CASE 17.2

The Dunn Corporation*

Robert Head, the newly appointed sales manager for the Dunn Corporation, completed a

review of the sales force that he inherited. He knew that he had an important decision facing

him regarding one of his sales representatives, John Little.

Company Background. The Dunn Corporation, with headquarters in Tuscaloosa, Alabama,

produced and sold asphalt roofing products and other building materials throughout the

southeastern United States. The primary market area consisted of the states of Alabama,

Tennessee, Georgia, Florida, and Mississippi. There were also selected accounts in

Kentucky, Indiana, and South Carolina. Five sales representatives covered the primary

marketing area, with each representative having one state assigned as a territory. The

selected accounts were assigned to the sales representatives at the sales manager's

discretion.

Historically, the management of Dunn had pursued a conservative growth strategy with

particular emphasis on achieving maximum return on investment. To keep costs down,

capital expenditures for replacement of worn-out or obsolete equipment were given low

priority. This led to a drop in production efficiency at the company's Tuscaloosa plant such

that production was unable to keep pace with demand. Thus, from 1999 to 2003, company

sales were limited by the availability of the product. However, despite these difficulties, the

company was profitable and had an excellent reputation in the construction industry for

service and quality.

The company initiated successful capital improvement programs during 2002 and 2003;

consequently, the company's production capacity had increased greatly. No longer would

Dunn's sales performance be hindered by lack of product availability. Robert Head

recognized that this increase in production capacity would require some revisions in the

sales representatives' duties. More time would have to be spent seeking new accounts to

fully realize this new sales potential.

One of the first tasks that Head undertook as sales manager was a review of the field

operations and performance of each sales representative. Head traveled with the sales

representatives for a week to obtain as much information on each representative as possible.

Head also spent two days with each person compiling a territorial analysis. This analysis

broke each representative's district into trade areas that were analyzed in terms of

established accounts, competitive accounts, potential of the trade territory, market position

of competitive manufacturers, and selection of target accounts. Head believed that a

properly prepared territorial analysis could reveal whether the sales representatives really

knew and worked their districts. Some pertinent statistics uncovered by the analysis are

reported in Exhibits A and B.

EXHIBIT A

Sales performance of the individual sales representatives, 2004-2005.

EXHIBIT B

Results of territorial analysis.

John Little's Performance. Head concluded, after reviewing the results of the territorial

analysis, that John Little's sales performance could be improved. Little had been with the

company for over 20 years. A tall, handsome individual with a polished, articulate manner,

he appeared to be a perfect salesperson, yet his performance never seemed to equal his

potential.

While evaluating Little's accounts, call reports, and expense accounts, Head un-covered a

pattern of infrequent travel throughout Little's district. Little sold only 34 active accounts,

well below the company average of approximately 55. With the low number of accounts

and a daily call rate of two, it appeared that Little was not working hard. When Little's sales

performance was compared to his district's estimated potential, it appeared that Little was

realizing only about 60 percent of the potential sales of his area. When compared with the

other territories, Little's district ranked last in sales volume per 1,000 housing starts and

sales volume per 100,000 population.

Head questioned Little concerning coverage in his Georgia district. Head recalled part of

their conversation:

Head: John, it appears that you are not calling on the potential customers in the outer areas

of your district. For example, last month you spent 12 out of 20 days working in Atlanta. I

know you live in Atlanta, and there is a tendency to work closer to home, but I believe that

we are missing a lot of business in your area simply by not calling on people.

Little: Look, I have been selling roofing for a long time, even when the plant couldn't

produce and ship it. Why get upset when we have a little extra product to sell?

Head: Look, John, we have increased production by 20 percent. You will have all the

product you can sell. This means extra income to you, better services to your accounts, and

more profit to the company. I will be happy to assist you in working out a plan for coverage

of your district.

Little: Bob, don't you ever look at the volume of our customers? If you did, you would

know that the Republic Roofing Supply in Atlanta is the second largest account of Dunn.

Upchurch, the owner of Republic, is very demanding concerning my servicing Republic on

ordering, delivery, and product promotion. It has taken a long time, but I have gained the

trust and respect of Upchurch. That is why he looks to me to take care of the account. The

reason that we have not lost the account to our competitors is that I give the type of service

demanded by Upchurch.

Head: John, I agree that service to all of our accounts is extremely important. However,

service does represent a cost, not only in terms of an outlay of money but also in the

potential loss of business from other accounts. I seriously question the profitability of

spending approximately 40 percent of your time with one account.

Little: What do you mean, profitability? My district has always made money. Just because

we have new management, why does everything have to change?

Head continued the conversation by suggesting that he and Little meet at some future date

to lay out a travel schedule. It was Head's intention to structure the schedule so that Little

could make a minimum of four calls per day. Little, however, refused to consider setting a

schedule or to increase the number of calls per day. His refusal was based on the contention

that he needed at least two days a week to service Republic properly. Little further stated

that if Dunn would not allow him the two days a week to service Republic, other roofing

manufacturers would.

Robert Head pondered his decision regarding John Little and the Georgia territory. He felt

that he had three options. First, he could simply fire Little with the possibility of losing the

Republic account. Because Republic was Dunn's second largest account, Head realized that

this might be a dangerous course of action. Second, Head considered rearranging Little's

district by transferring some of the outer counties to other sales representatives. Finally,

Head realized that he could simply accept the situation and leave things as they were now.

He remembered once being told by a close friend with years of management experience that

sometimes a don't-rock-the-boat strategy is the best way to handle difficult situations.

Question

What should Robert Head do regarding John Little and his Georgia territory?