Analysis of HR issues in Napa Valley Wineries (NVW)- A case study of San Francisco Region’s Chain Division

By | May 2, 2014

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Table of contents

 

 

  1.      Background information…………………………………………………………………………….. 2
  2. What are the problems facing Pat Waller?…………………………………………………….. 2
  3. What are the causes of the problems facing Waller?……………………………………….. 3

3.1      Reasons behind the high turnover rate………………………………………………… 3

3.1.1     Structural changes…………………………………………………………………… 3

3.1.2     A push sales goal setting strategy: unrealistic sale quota setting……. 3

3.2      High recruiting and training costs………………………………………………………. 4

  1. What steps should Waller take to resolve his problems?………………………………….. 5

4.1      Solutions to high turnover rate…………………………………………………………… 5

4.1.1     Consolidating structural change………………………………………………… 5

4.1.2     Adjust the sale quota………………………………………………………………. 6

4.2      Solutions to higher cost of recruiting and training………………………………… 6

4.2.1     Expanding the campus recruitment……………………………………………. 6

4.2.2     Reducing the complexity of the selection process……………………….. 7

  1. Concluding remarks and critical analysis………………………………………………………. 7

Reference……………………………………………………………………………………………………….. 8

 

List of tables & charts

 

Table 1 Costs and the nos. of new sale reps by the major recruitment methods…. 5

Chart 1 Quote vs Actual Results…………………………………………………………………. 4
Analysis of HR issues in Napa Valley Wineries (NVW)

–          A case study of San Francisco Region’s Chain Division

 

1.        Background information

 

Starting in 1933 in Napa, California, Napa Valley is now home to approximately 400 wineries and numerous more brands. Its growers and vintners combine cutting-edge science with traditional techniques, and its reputation for producing world-class wines is firmly established in an ever-growing global market (napavintners.com 2012). While the company has achieved great success accounting on the two major success factors (i.e. “consistently high quality wine at low priced” and “aggressive sales”), problems still exist which concern the management of the company a lot and they would be analyzed in the following.

 

2.        What are the problems facing Pat Waller?

 

Pat Waller is the new sales manager of San Francisco region’s chain division.[1] The major problems face him in respect of the human resource management despite the good sale in the area are: (i) high turnover rate; and (ii) high recruiting and training costs.

 

First of all, according to the case background, on average a sales representative had been with the San Francisco division of Valley Winery only for 7 months which contribute to the approximately 100 per cent turnover rate in the sale force in the division.

 

Secondly, the recruiting and training costs approached $25,000 per year for each representative and actually such recruiting which is considering at high cost because of the high turnover rate. And therefore training cost issue is in nature the side-effect of the high turnover rate of the sale persons in the division and without the high turnover rate, this problem could be much mitigated though it still concerns the management at the same time.

 

In the following, focus would be shifted to the analysis of the causes behind the two problems.

 

3.        What are the causes of the problems facing Waller?

 

3.1    Reasons behind the high turnover rate

 

3.1.1            Structural changes

 

From the late 2003 to the mid 2004, the chain store division in San Francisco underwent significant structural change which had created a turbulent reporting system and management hierarchy which contributed to the higher turnover rate through some mechanism. One of these mechanisms is known as resistant of change in the field of management of change. For example, fear of change is one of the most common reasons for resistance to change. While some anxiety is useful and can motivate us there are times when anxiety about something new can severely limit one’s decision making in particular when there’s uncertainty about the future (Blythe 2006). There are methods to mitigate the impacts caused by the changes which would be elaborated later in the paper in the solution section.

 

3.1.2            A push sales goal setting strategy: unrealistic sale quota setting

 

Chart 1 Quote vs Actual Results

 

As mentioned above, one of the major competitiveness behind Napa Valley Wineries (NVW)’s success is its aggressive sale which takes the form of push strategy by setting quota for the sale reps. As a matter of fact, in many industries in particular retail industry, quota setting is normal and in usual compensations could be linked to performance measured based on the quota realization. But the reason which it could become a problem is when the quotes become too far away from the sales reps’ reach, i.e. the goals are in general considered as very difficult or even impossible to achieve. From the above chart showing the realization of the quotes by 8 sale reps in three product lines: Cool Valley, Santo Rey and Valley Wines, termination became usual when the sale reps could not achieve the quota for a certain number of months, usually 3 months, and also from the reflections collected from the sale staffs, the quota are truly difficult even when the sale seemed to be good enough. When efforts are paid but quota is not fulfilled, it is normal and understandable that the sale staff would become discouraged and would choose to quit the job even though they are not terminated.

 

3.2    High recruiting and training costs

 

Another major issue is the high recruiting and training cost for each sale representative in the division. The costs and the nos. of new sale reps through the major recruitment methods are listed as following:

 

MethodNos. of new reps (approximately)Cost per new rep
Campus recruitment10 – 15N/A
News paper and website10N/A
Employment agencies15 – 20$ 2,000
Friend get friend10$ 200

Table 1 Costs and the nos. of new sale reps by the major recruitment methods

 

No doubt that each of the recruitment method would incur relative costs to the company and the considered most effective way of recruitment, the employment agencies, is actually probably the most expensive way of locating the new candidates for the sale reps jobs. And therefore, the high cost of overall recruitment of the sale reps could be reduced by managing the combination of using the various recruiting methods which would be discussed in detail in the next solution section. In addition, the selection procedure is also complex and too long for a sale job and the training cost is also high because of the high turnover rate.

 

4.        What steps should Waller take to resolve his problems?

 

4.1    Solutions to high turnover rate

 

4.1.1            Consolidating structural change

 

First of all, structural change in management should be prevented currently and in the short future to avoid the more morale loss and impact of fear of change spreading among the current sale team in the region caused by such fundamental change in the reporting system.

 

Secondly, soft skills could be used. Coaching and mentoring which are both processes that enable both individuals to achieve their full potential through the exploration of needs, motivations, desires, skills and thought processes to assist the individual in making real, lasting change (coachingnetwork.org.uk 2012) could be adopted by Pat Waller consolidate the structural change and thus assist the sale staffs to adjust to the new management structure. In detail, the district managers should be required to propose a plan as to provide coaching or mentoring services to the sale reps under their management. For example, a common tactic is to require to the line managers to coach their sales staffs for a number of hours per month, say 10 hours, and the line managers need to summit the papers with the signature from the staffs to be coached to the higher management, i.e. the area manager.

 

4.1.2            Adjust the sale quota

 

Adjusting the sale quota is necessary which is also obvious, but the problem is how much and to what extent the quota could be lowered. It is recommended that the company could review the quota made by the competitors as well as checking the company’s business strategy before the final decision could be reached.

 

4.2    Solutions to higher cost of recruiting and training

 

4.2.1            Expanding the campus recruitment

 

As a relatively low cost recruiting method, no question that the campus recruitment could be expanded by the company in its usage to help the company to look for the new sale rep candidates and to achieve this target one technique that could be used is to build up long term based cooperation relationship with the major local universities or colleges. The management could negotiate with the local universities or colleges, in particular those business schools, to set up such strategic partnership with the schools. This is possible because on one hand, the company needs to be exposed to more students who are the within the range of new sale rep candidates and on the other hand many students are eager to look for opportunities in the real working environment.

 

4.2.2            Reducing the complexity of the selection process

 

It is recommended that the company could reduce the three round selection procedures to a more simple way, say, two-round selection procedure: one day on-work testing and management interview after which final decision should be able to be made.

 

5.        Concluding remarks and critical analysis

 

Based on the case background, many would make the similar suggestion to reduce the sale quota and provide more coaching service to the sale reps to retain them as precious human resource, but the point is, the push and aggressive sale strategy is one of the two major success factors behind the company’s business success. Maybe, it is not the right timing to adjust such hr strategy because such adjustment would influence the effectiveness of the business strategy.

 

 

Reference

 

Blythe, J 2006, A very short, fairly interesting and reasonably cheap book about studying marketing, Sage Publications, London.

 

coachingnetwork.org.uk 2012. What are Coaching and Mentoring? Accessed on 14th Oct 2012 [online] available: http://www.coachingnetwork.org.uk/resourcecentre/whatarecoachingandmentoring.htm

 

Napavintners.com 2012. History and Timeline. Accessed on 14th Oct 2012 [online] available: http://www.napavintners.com/about/ab_2_overview.aspx

 

[1] There are three major sales groups: (i) liquor stores & bars; (ii) resorts, restaurants, hotel & motels and (iii) chain division.