Case of Ibm Restructuring Sales Force

1886 Words Apr 18th, 2013 8 Pages
CASE
IBM : Restructuring The Sales Force

In 1993, IBM’s Board of Directors decided the time was right for dramatic action. The once proud company had seen its sales fall from almost $69 billion in 1990 to $64,5 billion in 1992. In the same period, profits plunged from $5,9 billion to a loss of $4,96 billion. In April 1993, the Board hired Louis V. Gerstner, Jr. to serve as its new Chairman and Chief Executive Officer and to turn the company around.

Just three months into the job, Gerstner announced his first major strategic decision. He identified IBM’s sales force as a key source of problems. Observes expected that he would restructure the sales force because it was too large, unwieldy and slow to meet changing customer needs. Gerstner
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Observers felt that the new system might run into problems in international markets where country heads had held strong, autonomous positions. But Gerstner and his managers had been frustrated by their inability to control the country heads. The new system would shift the salesperson’s loyalty to the industry group head. It would also transform account executives from order takers to business advisers.

IBM indicated it would fill half of the new industry posts with outsiders who had experience in the consulting industry. This was a major change from IBM’s traditional policy of promoting from within. IBM also changed the compensation system to base 60 percent of commission on profitability and the remainder on customer satisfaction as measured by customer surveys. Earlier, only six percent of a salesperson’s salary above the base salary (the bulk of a person’s pay) reflected the profitability of his or her sales.

Observers warned that it would take months or years to implement the changes and that the changes would cause upheavals and power struggles. They also noted that what IBM was trying to do was not new to the computer industry. Digital Equipment Corporation tried the industry based salesforce idea in 1993 and abandoned it in less than a year. Apparently, DEC felt that the new structure had not helped reverse a sales slide. However, IBM’s salesforce changes are

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