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Subject category: Entrepreneurship
Published by:
Stanford Business School (2003)
Version:
14 July 2003
Length:
19 pages
Data source:
Field research

Abstract

Peter Kelly became CEO of Med-Mart, a home health supply company, shortly after his search fund acquired it in 1993. Unfortunately, at the time of purchase, Med-Mart''s sales growth, inventories, and receivables had been grossly overstated, leading to a precarious financial situation once these errors were discovered after the acquisition was completed. During the summer of 1995, Kelly hired Tim Martin as Med-Mart''s vice-president of sales to boost sales and help rescue Med-Mart from financial peril. However, Martin''s proposal to increase sales involved refocusing Med-Mart from thousands of products down to just a few high-margin products, eliminating over 80% of current revenues. Kelly was wary of implementing such a drastic plan and knew that success was wholly dependent on the ability of the sales force to increase sales of the few remaining products dramatically. Kelly thought they could reorient the sales force to implement Med-Mart''s proposed change in strategy effectively by changing the commission scheme. Kelly''s next step was to design this new commission plan, considering the dollar value and timing of commission payments, as well as any thresholds, caps, or ramping of commissions. He wondered how the sales force would react to a compensation revamp and handle selling only one primary product.

Topics

Sales compensation; Sales management; Sales agent; Entrepreneurship; Strategy implementation; Business models
Size:
200 employees, USD18 million revenues
Other setting(s):
1995

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