McGraw Hill Case Study
Grant Senter and James Paulsen
Baylor University
Identification of the Issues

Sales Process

Sales force Structure

Compensation

Sales Training
Sales Process



Campus Plan

All about numbers and opportunity for revenue

No deep thought process

Created the night before

Lack of real preparation

Relationship is lost
No Desire

5 minute meetings with professors

Bookstores are checked to be up-to-date

Goal: to get the professor “up to speed” on the latest offerings
Bottom Line:

Customers are not being appreciated

Sales Process is shorted in an effort to maximize revenue opportunity

Result of a poor training process and incentive structure
Buyer Process
Salesforce Structure
The cons of a “generalist geographic approach” often limit the product
knowledge the sales representatives have, make it difficult for reps to master
broad product lines, and pose a coordination issue.
Consequences:
Decreased sales
Missed opportunities
Decrease in customer satisfaction
The current structure does not present the level of value that our clients are
seeking. McGraw Hill needs to slightly restructure the sales force to ensure that
there are resources available to help with McGraw Hill’s broad range of products.
The Candle Problem
Compensation Plans
Research:

“Once a task called for even a rudimentary cognitive skill,” a larger reward “led
to a poorer performance.”

“In eight of the nine tasks we examined across the three experiments, higher
incentives led to a worse performance.”

“We find that financial incentives can result in a negative impact on overall
performance.”-Dr. Bernd Irlenbusch, London School of Economics.
Issues:

The current commission plan only allows for commission to be achieved if one
achieves over 95% of quota.

The current plan is contrary to scientific research, does not promote a group
mentality, and does not financially incentivize any sales activity under 95%.
Sales Training

“Reps are thrown into the field with barebones training.”- Anonymous Sales Employee

McGraw Hill sales employees are moving from a generalist sales position to a specialist sales
position requiring an in-depth knowledge of McGraw Hill’s technology products.

McGraw Hill sales employees are given 2-3 weeks of in-house training led by their manager.
This is far below the standard.
Organizations sales training:
AT&T-6 months
Oxy Chem- 5 months
IBM- 9 months
Reynolds and Reynolds- 6 months
No current E-Learning Modules in place to keep sales representatives up to date on products
benefits, features, etc.
Recommendations
Sales Force:
Sales Process

Starts with Training

Process: Develop a Relationship


Remove “check ins”

Become less concerned with maximization of revenue opportunities

Require and encourage conversation
Cascading Campaign:
Recommended Sales Process
Compensation Plans
Sales representatives will no longer have to achieve 95% of quota to
receive additional compensation from their 50k base salary.
Sales representatives will operate on a straight base salary of 60,000 and
will be able to receive bonuses ranging from 1-10% of your current salary.
The bonus is based off the group performance of a district manager’s
sales team. This includes the product specialist. This method encourages
team work, collaboration, and friendly competition amongst groups.
The top performing team in each region will receive the 10% bonus off of
their base salary.
Sales Training
-Sales training will be given more of an emphasis as the new sales training
program will be 3 months long for recent undergraduates.
Experienced Sales Professionals will have a training process of 2-3 weeks.
E-Learning modules will have to be completed quarterly and will cover every
aspect of the sales cycle. Sales professionals will be trained on products, the
proper sales process, and additional learning
Turnover
Revenue & Profit
Implementation Process
January
Inform experienced reps of
the new policy
January
Training of
experienced reps at
main office
June
Experienced reps must
have logged second ELearning session
January
New recruits begin three month
training
June
Break down region by
district success
March
Experienced reps
must complete first
E-Leaning session
March
Conduct ride along,
district mangers observe
sales reps
June
Send directors to the least
productive districts. He
will train, advise, and
advance the process in
these districts
March
Make sure new
sales reps pass
certification to
enter the field
Financials:

Increased Revenues: 54 million dollars
Savings:
2.4 million dollars
Expenses: 2.32 million dollars
56.4 million -2.77 million dollars=
Increased Profit: 53.63 million dollars


Savings:
Expected Decrease in Turnover1,000,000
Compensation:
300 reps with the bottom 20% not making quota:
Currently: 60 x 50,000= 3,000,000
Revenues
Training- 30 million dollars (100,000 increase per sales rep)
Compensation- 9 million
Sales force structure-15 million dollars ( 50,000 increase per
sales rep)
Up front expenses:
Training- 5,000,000
18 Product Specialists- 900,000
Implementation- 200,000
Bonuses- 720,000
Total Expenses= 2.77 million
New plan: 60 x 60,000= 3,600,000
60% reps hit quota:
Currently: 180 x 70,000= 12,600,000
New plan: 180 x 60,000= 10,800,000
12.6 million – 10.8 million= 1.8 million
10% reps over 100% quota:
Currently: 30 x 100,000= 3 million
New plan: 30 x 60,000= 1.8 million
3 million – 1.8 million= 1.2 million
- 600,000
+1,800,000
+ 1,200,000
Total Savings= 2.4 million dollars
Impact on Revenues= 1.5 million dollars