Oracle South Africa Investigates the Value of High Performance HRM for Its Sales Force (this case is based on Opperman, 2012).

Oracle, founded more than three and a half decades ago by Larry Ellison, Bob Miner and Ed Oates, is a privately owned company at the forefront of the business computing world. Oracle commands solutions across the whole technology spectrum, including servers and data storage, database software, middleware, user applications and cloud options. As of 2014 Oracle served more than 400,000 customers in more than 145 countries worldwide, including all of the Fortune 100. Oracle earned USD 38.3 billion in total GAAP revenue in 2014.

Sales are a substantial part of the Oracle business model, since it operates in a business-to-business paradigm, often selling large-scale solutions to customers worth as much as hundreds of millions at a time. Having a highly skilled, engaged and loyal sales force is critical in such a high-stakes environment. Oracle South Africa is one of the fastest growing regional arms of the corporation, selling into a sub-Saharan economic zone that over the past ten years had become the third-highest growth area in the world. Sales opportunities abound for Oracle South Africa.

To ensure a top-class sales force, Oracle South Africa (Oracle SA) invests heavily in high-performance human resource management (HRM), including careful recruitment and selection, high levels of targeted training and development, incentive systems for excellence, team initiatives, and many others. Two downsides to high investment in HR include the high costs and difficulty in knowing whether such initiatives really improve key organizational outcomes and increase the bottom line. With this in mind, Oracle SA commissioned an internal study by Eldrid Opperman, an employee doing an MBA, to study the effect that the sales force HRM was possibly having on key sales outcomes.

To start, Eldrid gathered key data on the high-performance human resource inputs given to each salesperson for a three-year period, including objective data gathered by the company (e.g. hours per salesperson in training, direct training spend on each salesperson, incentives and salary data, and the like). He also included more subjective data gathered through surveys (e.g. extent to which salespeople perceived that they were a match for the organizational culture, the extent to which they participated in team sessions, and the like).

For outcome data, Eldrid gathered not only three years of actual sales data, but also conducted special overall performance appraisals with sales managers to gauge other elements of salesperson performance as well, such as service and team behaviors.

Eldrid also gathered data on the demographics of the salespeople and the external economic environments pertaining to each salesperson’s area, to screen out personal or external economic influences on sales.

Eldrid then employed statistical procedures to study the extent to which each element of HRM links to both sales and general performance (using multiple linear regression, which is taught later in this book). He showed statistically that some elements of HRM – such as training – seemingly improved sales or general performance substantially. Other HRM elements had little or no impact, and one or two actually had somewhat negative impacts. Eldrid could have used this information to suggest where to improve things, or to show the importance of other HRM elements.

However, Eldrid did not stop there. Knowing the results of the statistical analysis, he went on to conduct a more complete and integrated financial analysis of the value of sales force HRM. Since sales are linked to revenue values, Eldrid could easily extract the revenue implications of each element of HRM. However, each HRM activity also has a cost, which he analyzed separately using cost accounting methods (e.g. the cost of selecting salespeople includes the costs of recruitment and the time costs of the people doing the interviewing). In addition, he found methods to calculate the extra revenue values associated with the non-sales performance implications that the statistics ascribed to HRM. Finally, he could add all revenue values, account for all costs, and incorporate them into an overall return on investment (ROI) figure for the high-performance human resource management that Oracle SA applies to its sales force.

Without revealing exact numbers, the analysis discovered that Oracle SA enjoys very high profitability related to its salesforce HRM, but also revealed potential improvements that could generate even more value in the future.