Identify the worst performer and provide written feedback as a supervisor addressing directly to him/her. (Maximum 250 words. No referencing required).

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  1. After reading the case.
  2. Identify the worst performer and provide written feedback as a supervisor addressing directly to him/her. (Maximum 250 words. No referencing required).
  3. Using relevant theories/concepts (based on the HR perspective, especially performance and rewards), justify your decision of Q1 and the approach you took in providing the feedback (Maximum 550 words. Proper citation/referencing expected)

 

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9 -9 1 4 -5 0 9 REVISED: SEPTEMBER 19, 2019 ROBERT J. DOLAN BENSON P. SHAPIRO ALISA ZALOSH StepSmart Fitness Introduction Ben Cooper opened his laptop and settled in for a weekend of work. It was Friday, September 7, 2012, ten weeks since he’d been unexpectedly promoted to district sales director for the New England region of StepSmart Fitness. On Monday, Cooper was to attend his first quarterly sales meeting with Caitlin Sheridan, the company’s newly appointed regional vice president of sales for the Northeast, and provide a detailed update on his ailing district. Cooper recalled his last conversation with Sheridan from ten days earlier: Ben, I know you’ve had a lot thrown at you these last few months as a result of the reorganization, with no help or information from your predecessor. I’m in the same boat here at the regional level. There’s been a lot of upheaval across the company since Mark Wallace became our CEO six months ago. Wallace hopes that we can improve our sales efforts in faltering districts and regions with high-performing talent like you in place; he is confident that sales revenue, morale, and productivity will soon improve. I was impressed by your success as a salesperson in New York, and enjoyed collaborating with you on the treadmill product last year. Despite your lack of managerial experience, I wanted you on my team because I felt you’d be able to quickly assess what’s wrong with the New England district and suggest some fresh approaches for improving future performance. As you know, I have the authority to terminate employees and will do so based on your recommendation. You may put salespeople on probation, which requires you to work with them to set very specific targets and metrics. If those targets are not met within ninety days, the employee will be terminated. We also have the ability to adjust and reassign territories if that makes sense. ________________________________________________________________________________________________________________ HBS Professor HBS Professors Robert J. Dolan and Benson P. Shapiro and writer Alisa Zalosh prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. Although based on real events and despite occasional references to actual companies, this case is fictitious and any resemblance to actual persons or entities is coincidental. Copyright © 2019 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. This document is authorized for use only in Sunghoon KIM’s WORK6030, Sem 1 2021 at University of Sydney from Mar 2021 to Jun 2021. 914-509 | StepSmart Fitness At our quarterly sales meeting next week, I’d like you to tell me the following: 1. Which of your district’s salespeople are underperforming? Should anyone be terminated or placed on probation? 2. Do you recommend we hire additional salespeople? Why or why not? 3. How might we increase salesperson productivity, if that’s even possible? 4. How we can better evaluate salesperson performance, since you mentioned you felt some of our current metrics aren’t working well? Cooper reflected on his original impression of the district’s sales team. How different his view of the team was now, after two and a half months of analysis! In its current state, Cooper felt the team could increase sales with a combination of some coaching and geographical adjustments. But would that be enough to meet and exceed Sheridan’s heightened expectations? After spending time with each salesperson, Cooper knew a bit about their personal lives and understood, on a deeper level, the ramifications of termination were serious. Executing a turnaround of the New England district would be challenging but not impossible. With a pile of notes at his side, Cooper began to prepare a brief, one-page document that answered Sheridan’s four questions and provided his recommendations for future sales-evaluation methods. Ben Cooper: Background Ben Cooper, 30, grew up in a suburb of Washington D.C. An avid athlete, he earned spots on varsity teams in soccer and lacrosse in high school, and earned a partial lacrosse scholarship to a Division III college in New England, from which he graduated in 2003. Cooper was passionate about athletics but was also a dedicated student, majoring in economics. After college, Cooper secured an entry-level sales associate position at the Washington, D.C., office of an international software company, where he supported a team of senior sales executives. To fulfill his desire to keep team athletics in his life, he volunteered to help coach and train his high school lacrosse team on weekends. After three years of working successfully in software sales, Cooper returned to New England to attend business school. Upon graduating in 2008, he was offered a New York-based sales job for StepSmart Fitness, a manufacturer of exercise equipment for health clubs, private health facilities, and home use. The firm was headquartered in New York; Cooper’s sales territory included the West Side of Manhattan as well as Westchester county and parts of eastern New Jersey. Active and prospective clients in Cooper’s region numbered more than 500. Cooper found that working for StepSmart aligned his professional goals with his personal interest in athletics. He was a top performer, exceeding sales targets by 25% his first year and 35% his second year. Said Cooper: I used many StepSmart cardio and strength machines over the course of my athletic career and can attest to the products’ quality and effectiveness; selling StepSmart’s products was a natural fit for me. However, I didn’t want to be in a sales role forever; I hope to become a general manager someday, or perhaps start my own business. To follow either of those paths, I need a diverse skill set. So, in 2010, I sought and attained a promotion to product manager for the company’s treadmill business. 2 BRIEFCASES | HARVARD BUSINESS SCHOOL This document is authorized for use only in Sunghoon KIM’s WORK6030, Sem 1 2021 at University of Sydney from Mar 2021 to Jun 2021. StepSmart Fitness | 914-509 Cooper’s sales experience helped him as a product manager. With feedback he’d gleaned from clients, relating to treadmill features and hoped-for improvements, Cooper influenced new treadmill designs. One of his product suggestions, an additive technology feature with a 35% contribution margin, was adopted in 30% of new treadmill purchases in 2011. StepSmart Fitness: Overview StepSmart Fitness was a manufacturer of exercise equipment in the U.S. The company held roughly 18% share of the industry’s dollar sales, estimated to be $3.5 billion for 2011. StepSmart’s U.S. sales for 2011 totaled $630 million. The company employed 540 people. To reach three distinct sets of customers, the company’s sales force was organized into three groups: 1. Retail Products—63% of StepSmart’s U.S. sales: Supplied home gym equipment to big-box retailers, sporting-equipment retail chains, and online retailers for eventual resale to consumers with a home gym. (The company did not sell directly to home consumers through a StepSmart branded brick-and-mortar or online retail store.) The company held 27% market share in this segment. 2. Private and Institutional—7.7% of StepSmart’s U.S. sales: Supplied a full range of exercise equipment to private organizations, including private clubs, universities, training facilities for professional sports organizations, and residential property managers. The company entered this market only recently and, as a result, market share was just 10%. 3. Commercial Products—29.3% of StepSmart’s U.S. sales: Supplied a range of cardio and strength training equipment to fee-based health clubs. The company’s market share in this segment was 17%. StepSmart’s Commercial Product Line: Selling to Health and Fitness Clubs Four distinct product lines were sold by the Commercial Sales organization; Exhibit 1 provides sales and margin data for each product line. 1. Cardio Products: Treadmills, stationary bikes, and elliptical trainers fell into this category. Prices ranged from $1,200 to $5,000 for treadmills, from $600 to $2,000 for stationary bikes, and from $1,000 to $3,000 for elliptical trainers. 2. Strength Products: Strength-training products included “selectorized” and “plate-loaded” stations. Selectorized products came with built-in weights and adjustable resistance levels; they ranged in price from $1,500 to $3,500. In contrast, plate-loaded stations required users to “load” free weights onto specially designed bars to perform weight-bearing activity; they ranged in price from $500 to $1,800. Most health clubs owned a mix of machines from both product lines in order to create a strength training circuit, for a fullbody workout. 3. Technology: Most health clubs provided members with some form of audio, visual and/or interactive entertainment to enhance their members’ workouts. StepSmart’s Technology line included: (1) Wireless Audio Consoles that integrated with the company’s cardio products ($300 to $500) to provide streaming audio for shared TV screens and club radio stations; (2) personal viewing screens that attached to the individual cardio machine and enabled users to select from a wide range of television or HARVARD BUSINESS SCHOOL | BRIEFCASES This document is authorized for use only in Sunghoon KIM’s WORK6030, Sem 1 2021 at University of Sydney from Mar 2021 to Jun 2021. 3 914-509 | StepSmart Fitness cable programming ($700 to $1,200); and (3) audiovisual attachments providing cardio users with the ability to accept calls and display documents from their smartphones ($1,500 to $1,800). This technology enabled users to participate in work-related activities while exercising. 4. Small Exercise Equipment: Products in this line expanded health club offerings beyond machinery. Accessories included medicine balls, stability balls, hand weights, kettle bells, push-up bars, and ab rollers. Accessories ranged in price from $20 to $75. Commercial Sales Force: Roles and Responsibilities StepSmart’s commercial sales force—which served markets across the U.S.—consisted of 115 salespeople, 15 district sales directors, five regional vice presidents, and one senior vice president of National Sales. See Exhibit 2 for an organizational chart of the Commercial Sales force. Regional Vice Presidents: Regional VPs, including Ben Cooper’s manager, Caitlin Sheridan, worked out of the company’s NY headquarters and juggled several responsibilities. They supervised district sales directors, setting district revenue targets and offering guidance to directors on building and managing sales teams. They also periodically met with the largest accounts in the region. Additional VP responsibilities at the corporate level included: (1) developing selling and sales management strategies, (2) collaborating with marketing on pricing and promotions, and (3) advising product management on product design and functionality. District Sales Directors: The primary responsibility of StepSmart’s 15 district sales directors was to monitor and guide the sales activities of their district sales team. On average, each sales director managed eight salespeople. Directors monitored individual contributions against (1) the collective regional and territory sales goals and (2) corporate-driven product quotas. In 2011, corporate encouraged the sale of cardio and technology products over strength and small exercise equipment. Directors evaluated employee performance and determined employee salary and bonus compensation annually. Additionally, directors recruited and hired new employees for the district. The director’s compensation included a salary (averaging $145,000 in 2012) as well as an escalating commission incentive if the district booked revenue in excess of stated revenue targets. Salespeople—Individual contributors on the sales team were responsible for: 1. Collaborating with Marketing to (a) identify prospective new clients, and (b) customize sales presentations. 2. Establishing contacts within target health clubs. 3. Educating decision makers via in-person meetings (preferred) or phone conversations, and performing meeting follow-up via phone calls and emails. 4. Executing sales transactions. 5. Providing ongoing service to existing clients. A 2010 survey conducted by StepSmart Human Resources indicated salespeople appreciated the freedom and flexibility of the sales role, and enjoyed interactions between colleagues and clients alike. Salespeople ranged in age from early twenties to mid-sixties, and most held college degrees. 4 BRIEFCASES | HARVARD BUSINESS SCHOOL This document is authorized for use only in Sunghoon KIM’s WORK6030, Sem 1 2021 at University of Sydney from Mar 2021 to Jun 2021. StepSmart Fitness | 914-509 Commercial Sales Force: Strategy In 2011, the U.S. health club industry was highly fragmented, with no established national market leader. Instead, smaller regional health clubs populated the industry. Nationally, the average regional health club chain had ten outlets clustered closely together within a designated geographic area. The number of outlets varied widely, however, with some having just one or two outlets and others more than thirty. The range of services and machines provided by clubs also varied, depending on the interests of the regional population. While home consumers could expect a treadmill to last between seven and twelve years, increased usage required health clubs to replace or update machinery at a significantly faster pace. As a result of the industry’s fragmentation, salespeople interacted daily with target customers—in some cases, club chain owners; in others, the athletic directors of individual clubs—in their specific region. Salespeople could not rely on just one or two large accounts to drive revenue; rather, they had to establish numerous relationships with health clubs of all sizes and varieties at the local level, in order to succeed. Company guidelines recommended face-to-face or telephone meetings with a minimum of five clients, or potential clients, per day. To assist salespeople and district sales directors with account management and sales tracking, salespeople were expected to log each and every call, email, or meeting activity. In 2008, StepSmart invested heavily in a leading customer relationship management (CRM) tool that enabled salespeople to easily report sales activities and updates remotely from their smartphones and laptops. Face-toface meetings provided the best return on time, followed by telephone conversations, and, last, email correspondence. As a result, StepSmart encouraged its salespeople to schedule in-person meetings either at regional health club offices or industry events. The company reimbursed salespeople for all travel expenses. Compensation for salespeople was a combination of salary and commission, and as a result varied widely, from roughly $55,000 for new salespeople to more than $190,000 for the highest performing members of the team. District directors set revenue targets for each salesperson; most directors relied on previous years’ territory revenues to generate future goals. Additional bonus opportunities existed for employees who exceeded average territory performance in (1) the number of active accounts and/or (2) the number of “calls” (client visits) per year. Reorganization In May 2011, Mark Wallace, StepSmart’s new CEO, made sweeping changes to its sales organization. With a background in market research and analytics, Wallace seldom made decisions without studying the numbers. In his judgment, StepSmart’s sales force relied too heavily on past performance, habit, and instinct; and many longstanding sales employees had grown complacent. Wallace had terminated the previous regional VP for the Northeast region and director for the New England district for these reason, as well as the fact that a year of district sales performance once again fell short of expectations. In mid-June, Cooper received a phone call and follow-up email from Caitlin Sheridan. The email described the challenges and opportunities facing the New England district and offered Cooper the chance to lead the district through a turnaround: HARVARD BUSINESS SCHOOL | BRIEFCASES This document is authorized for use only in Sunghoon KIM’s WORK6030, Sem 1 2021 at University of Sydney from Mar 2021 to Jun 2021. 5 914-509 | StepSmart Fitness Dear Ben, It was a pleasure to speak with you on the phone earlier this week. I’m glad you are considering the opportunity to work as the sales director for the New England district; the challenges are significant—but not insurmountable—for a motivated leader with a strong quantitative background. I enclose the following two supplements—brought to my attention by our CEO, Mike Wallace—to illustrate the size and scope of the district’s revenue decline, as well as the financial opportunity: Commercial Sales History 2009 2010 2011 StepSmart U.S. Commercial Sales History U.S. Region District $ 149,628,483 $ 58,886,424 $ 8,369,119 $ 164,292,075 $ 66,188,341 $ 8,954,958 $ 184,500,000 $ 73,800,000 $ 9,483,300 If you compare the New England district’s year-over-year growth to company and regional sales growth, you’ll notice it falls well short of expectations. Buying Power Index Ellis Barrow Hammond Foster Gibbons Concetta Avery TOTAL Buying Power 1.27 1.8 0.8 0.97 0.63 1.08 0.94 7.49 Territory Boston suburbs CT City of Boston NH Eastern MA and RI VT and Western MA ME Actual % of 2011 Sales 1.08% 0.93% 0.82% 0.77% 0.72% 0.46% 0.36% 5.14% Wallace—with the help of our market research department—analyzed new demographic, economic, and purchasing data to generate a proprietary Buying Power Index (BPI) for each territory. We believe these BPIs reflect the true commercial purchasing power of different regions and districts across the U.S. The BPI indicates the New England district’s purchasing power is 7.49%, meaning it should be able to generate 7.49% of our company’s U.S. sales. However, the district generated just 5.14% of sales in 2011—only 68.6% of the BPI target. I believe that the district’s underperformance was the direct result of poor management and a lack of strategic direction. With proper guidance and monitoring, I believe the New England district has a good chance achieving close to 100% attainment of the BPI goal. If, by the end of 2013, you achieve revenues that equal or exceed the district’s BPI, I can offer you a bonus in the amount of 2% of your district’s sales. If, however, revenues fall short of that goal, it is my understanding that the New England district will merge with our New York district, and more than 50% of New England team will be terminated. Best regards, Caitlin Sheridan Cooper considered Sheridan’s proposal. Said Cooper: It was a high-risk opportunity. Failure could mean unemployment at a time when jobs were scarce and the average worker’s unemployment lasted 37 weeks. But the opportunity was enormous: 2% of 2011 district revenue was close to $200,000. With a 6 BRIEFCASES | HARVARD BUSINESS SCHOOL This document is authorized for use only in Sunghoon KIM’s WORK6030, Sem 1 2021 at University of Sydney from Mar 2021 to Jun 2021. StepSmart Fitness | 914-509 bonus of that size I could pay off my student loan debt and fund the down payment on an apartment. Plus, I needed management experience if I …
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