Visionary Design Systems(VDS)

Are Incentives Enough?

Team Members:

Mr. Usman Zakir (BBAsp09-007)

Mr. Qamar -uz- Zaman (BBAsp09-08)

Discussed Material

Employee compensation

Incentives

Service management

Summary

VDS was market leader in CAD (Computer Aided Design) software and hardware but PDM (Product Data Management) was critical market for it. So VDS hired two experts in the field. Management offered attractive incentives for growing the PDM business but unfortunately they remain loser to drive VDS forward in this industry. Things were not progressing quickly and top management didn’t know what to do next.

Introduction

VDS was a system integrator and seller of CAD systems along with customization and training services.

The philosophy is empowerment combined with high rewards.

Company was facing difficulties with a critical division – Product Data Management.

 

Philosophy of Company

everyone is a partner

Performance based pay

empowerment

Decentralization

encourages atmosphere

of friendliness

philosophy and values

Recent Development in Industry Engineering Analysis Tools:

Automates the physical testing of parts created by CAD System

To detect design flaws earlier and save on costs of real testing

Reduces length of typical product design cycle

Contd….

Product Data Management:

stores information CAD documents in and organized manner like an electronic vault.

improves company ability to manage data.

this market is not yet really operational – companies are investing but no one yet earning

Visionary Design Systems helping customers restructure their design process and get

the most out of their CAD systems

Strategy is to develop a long term relationship with customers

Founded by ex-HP people, including #1 CAD salesman in the world

11 offices, each separate profit centre

20 sales reps, 25 Applications Engineers, 3 software engineers, 20 admin employees and 7 Specialists

Specialist: hired within a field, eg analysis tools, Product Data Management, computer networking

Contd……..

Projects typically begin with development of customized CAD interface.

Coming generation of mechanical engineering processes labeled Vision 2000 by VDS founders

HR Systems

Founding Beliefs

Partnership approach

Teamwork and cooperative spirit

Family sense, ethical, moral

Mission, Goals, Tactics and Objectives

Empowerment

Mission, Goals, Tactics and Objectives

Define goals

Objectives Tactics

Develop action plans

Manager’s name attached to each action

plan for accountability

Keep on updatin

g annually

Document laid 5 yrs strategy

plan

Factors for success

Give the autonomy of making decision to the employees after aligning the employees interests with the organization’s goals

Employee’s Interest

• Giving Stocks to full time employees

• Giving stock options through bonus plans

• Cash rewards• commissions

Organization’s Interest

• Productivity • Profitability• Market recognition

Motivated to make right decision at

work

Cooperating and friendly

work environment

Require Sufficient

information (KASO)

Training

Education

Lectures

Group Discussi

on

Increase the worth of

employee

Employee retention

Able to make right

independent decisions

Compensation System

Performance based pay

Low fixed salary

Base Salary < Industry Average

Commissions and bonuses were significant portion of total compensation

Characteristics of VDS compensation System o Compensations such as commissions

and bonus would vary fairly

o Commissions which account for 50% and 30% of their income for sales representatives and application engineers each are paid on the basis of output

Cont…….

According to management stock option was also motivator but it seems that most of employees may not fully understand their stock shares and meaning of stock options.

Base Salaries/Commissions/Bo

nuses Bonus –(10%)paid monthly, annually and quarterly

Monthly

Sales reps: 150 options distributed to 3 reps rewarding sales booked, new business booked and ideas for improving the company. Means that best Sales Reps are incented to stay

Applications Engineers: nearly identical to sales reps

Specialists and Admin: 50 share options for individual improvement or ideas that benefit company

Contd…….

Quarterly: only Sales Reps and AEs – used to encourage sales in strategic areas

Annual: more customized and awarded in cash

Sales reps: company wide bonus for exceeding goals; individual bonus for exceeding individual quota

Applications Engineers: similar to sales reps

Stock Ownership

All employees own stock

Almost 100% of employees earn additional options through the year

Awareness sessions has been conducted to explain the value of the options when it became clear that employees did not really understand

Performance Reviews

Used at VDS to help employees to improve their performance and increase compensation

Annual reviews on anniversary of start date

Contd……

7 page questionnaire completed by manager and employee about KSAO as well as performance highlights and establishes objectives for the coming year

PDM: The Problem Area

Issues

Customers are satisfied with quality but sales volumes are low

Not recognized in industry as a player in the area

Fred always seeking consensus or asking permission rather than just doing it

Hired a new specialist, Bill Braxton to help Fred but same problems continue to exist

Fred Bulatoa’s opinion

Believes that this is a nascent industry that needs to be supported with software development hours and sales commissions

Increasing Sales with Zero Credit: Feels they are under sourced because cannot support consulting staff

Contd……

Believes sales process is difficult – new language and other VDS staff are not knowledgeable about it. Currently training sales reps 1:1 because not included adequately in training program

Contd……

Customers cut the consulting time, because product is expensive – believes VDS should develop a software program that allows companies to get started with minimal consulting time, but he has not been given development hours

Bill Braxton’s opinion

For the product to work it requires integration with CAD – currently not enough resources to integrate

Need to develop infrastructure of capabilities before sales will come.

Sales people not adequately educated

ANALYSIS

Source of problems with PDM Company was demanding zero

investment growth

allocation of resources to non-manufacturing sectors

rivalry establishment of market awareness

Recommendations

Need to modify the PDM plan

Commit the appropriate amount of resources

PDM plan should be treated as separate business unit

Contd…..

Making the business plan would require the grouping of the software group with the staff responsible for the Product Data Management project

Steps Should be Taken by VDS We would recommend the following

points which should be focused to get out of all these issues:

should develop software program for clients to begin their operations with the least of expenses.

Contd……..

Training and tutoring sales representatives on Product Data Management advances the design procedure.

VDS realizes the importance of consultation and tutoring as a means of solving PDM issues.