schmidt's presence. Rhoads was unable, however, to get the buyer aside during the brief visit to discover what the problem was. From Houston, the pair traveled to Dallas, where the distribution pattern was up for review. Rhoads and Schmidt discussed at length the seven current accounts, plus the account Schmidt had suggested. They began their Dallas visit by going to Schmidt's prospect. The store disappointed Rhoads. Unimpressive in appearance and located in a highway shopping center, the store offered furniture lines and conducted promotional practices that were not compatible with the Battlefield image ("SALE" signs festooned the store windows). A 20-minute conversation with the store's buyer confirmed Rhoads's initial opinion, and he terminated the negotiations. From there they proceeded to the one current account that Schmidt recommended keeping, but that store was even worse. The account had been opened by Old Frank in 1999, and, in Rhoads's opinion, approval to do so should never have been granted. In a half-hour conversation with the buyer, Rhoads persuaded her that the Battlefield line was not her kind of merchandise. The buyer agreed to stop buying the line, and the two parted with warm handshakes. With a now subdued Schmidt, Rhoads proceeded to Kluber's, generally recognized as the premier furniture store in the Southwest. Standing in the middle of the very elegant contemporary section of the store, Rhoads asked Schmidt, "Why didn't you recommend this store in your distribution plan?"