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Pharma Talent Paying Sales Force Bonuses Within A Fixed Budget Case Solution
The following report details the analysis and evaluation of Pharma Talent’s bonus structure. The company take helps pharmaceutical companies outsource their sales department so they can achieve maximum sales while maintaining their primary focus upon developing new medicine and perfecting existing ones. The company was set up by Camdon Arskey in 2006. Having worked with many top pharmaceutical companies in the past, Arskey has ample knowledge about the industry. It is this knowledge that made him realize that pharmaceutical companies will pay in a bid to get a sales team to market their products rather than having a sales department in-house.
Following questions are answered in this case study solution
Part 1- Organizational Iceberg Model
Part 2- Mintzberg’s “Managerial Roles” Model
Case Analysis for Pharma Talent Paying Sales Force Bonuses Within A Fixed Budget
While the business model of the company is a sound one, the organization’s management still needs work. The bonus mechanism, in particular, needs to be chalked out. The previously implemented bonus structures were either too focused on sales, which is not consistent with the current client, Natural Life’s, objectives, or were based entirely upon self-reporting by the representatives themselves. The company must evaluate and come up with a bonus system that achieves the two-pronged objective of motivating the sales force in a manner that is consistent with the client’s needs and one that is within the budget set by the company.
2. Part 1- Organizational Iceberg Model
Pharma talent provides the services of a sales department to pharmaceutical companies on a contract basis. It is different from its competitors in that it provides dedicated services which result in a more focused approach and provide much better sales figures for its clients. The company recently took on the task of representing its first client that produces OTC (over-the-counter) drugs, Natural Life. Natural Life manufactures and sells natural health products, its best seller being a natural remedy for flu and cold. Before Natural Life, Pharma talent had only worked with companies that produced prescription drugs. This is important since prescription drugs can only be bought if they are authorized by a physician or a certified healthcare provider, while OTC medicine is generally purchased on the recommendation of a pharmacist. This distinction is critical as it means that the sales effort for OTC drugs is completely different from that of prescription drugs.
Whether Pharma Talent will be able to make the change effectively to meet the demands of a new type of client is an important consideration. To assess the organization’s ability to accept and adopt change it is essential to examine the organization’s culture. There is ample evidence that suggests that an organization’s internal culture is one of the main influences when it comes to adapting to change (Rashid, et al., 2004). To assess Pharma Talent’s internal organizational structure it is important to examine the overt forces that influence the organizational culture as well as the covert forces. Once these are determined will it be able to evaluate whether these forces support and assist the process of change or whether the culture resists change.
One excellent theoretical model that helps identify the forces that make an organization’s internal culture is the Organizational Iceberg Model, as depicted below:
The model uses the iceberg metaphorically to indicate that while many aspects of the culture are overt and easily distinguishable, most of the aspects that determines an organizational culture are covert. Most organizations have their values, mission, rules and regulations formally communicated. In the case of Pharma Talent, for instance, the value is placed upon customer satisfaction. Yet, the company is not operating according to this ideal. This is because there are many unseen forces that are part of the culture.
What can be seen and identified is just the tip of the iceberg, which can be deceiving as culture is mostly shaped by the unseen, informal forces. These lie below the surface and are hard to distinguish. Individual attitudes, personalities, skills as well as the group communication patterns, conflicts, informal team processes and the political structure determine the culture in reality.
The attitudes of the sales personnel at Pharma Talent play a significant role in determining the culture. These attitudes are in part based on the bonus system in place. For example, initially the bonus system was based solely upon sales. This create a very sales driven attitude. Also the bonuses were rewarded based on the total dollar sales, rather than percentage increases in sales. This meant that locations where sales were generally high had a sales force that was not motivated to work hard as their saes were already quite high by default. On the flip side, regions that experienced low sales volume had sales teams that were also not motivated to increase sales as no matter how hard they tried their sales amount still fell way below the average due to factors that were out of their control. Such an attitude proved problematic once Pharma Talent took on Natural Life as a client. Natural Life requirement was getting more pharmacists to recommend Natural Life health products as well as to maintain well-stocked shelves with all its distributors.
Similarly, conflict at the sales representatives’ level also underlies the organization’s culture. The bonus structures are perceived as being unfair. Especially the very first bonus structure that rewarded bonuses on the basis of total sales in dollar terms. This bonus scheme was simply rewarding individuals based on the sales figure which in many cases was determined more by external factors, like population density of an area, rather than the performance of an individual. This meant that much more skilled and driven sales personnel were being undermined. This created dissatisfaction and sowed the seeds of discord and conflict.
To rectify the situation, the company did implement different bonus structures. The latest one, the third structure it adopted, also had an undesirable impact. In order to align the bonus with the client’s need for well-stocked shelves and ample product at its distributions, the company introduced the planogram, meaning how well the shelves are stocked with Natural Life’s products. Since this measure was self-reported, the data showed perfect planogram results in most cases. This clearly meant that while some sales representatives may have been working hard to ensure that the shelves were stocked at all times, there were others that simply lied about it to get the bonus. This, unintentionally, encouraged employees to lie and overstate their performance.
To improve the performance of its sales representatives and to align them more accurately with the needs and wants of its clients, Pharma Talent’s management must tailor bonus structures according to each individual job. This makes sense since every company that hires Pharma Talent has its own objectives. Management must foster a conducive environment for the employees to work in so they can perform well (Eskildsen & Nussler, 2000). Developing a culture that is more accepting of change goes beyond the implementation of a mere bonus structure. Management has immense responsibility in leading the change and enabling the employees to do the same.
3. Part 2- Mintzberg’s “Managerial Roles” Model
The importance of managers within an organization can never be overestimated. Managers get things done. They develop the framework and foster an environment within which employees can perform (Tovmasyan, 2017). It is hard to describe exactly what a manager does because, depending upon the situation and the organization’s requirement, the manager may be required to perform many different tasks. A manager may lead the organization through the process of change or may help motivate workers to perform better and work harder. The roles and responsibilities of a manager vary and change according to the organization’s needs. In all cases, however, managers perform a supporting role to the rest of the resources that the company possesses.
According to Henry Mintzberg, someone who has researched and wrote prolifically on managers, managers perform and assume many different roles within an organization (Kumar, 2015). A manager’s job is a combination of interpersonal roles, informational roles and decisional roles.
Under interpersonal roles, a manager is a figurehead, a liaison and a leader. As a figurehead the manager embodies the values of the organization and represents the company in a formal manner externally, like attending a social event on behalf of the organization. In this case the manager symbolizes the organization and whatever it stands for. In the role of a liaison, on the other hand, the manager communicates and reaches out to people both within as well as outside the organization. They forge relationships in order to gain information or favours, or simply to get things done within the organization (Taskworld, 2016).
In the informational role the manager monitors the situation, disseminates information, and acts as a spokesperson. As a monitor the manager scans the internal environment to examine the workings within the organizations and observes the external environment to keep a look out for changes that will impact the organization. Any important information gained is then communicated to subordinates in the role of a disseminator. This involves the collection of information and analysis to determine what needs to be communicated to subordinates. As a spokesperson the manager communicates information from within the organization to stakeholders, like shareholders, employees, consumers, and the society in general. In the informational role a manager must not only have excellent communication skills but also the ability to collect data and process it according to the objectives of the organization so critical information can be used in an effective manner (Gutterman, 2015).
The final set of roles that manager assumes relates to the all-important decisional process. As a manager decisions of every magnitude need to be made on a daily basis. Decisions need to be made with regards to allocation of organizational resources. This involves insight and careful planning so resources are used as efficiently as possible. A manager is also an entrepreneur and when issues arise he or she needs to become a disturbance handler as well as a negotiator. Foresight and judgement are key in making decisions. In a way all the major roles are interrelated and this makes defining the job a manager does, all the more complex.
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