NetApp The Day-to-Day of A District Manager

CASE: E-263
DATE: 08/06/07
NETAPP: THE DAY-TO-DAY OF A DM

As a rep, your time is your own. As a DM, your time is your rep’s.
—Jim Wilson, District Manager
On a cloudy Tuesday morning, July 26, 2002, Jim Wilson arrived for work at 6:43 a.m. on his,
one hundred and eightieth day as district sales manager at Silicon Valley-based Network
Appliance (NetApp). He had completed his second full quarter as district manager (DM) at the
technology company and, according to his custom, arrived early to try to handle important
matters that required his concentration, before the bustle of the day began. The critical question
ahead of him that day was deciding whether or not to terminate Todd DeSchutes, his sales
representative managing e-Market.com, the company’s largest Internet account. Although
DeSchutes had received praise for being one of the best customer advocates in the company’s
sales team, Wilson felt that he had lacked judgment in giving the customer discounts that were
beyond what was acceptable (and profitable) to NetApp. The company was on a hiring freeze
after having executed its first large-scale layoff three months earlier, and one of his five reps was
already on his way out. As Wilson reconsidered DeSchutes’ termination, the prospect of
meeting his numbers for that quarter—let alone that year—seemed even more distant. Wilson’s
thought was interrupted by the unexpected arrival of his star sales representative, Patty
Thompson, who approached his desk. Without saying a word, she handed him a bright orange-
colored envelope. It was her resignation letter, giving the company a “30-minute notice.”
Wilson could hardly believe his eyes.
INTRODUCING NETAPP
Network Appliance (NetApp) was cofounded by David Hitz and James Lau, in April of 1992.
Hitz had earned a double engineering degree from Princeton University and worked at MIPS
Computer, before meeting Lau at Silicon Valley-based Auspex Systems. Lau had obtained his
Patrick Arippol, MBA 2004, prepared this case under the supervision of Mark Leslie, Lecturer in Management, as
the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative
situation.
Certain names and details in this case study have been changed.
This case was made possible by the generous support of Mr. Jeffrey T. Chambers.
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This document is authorized for use only in G. N. Kamath's Advanced Selling Skills and Management PGP19 at Indian Institute of Management - Shillong from Jul 2020 to Jan 2021.
NetApp: The Day-to-Day of a DM E-263 p. 2
dual B.S. degree at University of California, Berkeley, and his M.S. degree in computer
engineering from Stanford University, before working at Bridge Communications (3Com) and
then joining Auspex Systems as director of software development.
Leveraging from their combined experience in data management and network storage, the two
engineers started NetApp with the goal of simplifying the data storage industry. They developed
a product that separated the typical computer server into its storage and management
components, into appliances that they called “filers.” Unlike other products in the market at the
time, NetApp’s appliances performed one single task—that of storing network data, without the
additional file and operating system overheads. It enabled companies with data-intensive
networks to use industry standards and avoid being trapped into proprietary hardware systems,
while being able to store and retrieve data at substantially faster rates.
NetApp finished developing the first version of its product in 1993, at which time start-up
veteran Michael Malcolm joined the company. By 1994, he had helped secure over $10 million
in venture funding from firms such as Vanguard, Sequoia Capital, TA Associates, and Sutter Hill
Ventures. Thomas Mendoza then joined the company as VP of sales, further driving the
company’s outbound activities. Princeton graduate Daniel Warmenhoven became the
company’s CEO soon thereafter, contributing his experience from managing telecommunications
companies such as Network Equipment Technologies.
NetApp closed its 1995 fiscal year in April of that year, generating $15 million in revenues and
expecting to break even and triple in size in another year. Later that year, Warmenhoven took
NetApp public in the NASDAQ. Driven by the founders’ product expertise and by the senior
team’s strategic and execution acumen, NetApp continued growing. By year 2000, it had
reached over 1,500 employees and $579 million in revenues and had consolidated its position as
a leading global provider of data storage and content delivery products. NetApp offered over 14
different products, which interfaced with standard industry components and helped global
companies face their major IT challenges—of consolidating rapidly growing storage solutions,
reducing costs, guaranteeing business continuance, and making data available throughout their
various branches and geographies. The organization matured as Mendoza was promoted to
President—to work alongside CEO Warmenhoven.
By that time, the storage market had turned very dynamic and competitive. NetApp’s products
faced competition from EMC Corporation, Hitachi Data Systems, Hewlett-Packard Company,
IBM Corporation and Sun Microsystems. Furthermore, it also faced occasional competition
from smaller players, such as Auspex Systems, LSI Logic, MTI Corporation, and Procom
Technology. NetApp served customers in the energy, federal government, financial services, life
sciences, manufacturing, telecommunications, high technology and Internet industries. High
technology start-ups grew at a frenetic pace, which also propelled NetApp to become a 2,200-
employee-strong organization and generate over $1.1 billion in revenues by the fiscal year
ending in April 30, 2001. Ninety-two percent of its revenues came from the sale of its appliance
products; the rest was split between professional services and software sales.
CHALLENGING MARKET ENVIRONMENT
The late 1990s market euphoria was followed by a period of significant economic slowdown,
particularly among Internet and technology companies. By January of 2002, the effects of the
“dot-com bust” reverberated throughout the U.S., causing companies in most sectors to slow, or
even stall IT spending. NetApp’s revenues for calendar year 2001 fell by nearly 20 percent from
the previous year, to $819 million. NetApp’s stock had already dropped from a $70-$120 price
range in 2000 to a low of $6.54 in October of 2001.
NetApp’s most direct competitor, EMC Corporation, also saw its revenues dwindle by 20
percent at the close of 2001. Its net income fell from 20.1 percent to a negative 7.5 percent of
revenues. Larger companies that benefited from having broader product portfolios also suffered
from the market collapse. In 2001, Hewlett-Packard’s and IBM’s revenues dropped by 7.5 and
2.9 percent, respectively, while their net income eclipsed to zero from their historic 8-10
percent.1
Recently hired President Mendoza and CEO Warmenhoven decided to implement an aggressive
restructuring plan to cope with decreased IT spending rates, and to adjust the company to its new
level of revenues. In late 2001, NetApp executed the first ever layoff, terminating 200
employees and consolidating facilities to its Sunnyvale headquarters. The company’s
restructuring led to a total charge of $8 million, 60 percent of which were severance payments.
Significant changes also took place in the sales and marketing departments, which together
employed more than half of the company’s people. NetApp’s sales force sold into more than 90
countries, and 58 percent of its 2002 revenues were generated through direct versus indirect
sales. NetApp determined that its sales and marketing operating expense was to stay below its
2001 level of $289 million throughout 2002.2 Although sales headcount increased to 915 in
January of 2002 (as compared to 870 one year earlier), changes were implemented to improve
sales force efficiency, such as cost control measures (e.g., health insurance) and commission
reduction policies. After the changes, sales and marketing expenses decreased 1.5 percent to
$209.3 million for the nine-month period ended January 25, 2002 (from $212.6 million for the
nine-month period ended January 26, 2001). The company was noticeably leaner. The
challenge now was increasing employee productivity and the company’s profit margins, once
again.
NEW DM FOR NORTH SILICON VALLEY
On Monday, January 28, 2002, the first day of NetApp’s fourth fiscal quarter, Jim Wilson was
hired and started working as new district manager (DM), to lead the sales representatives of one
of NetApp’s highest-potential districts in the San Francisco Bay Area. Called “North Silicon
Valley,” Wilson’s district covered most companies located between North Palo Alto and the city
of Belmont, as well as additional “named accounts” that fell outside of that perimeter (see
Exhibit 1 for a further description of the district). It was one of three districts in the San
1
Sources: SEC Filings; Network Appliance Form 10-K, for the year ended April 26, 2002.
2
Note: In 2000-01, NetApp’s sales and marketing operating expense had increased by 88 percent.
Francisco Bay Area region, which also included the South Silicon Valley and Downtown San
Francisco Districts—all densely populated with start-up high technology companies.
After obtaining his B.S. degree in Business Administration from California State University at
Chico, Wilson began working as a stock trader, then decided to change careers after “Black
Monday,” the 1987 market crash. He worked for two to four years at each of five technology
start-up companies, mostly in the Silicon Valley. Over 13 years, as he developed an expertise of
successfully selling IT infrastructure products, his role evolved from sales representative to
director (see Exhibit 2 for his professional profile). Wilson’s first experience with NetApp was
in 1995, when he worked as a value-added reseller of its product. He was a keen believer in (and
seller of) NetApp’s product, and became an investor in the company after the Sunnyvale-based
start-up offered its partner companies the opportunity to participate in one of its private
investment rounds.
Wilson was hired by Regional Sales Director (RD) Alice Minnelli, who in turn reported to VP of
Sales Whitney Tomlin. Minnelli was a friend of NetApp’s CEO before she joined the company.
By 2001, she had accumulated six years of work in sales, and had rapidly moved up NetApp’s
ranks to become a second-line manager. Tomlin, on the other hand, had just joined NetApp in
October of 2001. Besides selling mainframes for IBM and Wang Laboratories for nearly a
decade, he had also spent five years as VP of Sales for Cisco’s western region.
Wilson’s district had six representatives: Todd DeSchutes, Victoria Knapp, Patty Thompson,
William Frank, Brian Smith and Bing Chasen. Like NetApp’s other DMs, Wilson faced two key
challenges for Q4/FY02: to successfully restructure his sales team, and to validate his effort by
reaching the company’s aggressive sales target of 30 percent increase for FY2003. He also faced
the typical challenges of “learning the ropes” of his new job. Wilson explained:
Positions in sales are very visible to the company’s senior management,

particularly in difficult environments like that of 2001. In any organization, sales
representatives have some downtime due to their irregular work schedules, which
inevitably fuels a gossip ring that I’ve seen create irreversible damage to
incoming DMs. The only way for me to make a positive impression on my
managers is to deliver—which would allow me to build credibility with my team
members.3
Wilson decided to set the tone for his team by instilling an informal work environment. He did
not demand attendance to many regular meetings, except for a monthly update meeting with all
reps. Wilson tried to be accessible to his team, by often stopping by his team members’ desks to
learn of progress and make everyone feel included. He explained:
I didn’t feel like I had to micro-manage my people. I only got more involved
when reps asked for help, or when strategizing was needed. I was upfront with
3
Interviews with District Manager Jim Wilson (June 6, June 13, July 23, and July 26, 2007), Sales Representative
Garett Okano (June 27, 2007), VP of Sales for the West Coast Whitney Tomlin (June 29, 2007), Sales
Representative Victoria Knapp (July 3, 2007), and Sales Representative David Engel (July 5, 2007). Subsequent
quotations are from the author’s interviews unless otherwise noted.
my team in that I expected them to send me updated weekly forecasts, called

“flash reports,” and to always give me the straight scoop—especially when the
news was not good.
Wilson felt that his approach was adequate, given NetApp’s culture, the office’s open-door
layout, and the fact that his entire team was located in the same physical office space. Aware of
the fact that he would likely have to change members of his sales team, Wilson sought to
understand NetApp’s sales management tools and policies, during his first week at the job. He
discovered two key processes at NetApp that would help him monitor and manage his team.
One was the “Focal Review,” an appraisal of reps that was conducted every year at the end of Q4
(see Exhibit 3). The other one, called the “Improvement Plan,” was used for employees with
mediocre or failing performance (see Exhibit 4). Managed jointly by the rep’s DM and by the
company’s Human Resources (HR) department, this program extended over 90 days, and
consisted of classes and a close monitoring of the rep’s performance metrics—which included
numbers of sales calls, numbers of visits, and booked revenues. Wilson learned that
Improvement Plans led to one of two outcomes: “The rep either improved in performance, or
was terminated. NetApp’s HR folks were jokingly called ‘angels of death,’ for that reason.”
In Wilson’s second week at the job, NetApp announced negative results for the third quarter of
FY2002 with revenues of $198 million, as compared to $288 million for the same period the year
before. He knew that the situation was critical. Customers within his district were still reticent
about making new capital expenditures in technology, and the overall economic environment
remained unfavorable. NetApp’s products, which sold for prices ranging from $4,000 to more
than $1,000,000, saw declining unit volumes. Its older products, such as F700 Filers, also
suffered from a falling selling price.
Wilson refocused his activities, in his DM capacity, to face the situation: “Reps can only see and
influence events in the next 60 days. As a DM, I need to see and maximize results 120 days
ahead, and leave it up to the RD and VPs to see and change things for the longer-term.” On the
morning of Monday, February 11, Wilson translated NetApp’s revised strategy for FY2003,
which was distributed internally, into concrete goals for his reps. He wrote down the three main
points he was going to cover with his team during the meeting he had scheduled for that
afternoon:
• Sell new products: Try to sell NearStore and NetCache more aggressively. Introduced in
mid-2002, the products sought to take advantage of the new market demands for data
backup/recovery, and fast Internet content delivery.
• Software sales: Focus on selling software subscription upgrades, given the large number of
new features that were introduced to those products.
• Total cost of ownership (TCO): Position NetApp products by using their TCO analyses,
since the company had recently revised its pricing strategy, improved product performance
(to decrease system downtime and minimize service costs), and increased ease of use (to
lower the administrative overhead of products).
Wilson intuitively believed that NetApp’s larger competitors were still reshuffling from the
impact of the “dot-com crash” on their businesses, which could create a substantial opportunity
for his team.
EVALUATING REPS
At the request of his RD, Minnelli, Wilson reported his progress to her on a weekly basis. They
had arranged a 3 p.m.to 4 p.m. meeting every Monday to review Wilson’s detailed opportunity
forecast and district activities and issues during that time. Like the two other DMs in his region,
Wilson was also scheduled to meet with Minnelli and VP of Sales Whitney Tomlin once every
month, to present account reviews for the quarter.
Wilson’s first meeting with Tomlin was on Monday, February 25, 2002—one month into his
tenure. He shared his preliminary impressions of his district and accounts, and explained how he
did not feel comfortable about evaluating any of his representatives yet, except for Bing Chasen
and Brian Smith. Chasen was already on an improvement plan when Wilson joined, and they
agreed that he was probably not going to make it. In addition, Wilson had just put Brian Smith
on an improvement plan, since by then he had only reached an average of 60 percent of his quota
during the nine previous months (see Exhibit 5 for quotas versus actuals, for FY2002). He
thought that NetApp’s improvement plan would likely help Smith, who appeared to have the
proven skills but was temporarily struggling to cope with caring for his first baby, then six
months old.
Tomlin often used his first meetings with incoming DMs to field potential questions, and to
provide them with additional context, as he did with Wilson:
I know that you’ve inherited a mixed bag of talent. Hyper-growth companies—or

ones that grow at 30 percent or more for successive years—are known to face
difficulties in growing [their] sales organizations. NetApp grew at more than 70
percent for seven successive years, and we nearly doubled our sales team last year
alone. Now we have no choice but to scale back our sales organization, and to
filter the keepers from the reps we have to let go.
Tomlin then provided Wilson with further detail about what had happened with NetApp’s sales
area in recent years. Their hiring philosophy had always been to “over hire,” which they
described as the practice of hiring professionals with more proven experience than what was
demanded by their new jobs. He explained:
“Over hiring” empowers our people. It allows them to grow from within the
company. That would not occur if we hired top-guns from the outside, directly
into senior positions. It also gave us good management depth that counter-
balances the capable yet green managers who rapidly rose up our ranks.
Altogether, this practice has kept our team both dynamic and solid. The scarcity
of good professionals during the dot-com period, however, forced us to become
more liberal in our hiring practices, and to hire professionals that were less
experienced ones—or who had generic high-tech backgrounds instead of specific
domain expertise in storage technologies.
Tomlin continued:
In 2000, almost anyone could sell. Only the best ones can sell in today’s
environment, though. The new paradigm requires reps to draw from all of their
sales skills, and to help customers see how they can save money by investing in
our technologies.
Wilson thanked Tomlin for sharing his insights, and affirmed that changes in his team would
probably be needed: “After getting to know my crew, I will certainly be able to maintain our
airplane in mid-flight.” He went on: “We certainly do not want our best people to leave, and
fortunately our good sales people do not want to leave NetApp either. The job market is rougher
than ever, and our competitors continue in turmoil—and with high turnover rates.”
FOCAL REVIEWS
By mid March of 2002, as Wilson evolved his relationship with each sales rep, he kept a mental
log of how each one fared against the criteria he felt were most crucial for the role:
understanding of sales cycles; ability to prioritize leads; skill of navigating within the right levels
of the customer’s organizations; understanding of customer’s needs; and ability to adapt to the
industry’s changing dynamics. Wilson also tried to determine which reps performed best as
“farmers” (who built on existing relationships to grow accounts), and which ones were better
“hunters” (who efficiently converted a mixed bag of prospects into first-time customers). Wilson
also made a concerted effort to support his reps emotionally. Although he liked the reps who
could deal with adversity, he knew that people living through difficulties were less likely to
perform well.
Wilson discovered that, like all DMs at NetApp, he had to conduct focal reviews with reps in the
last 30 days of the fourth quarter. He used much of the rep evaluations that he had already begun
conducting before having one-on-one conversations with them. Only one of his sales people,
Todd DeSchutes, disagreed and decided to discuss Wilson’s assessment of his performance that
year.4 The situation was ultimately resolved after conducting a meeting that included one
representative from the HR department, and resulted in DeSchutes being assessed an
intermediate score. Those scores did not affect sales representatives’ commissions, but helped
guide DMs so they defined who they promoted. (See Exhibit 6 for a description of reps’
compensation models.)
SETTING FY2003 QUOTAS
One month before the close of NetApp’s fiscal year, on Monday, March 26, Wilson reviewed his
progress with Minnelli and Tomlin. He learned from Tomlin that so far NetApp was finishing
the quarter at slightly over $200 million in sales, closing product revenues for FY2002 more than
20 percent below FY2001 levels. Wilson’s district was expected to reach 85 percent of its $8
million target, even though two of his reps—Victoria Knapp and Patty Thompson—were
4
Note: That year, for the first time, NetApp’s DMs had to score reps on a “normal distribution curve” (in which
only 5 percent of reps ever made the highest score of 1). In prior years, DMs were allowed to score reps as they
pleased. Todd DeSchutes complained that he received a score of 3, instead of 2, which had been the score given to
him for the prior two years (by DM Jim Wilson’s predecessor).
performing well and would probably make it to “club” (receive NetApp’s top salesperson
recognition). Before breaking from the meeting, Tomlin reminded Wilson that his quotas for
NetApp’s Annual Operating Plan (AOP) were due the following week.
NetApp’s AOP detailed the company’s sales goals for the upcoming fiscal year. AOP was
typically defined during the entire fourth quarter, and sought to align all levels of the
organization to the company’s plan. On average, sales organizations of publicly traded
companies sought to reach 20 percent of their annual sales targets during first quarter, and 22,
26, and 32 percent in each of the successive quarters. Fourth quarter was also the time when
most major changes to districts and teams were executed.
In early March, Minnelli handed Wilson his target, which was to generate a 30 percent annual
growth in sales, from the same region, accounts, and team. That translated to $32 million for the
year, and $6.4 million for the first quarter of FY2003. Minnelli surprised Wilson by asking him
to research public databases, in order to discover if any of the 1,000 companies in his district had
an equipment lease agreement which was about to expire. After three days of fruitless pursuit,
Wilson reported that he would instead spend his time becoming acquainted with his team and
accounts, in order to verify the feasibility of his targets, before committing to a number. He
continued informally meeting one-on-one with each of his reps.
Wilson felt that setting quotas was both a bit of an art—and a bit of a gamble. RDs based their
initial quotas on actual sales figures and on Total Addressable Market (TAM) calculations for
each prospective customer. The method was somewhat arbitrary, however, and needed to be re-
iterated, balanced against operational expenses (bottom-up analysis), and filtered for reps who
might have “sandbagged” some sales the previous quarter.5 For that reason, Wilson sought to
“really get to know the district,” to avoid “just rolling the dice.” Besides analyzing the TAM, he
also analyzed each customer’s growth over time, type of business growth (organic vs. by
acquisition), and projected level of storage product saturation within the account. Wilson also
re-prioritized his industries of focus. Consumer technology companies such as Scan Disk
continued growing in spite of the economic slowdown, while core technology companies, like
Intel, appeared to maintain their IT budgets dry.
Wilson estimated, though he was not sure, that Minnelli had applied the same growth target to all
three districts in her region. He felt that his district’s $32 million annual target sounded feasible
though, and told his RD so. Before calculating targets for individual sales reps, however, he
decided to first inflate his total growth target from 30 to 35 percent, so as to “overgoal,” in order
to hedge against rep attrition, openings, and the entry of rookies—who typically took nine
months to ramp up and become productive. Although his superiors did not appear to use this
technique, Wilson felt that this extra “buffer” would allow him to manage changes that could
occur to his team throughout the year.
Before discussing quotas with reps he first studied how he could reallocate quotas to maximize
results—rather than just applying the growth target uniformly across all reps and accounts. He
5
The term “sandbagging” was used colloquially at NetApp, to describe a sales person’s effort to close all potential
sales transactions that s/he possibly could during a particular quarter, without consideration for quotas of future sales
periods. This practice often led to unrealistically high goals for customers in which this occurred.
decided to follow a method he called “best on best,” in which he allocated his best reps, or those
that had exceeded quota for two to three consecutive quarters, on his best accounts. After
identifying the top customers (that would represent 60 percent of the district’s revenues for
FY2003) and allocating “best on best” for farming those accounts, Wilson distributed new
accounts across the remaining “hunter” reps.
On Monday, April 8, 2002, Wilson called for a meeting with all of his reps and allocated
individual quotas ranging from $4 to $9 million for the year (see Exhibit 7). He had discussed
targets with each team member separately. NetApp used goal-based compensation plans for
sales reps, meaning that people in similar positions made the same salary for “on-target actuals.”
That appeared to make reps more willing to swap accounts and territories, as long as they found
their numbers to be achievable. Although he felt he was gambling on some of his reps, Wilson
hoped that the process of discussing quotas with team members would help to keep his team
intact, motivated, and productive.
On April 29, 2002, NetApp entered its 2003 fiscal year. After preparing its preliminary numbers
and releases (see Exhibit 8, Exhibit 9, and Exhibit 10), the company’s sales team began to
operate under the new quotas.
TEAM CHANGES
Wilson executed multiple changes in his team during the first two months of FY2003. The
environment in NetApp’s sales area was already tense since a total of four sales reps in the San
Francisco Bay Area region had been let go. One of those terminations was within Wilson’s
district. Bing Chasen, who finished his improvement plan on May 10, 2002, was fired later that
day.
The next day, Tuesday, May 11, Wilson managed an uneventful monthly meeting with his reps.
One hour after their monthly meeting, Brian Smith surprised Wilson by submitting his
resignation letter to him, 75 days into his 90-day improvement plan. Wilson knew that Smith
was slightly below his $910,000 target for the quarter, but still expected him to have a chance at
recovering. They discussed Smith’s decision, and Wilson learned that his rep had decided to
leave because he could not bear the pressure of being an underperformer, when all of his peers
appeared to be well above target—as had just surfaced in their monthly update meeting. Wilson
suspected that his rep’s decision had also been driven by the fact that their RD, Minnelli, had
pressured Smith to sell into the Synopsis account, where she was micro-managing his activities.
Wilson felt uncomfortable and disempowered by his RD’s attitude himself, but Smith preferred
not to discuss the incident. After bidding farewell to Smith, Wilson refocused on the challenge
of suddenly having to cope with the loss of two, not just one, of the members of his already small
sales team.
Wilson and Minnelli had their traditional 3 p.m. meeting that day, which started with the RD’s
emotional outburst: “We should have given Brian Smith another chance! Putting him on an
improvement plan was a mistake. What are we going to do now? We already have too many
things taking place at NetApp to be able to manage yet another change in your district.” After
discussing next steps, Wilson ultimately agreed to run major changes in his team by her in
advance. That discussion had convinced him, however, that Minnelli did not like some of their
reps (who happened to be the top performers). Furthermore, she expected him to make fewer
changes in his team than he thought were needed.
Wilson decided to temporarily assign the major accounts vacated by the departure of Smith and
Chasen, to try to avoid losing some key customers. As he considered how to reallocate these
accounts across his team, Wilson decided to allocate “best on best,” and gave the accounts with
highest growth potential to Knapp.
Originally from Washington, D.C., Victoria Knapp had started her career in accounting/finance,
before finding her aptitude for sales almost by accident while working as executive administrator
for the VPs of sales at Tektronix. She then worked for 11 years as sales account manager at
Silicon Graphics, and in April of 1999 joined NetApp as a sales representative for the Downtown
San Francisco District. Knapp developed a positive sales track record in the following two
years, in spite of the epidemic of shut-downs among young Internet companies at the time.
Realizing that her district was bound to be downsized, she requested to move to the North
Silicon Valley District. In July of 2001, she was effectively transferred, named account
manager, and given 20 mid-range enterprise accounts. Soon after Wilson joined in January of
2002, he added eBay to her accounts, and was most impressed by Knapp’s skill and results. He
explained: “Knapp did a wonderful job at eBay. She was an amazingly good listener, which was
critical to be successful within the company’s homogeneous group of ambitious, male,
inexperienced, mid-level managers.” Wilson assessed that even though Bing Chasen’s accounts
were generating almost zero revenues, they had significant potential. He therefore decided to
allocate those accounts, which included Marvell and Toshiba, to Knapp.
NetApp was under a hiring freeze at that point, yet Wilson felt that he needed at least one
additional rep. He called for a meeting with both Minnelli and Tomlin, in which he raised the
problem and suggested that they hire David Engel, a junior representative who had just applied
for an internal transfer into his district. Engel had joined NetApp in April of 2001, and until then
had managed 15 accounts in the Pleasanton/Livermore District. Previously, he had built his
career as a stock broker and as a sales representative—having worked at Oracle and at Telera
(acquired by Alcatel). After weighing the prospect’s profile and Wilson’s budget, Tomlin agreed
with the transfer, and Minnelli concurred.
Wilson arranged to meet Engel that afternoon, to discuss his transfer and specifically the
Synopsis account. Engel was also going to oversee the Verisign, Broadcom, and GE Nuclear
accounts, yet Synopsis represented 90 percent of his new accounts’ revenues. Engel was
unseasoned and did not have the kind of strong track record that would give Wilson the sense of
security that Knapp did, for example. The DM thought that his new rep was bright and a fast
learner, however, and set him the aggressive quota of $6.5 million. Since the Synopsis account
appeared to demand much strategizing (as compared to other accounts) Wilson expected to
continue to be involved with it. In spite of the uncertainty that accompanied his new rep, Wilson
was satisfied with the change.
MARGINAL REP
By June 11, 2002, Wilson felt that he had been spending too much of his time supporting small
enterprise accounts based in the cities of Menlo Park and Palo Alto in the North Silicon Valley
District. He was accompanying sales rep William Frank, at his request, to more than five sales
visits every week. Frank was one of the best-liked people in NetApp’s sales team, and had been
working for that district the longest—since early 1998, when he was hired by Minnelli. With an
annual target of $4 million, he managed 150 third-tier accounts.
The more that Wilson chaperoned Frank in sales calls, the more unconvinced he became about
his rep’s ability. Frank understood sales cycles and customers’ needs but lacked some key skills
that Wilson thought were key to handling the downturn environment:
o He could not prioritize or qualify leads effectively.

o He was unable to adapt as decisions moved “upstream” in start-ups (sometimes as far
as the CTO).
o He did not develop any creative customer solutions (e.g., product refreshes, leasing,
sale of used equipment, etc.).
o He was not conveying to customers how NetApp’s products could ultimately lead to
cost reductions.
He explained: “Frank was very much liked by customers, but simply could not bring much value
to them. He only sold when the customer wanted to buy a specific product. Furthermore, he
often fell apart when he was introduced to new people. He sought to build a degree of
interpersonal relationship with customers that was simply too costly.”
Frank appeared to be en route to reach 60 percent of his target that quarter—as some of his
accounts began going under and he failed to realize new ones. He was losing about 30 accounts
that month alone. Looking back, Wilson described his concern: “Even if William Frank actually
made 120 percent of his goal—which was highly unlikely—that would not really change results
for our region significantly. He had not shown any promise of becoming a star salesperson or of
delivering on key customer accounts.” Wilson had spent much of his bandwidth with Frank:
“Perhaps I should be spending more of my time with my best reps, instead,” he thought.
The decision was not a simple one, though. Wilson had become more involved with Frank
personally, which made the decision difficult. Furthermore, he had previously managed reps
who were slow to start performing or who eventually turned around to become star performers—
after being moved across regions. If Frank were terminated, his RD Minnelli was likely to have
another emotional tantrum—or use her political capital in the company to try to reverse the
decision. Wilson considered:
Frank’s termination will likely take a personal toll on some of our other team
members, as well as a financial toll on our aggregate results. In all likelihood, I
will probably remain understaffed for the rest of FY2003. Even if I hired a new
rep, my experience is that each rep costs the company a $1-2 million investment,
since each candidate is subject to 12 to 18 interviews before being hired, and
takes around 90 days to ramp up. Also, overseeing a new hire will be an
additional energy drain, since they typically take 25 percent of my bandwidth for
months—before reaching their full potential.
Most concerned about the fact that Frank’s irregular performance would likely make his team
fall short of its goals, however, Wilson put him on an improvement plan.
CUSTOMER ADVOCACY OR LACK OF ETHICS ?
The following Monday, June 27, 2002, Wilson held his monthly meeting with reps. As Todd
DeSchutes presented results for the company’s largest Internet account, e-Market.com, the DM
noticed how revenue volumes from the customer had grown significantly less than unit volumes.
He approached DeSchutes after the meeting, to understand what was happening with one of
NetApp’s most valued customers. e-Market.com generated approximately $8 million per year,
and NetApp had three of its support people working on-site. After discussing the account with
DeSchutes, Wilson began suspecting that his top rep had extended an excessively preferential
pricing condition to the customer, and could be acting in bad faith.
DeSchutes had been managing the account for three years, and before NetApp’s reorganization
he reported directly to the VP of Sales Rob Salmon and to President Thomas Mendoza. In
Q4/2002, after DeSchutes fell under the authority of the North Silicon Valley District, he clearly
lost some of his latitude in making customer decisions.
DeSchutes’ reaction to his questioning gave Wilson pause. The sales representative ultimately
admitted that he refused to apply the new pricing table, announced at the start of FY2003, to e-
Market.com. NetApp had increased all hardware prices to adjust for an increase in COGS
(which was beyond the company’s control), while preserving its 65 percent gross margins.
DeSchutes had ignored the price increase, and continued giving e-Market.com the best possible
discount—by artificially classifying new product sales as upgrades to have the sale fall under
more favorable pricing terms. DeSchutes appeared to be abusing the dynamic pricing scheme
that was extended specifically to e-Market.com. After running the numbers, Wilson found that
DeSchutes’ recent sales to e-Market.com would generate a gross margin of 7 percent to NetApp,
which amounted to a total loss of $1.3 million that year.
As Wilson asked his sales rep for an explanation, DeSchutes resisted, became emotional, and
even called VP of Sales Rob Salmon to contest the matter. He finally conceded that he would
apply the price increase to future sales. Although the incident seemed to raise sufficient grounds
for a termination, Wilson felt that managing DeSchutes’ situation was not that straightforward:
Sales reps are expected to represent customer’s interests. Did Todd DeSchutes go
overboard and put e-Market.com’s interests ahead of NetApp’s? Would
terminating DeSchutes emanate the dangerous signal that sales reps should not be
customer advocates? Some executives at NetApp appeared to be applauding
DeSchutes for his concerted dedication to serving e-Market.com.
Wilson also asked HR to verify his sales team’s recent communications with e-Market.com and
discovered that, soon after their one-on-one meeting, DeSchutes even wrote an unofficial letter
to e-Market.com shortly after their one-on-one meeting, saying that he still expected to be able to
maintain the original discount. Although NetApp had deep and wide relationship mapping with
e-Market.com, and was likely to keep its relationship in the event of DeSchutes’ termination,
DeSchutes possessed some of the company’s most sensitive information that could be very
damaging if it reached NetApp’s competitors.
After analyzing the situation further, Wilson concluded that NetApp was partially at fault, for
allowing DeSchutes to operate autonomously for such a long time. Furthermore, the company
compensated its sales people based on the total revenues they generated, and not on the
profitability of each account. Rather then terminating DeSchutes immediately Wilson put him
on an improvement program that required him to conform to company policies. They arranged
to meet again and follow up on his progress in the first week of Q2/2003.
ROUGH START TO THE NEW QUARTER
On Monday, July 25, 2007, Alice Minnelli met with the DMs and reps in her region to discuss
the results for the first quarter of fiscal year 2003. The company had reached $207 million in
revenues, or 3.5 percent more than the same quarter in FY2002. Although the number had
turned positive, it was shy of the company’s targets. The North Silicon Valley District was the
only one that had exceeded quota. Perceptibly anguished, Minnelli pressured all of her other
DMs to reach quota the following quarter—at the risk of losing their jobs. Uncomfortable and
unsure about how to respond to the meeting’s rough start, Wilson exchanged glances with the
manager of the struggling Downtown San Francisco District. Wilson had already met with his
fellow DM twice, trying to exchange insights and help him improve his sales team’s
performance. The question that remained at the back of Wilson’s mind, however, was what he
should do about Todd DeSchutes and William Frank.
It was on the very next morning, at 7:30 a.m., that Wilson received a visit from his star
representative, Patty Thompson. It was her resignation letter. Wilson could not foresee a worse
moment for this to happen. He had actively tried to keep in close contact with his reps in order
to support them through difficult personal situations that they might be facing. He asked
Thompson if she could share her reasons for leaving the company, and learned that her decision
was completely personal. She had met a man on her trip to Atlanta that weekend and accepted
his invitation to marry him. The following seven days were barely going to be enough for her to
prepare for the wedding celebration that was to take place in two weeks, and for the 40-day
honeymoon they were planning thereafter.
Wilson wondered if there was any way to keep her in the District. Maybe he could offer to put
her on a leave of absence until the return from her honeymoon some 60 days later. But then
again, what about the geographic issues? What does it say about Thompson that she could make
a decision as important as marriage so impulsively? Given all of the other personnel issues,
however, getting Thompson back even for a while sounded like an appealing option.
Wilson congratulated Thompson and turned his attention back to the burning question of how he
was going to meet quota that quarter.
Exhibit 1
Description of the North Silicon Valley District
Region Covered by District

San Francisco Bay Area, California, U.S.
North Palo Alto to Belmont
Named Accounts in North Silicon Valley District
• 36 chip design/manufacturing companies

• 26 Internet companies
• 22 software companies
• 15 biotech companies
• 13 banks / financial services firms
• 12 telecommunication equipment manufacturers
• 11 government entities and contractors
• 8 retailers
Sources: Google Maps; Management interviews with District Manager Jim Wilson.
Exhibit 2
Jim Wilson’s Professional Experience
NetGenesis, Cupertino CA
Director Hi-Tech Sales Vertical, 1999 - 2002
Responsible for the sale of web analytic solutions and the management of the Hi-Tech sales vertical.
Providing enterprise-level solutions for Fortune 500 clients in the B to B and, B to C web environment.
• 202 percent of 2000 Quota, and 160 percent of 1999 quota
• Closed site licenses with Sun Microsystems , Adobe and Seagate Technology
• First million-dollar sale in company’s history
Vangard Technology, Denver CO

Western Regional Sales Manager, 1996 - 1999
Reporting to EVP of Sales for the strategic planning, staffing, training and achievement of Western Region sales
objectives in the following business elements (Colorado West).
• Sales of Enterprise Client/Server storage software, RAID systems, and UNIX computing systems
• Planning, scheduling, and implementation of all enterprise solutions
• Increased sales 610 percent from 1996 to 1998
Parity Systems Inc., Los Gatos, CA

Regional Sales Manager, 1994 - 1996
Served as a top sales person and manager for an industry leading system integrator, focused on the delivery and
sale of mission-critical solutions.
• Sales of enterprise Client/Server software solutions, high performance networking equipment, and
related UNIX computing systems
• Increased sales by 176 percent and gross profit from 18-26 percent 1995 Vs 1994
Highland Digital, Palo Alto, CA

District Sales Manager, 1990 - 1994
Responsible for sales of UNIX applications software, Ethernet networking products, Sun workstations and
servers to the commercial, technical and software development markets.
• Achieved 100 to 150 percent of quota 1991 - 1994
• Highest Gross margin percent in sales 1992 -1994
Harris/3M San Francisco, CA

National Account Representative, 1988 - 1990
Sales of high-end network and stand-alone facsimile equipment. Negotiate and coordinate the implementation
of national contracts. Key accounts Pacific Bell , PG&E and Hills Brothers.
• Best of the West 1989, 1990
• Top Sales person in San Francisco 1989
• Vice Presidents Council 1988
Source: NetApp internal documents, July 2007.
Exhibit 3
Focal Review Report
Employee Name: Manager:

Position Title: Review Period:
Performance Summary High Performance Culture Behaviors

Past Years Highlights and Results High Medium Low
Compared to Objectives: Customer scorecard/ Total Cust. Experience
Drives for Results
Planning and Forecasting
Communication Skills
NetApp Product/Functional Knowledge
Builds Cross-Functional Collaboration
Team Player
(For Management Positions)
Owns, Develops and Executes Business Plan
Effectively Leads and Develops Team
Capabilities Summary
Strengths Growth Opportunities
Development Actions and Timing

Action Target Date
Future Goals and Individual Objectives (use the optional development planning tool on last page for a
more detailed plan )
General Summary/Comments (note: employees will have an opportunity to leave comments once they
acknowledge receipt of their review in the Focal HQ website)
Employee Manager
Date Date
Please upload your completed review forms to the Focal HQ website.

For tips on writing a review for a Sales Rep, click here.
For tips on writing a review for an SE, click here.

Note: After the first 90 days at their jobs, employees were assessed a rating of 1 for overall performance that
“consistently exceeded all expectations for the job,” 2 for performance that “consistently met all and exceeded many
of the position requirements,” 3 for performance that “met all and exceeded some of the position requirements,” and
4 for performance that “met some but missed many of the position requirements.”
Exhibit 4
NetApp’s Template Performance Improvement Plan
— Summary Letter
Per our discussion on (date) , this letter outlines performance plan criteria you need to achieve in the
next four weeks to meet objectives that have not been previously achieved in (quarter) . This is a
performance plan for the period of (date range) and I am prepared and willing to assist you in any
way I can to help you achieve this goal.
The performance issue outlined is your inability to meet your monthly as well as quarterly booking
objectives over the last 9 months. To date your bookings are (actuals, YTD) million on a quota of
(annual quota) million booking. This represents (percentage) percent of YTD quota.
At the end of (following quarter) you and (name of DM) agreed on a level of sales for the
final quarter of (EOQ amount) . In analyzing that number as well as your current forecast you
appear to be well below that projected number. In putting this plan in place I hope that we can accelerate
your ability to achieve your goal. The first target for the (interim date) will be (amount) with
the remaining (remaining amount) being booked by EOY.
As you know, being successful in sales is more than just bringing in orders. These orders must be clean
and clear of any contingencies. In addition to clean, payable bookings, you are expected to respond to the
customer as well as to Network Appliance communication in a timely manner:
• Maintain an average of eight appointments per week
• Respond to requests for information from management or your admin in a timely manner
• Be on time with War Reports, Forecasts, and appointments.
• Be prepared prior to sales calls with management with a call plan and objectives for the call
• Provide feedback after sales call to sales team and management in regards to next steps, strategy,
obstacles and pricing recommendations
• Be available by pager or cell phone during all business hours
On (two weeks before the interim date) , I will review with you your progress towards meeting your
bookings objective. If appropriate progress has not been made, we will discuss what must be
accomplished by (interim date) . In the event that you have not accomplished your booking targets
by that time, Network Appliance could start the process for terminating your employment. Appropriate
progress will be considered as:
• Projected Forecasts greater than Quota and agreed to by your DM

• Continued 8 appointments per week
• Three calls per week with (your DM) or (HR contact) .
_________________________________ _____________________________
EMPLOYEE DATE
_________________________________ _____________________________
MANAGER DATE
Exhibit 4 (continued)
NetApp’s Template Performance Improvement Plan
— Accompanying Development Plan
• Development Plan Objectives: Create development needs and activities that will enhance productivity,
performance, competence and professional growth.
Development Development
Timeline Desired Results Support
Need Activities
What performance
improvement in
What on-the-job How many days,
What gaps or support of business Whose support is
experiences, projects, months or quarters
enhancements in results do you necessary for the
or stretch will it take to
competencies or expect will be development
assignments will be implement your
performance need to achieved through the activities to ensure
pursued to address stated development
be addressed? learning gained in success?
identified needs? activities?
the development
activities?
Source: NetApp internal company documents from March 19, 2002 (obtained in July 2007).
FY2002
NetApp: The Day-to-Day of a DM E-263
May/01 Jun/01 Jul/01 Aug/01 Sep/01 Oct/01 Nov/01 Dec/01 Jan/02 Feb/02 Mar/02 Apr/02 Total
Goal $430,769 $430,769 $538,460 $516,922 $516,922 $646,153 $560,000 $560,000 $700,000 $735,244 $646,153 $718,607 $7,000,000
Todd
Actuals $551,000 $512,350 $488,000 $360,770 $280,000 $344,250 $299,000 $123,000 $550,500 $742,000 $880,000 $560,122 $5,690,992
DeSchutes

% off quota 28% 19% -9% -30% -46% -47% -47% -78% -21% 1% 36% -22% -19%
Goal $307,692 $307,692 $384,615 $369,230 $369,230 $461,538 $400,000 $400,000 $500,000 $525,175 $461,538 $513,291 $5,000,000
Patty
Actuals $300,556 $398,332 $490,445 $250,000 $369,000 $363,050 $399,000 $100,000 $420,000 $835,050 $700,000 $655,000 $5,280,433
Thompson
% off quota -2% 29% 28% -32% 0% -21% 0% -75% -16% 59% 52% 28% 6%
Goal $307,692 $307,692 $384,615 $369,230 $369,230 $461,538 $400,000 $400,000 $500,000 $525,175 $461,538 $513,291 $5,000,000
Victoria
Actuals $238,000 $427,897 $472,089 $323,456 $324,000 $432,000 $186,000 $475,000 $373,451 $545,768 $545,678 $834,652 $5,177,991
Knapp
% off quota -23% 39% 23% -12% -12% -6% -54% 19% -25% 4% 18% 63% 4%
Exhibit 5
Goal $184,615 $184,615 $230,769 $221,538 $221,538 $276,923 $240,000 $240,000 $300,000 $315,105 $276,923 $307,975 $3,000,000
Brian
Actuals $120,000 $0 $201,000 $134,500 $312,250 $120,000 $99,000 $245,000 $30,000 $208,954 $180,400 $156,000 $1,807,104
Smith
% off quota -35% -100% -13% -39% 41% -57% -59% 2% -90% -34% -35% -49% -40%
Goal $184,615 $184,615 $230,769 $221,538 $221,538 $276,923 $240,000 $240,000 $300,000 $315,105 $276,923 $307,975 $3,000,000
Jim Wilson’s District
Bing
Actuals $68,000 $22,000 $106,000 $331,000 $100,000 $86,000 $715 $7,500 $73,456 $267,000 $0 $0 $1,061,671
Chasen
% off quota -63% -88% -54% 49% -55% -69% -100% -97% -76% -15% -100% -100% -65%
Quarterly Quotas and Actuals
Goal $184,615 $184,615 $230,769 $221,538 $221,538 $276,923 $240,000 $240,000 $300,000 $315,105 $276,923 $307,975 $3,000,000
William
Actuals $200,000 $243,343 $0 $50,000 $123,990 $280,000 $92,500 $0 $150,499 $100,000 $569,000 $120,500 $1,929,832
Frank
% off quota 8% 32% -100% -77% -44% 1% -61% -100% -50% -68% 105% -61% -36%
p. 19
Exhibit 6
Sales Representative Compensation
Summary of Benefits:
• Base salary: Sales representatives were paid annual salaries in fixed monthly amounts, depending
on their levels of experience. In FY2002, rep’s base salaries ranged from $60,000 to $80,000.
• Sales commissions: Reps were paid variable compensation, which in FY2002 ranged from
$60,000 to $90,000 for representatives achieving 100 percent of their respective annual goals,
which in that year ranged from $3 to $8 million. Commissions were paid on a monthly basis, one
month after the products sold were shipped to customers (which could be delayed in the event of
backlogs). Commissions were paid in proportion to the percentage of the rep’s annual goal that
was reached that month. A rep with $60,000 commission and $3 million annual goal, for example,
would get paid $6,000 in commissions for a month in which s/he sold $300,000. After reaching
110 percent of his or her goal, commission multiples would be doubled. Commissions were
“accelerated,” for reps that exceeded quota. After 130 percent of quota, commission multiples
would be tripled; after 150 percent, they would be quadrupled.
• Stock options: Upon joining the company, representatives were offered standard employee stock
option plans, which vested over 5 years. The number of stock options offered depended upon the
rep’s experience level, and varied between $30,000 and $60,000 in current value.
• Health benefits: NetApp paid approximately half of the premiums of one of two selected health
plans. The company offered to pay 30 percent of the health plans of the employee’s families and
significant others. (Note: Before Q3/FY2002, NetApp covered 100 percent of health plan
premiums for employees and their families, and offered a selection of all-inclusive health plans that
required $5 co-pays for most healthcare services rendered.)
Sales Force Motivation and Dynamics:

• Rep motivation: Given NetApp’s FY2002-2003 compensation model, sales reps were driven
mostly by their sales commissions. Top performers in FY2002 had reached total annual
compensations of more than 1 million dollars.
• Month-by-month focus: Sales force representatives were motivated to meet their numbers on a
month-by-month, more so than on a quarter-by-quarter basis. Consisting of 13 weeks, each quarter
was broken into “months” of 4, 4, and 5 weeks, respectively.
• End-of-year peak: The accelerated commission model used by NetApp typically made top-
performing sales representatives receive nearly half of their annual compensation in the fourth
quarter of the fiscal year, and the largest amount after the month of April. This model also
motivated sales team changes to be executed during, or shortly after the close of every fiscal year
(much like happened in many other Silicon Valley technology start-ups at the time).
Source: Management interviews with District Manager Jim Wilson.
Exhibit 7
North Silicon Valley District –
Team Members & Targets
Salaries and Annual Quotas
FY2002 FY2003
Salary Commission
Representative Quota Quota
(US $) (US $)
(US $ million) (US $ million)
Todd DeSchutes 70,000 90,000 7 9
Patty Thompson 65,000 80,000 5 6.5
Victoria Knapp 65,000 80,000 5 6.5
Brian Smith 60,000 60,000 3 4
Bing Chasen 60,000 60,000 3 4
William Frank 60,000 60,000 3 4
Total 380,000 430,000 26 34
Note: (*) Total targets account for the additional 3-5 percent “buffer” that Jim Wilson built into his district
representative’s targets.
Source: Internal company documents, June 2007.
Exhibit 8
NetApp Financials
Income Statement
1994 1995 1996 1997 1998 1999 2000 2001 2002
(US $ Million; Fiscal Year Ends April/30)
Revenues
Total Revenues 2 15 47 93 166 289 579 1,006 798
Costs
Cost Of Goods Sold 1 8 21 38 68 118 236 404 324
Selling General & Admin Exp. 2 9 15 28 49 86 176 333 326
R & D Exp. 1 3 5 9 17 31 62 124 122
Amortization of Goodwill - - - - - 0 0 9 15
Total Costs 4 20 41 76 133 234 474 870 787
Operating Income (Expense) (2) (5) 6 18 33 55 105 136 11
Other Income (Expense)
Net Interest and Investment Income (Exp.) 0 0 1 1 1 3 9 22 19
Other Non-Operating Income (Exp.) - - - (0) (0) (1) - 1 (2)
Total Non-Operating Income (Exp.) 0 0 1 1 1 2 9 23 17
Unusual Items - - - (15) - - - (27) (25)
Net Income (Loss) (2) (5) 7 4 34 57 114 133 3
Balance Sheet
1994 1995 1996 1997 1998 1999 2000 2001 2002
(US $ Million; Fiscal Year Ends April/30)
Total Cash & Short-term Investments - 2 28 28 48 227 354 364 454
Accounts Receivable - 3 5 14 34 57 109 187 147
Net Property, Plant & Equipment - 2 5 9 12 19 48 103 345
Other Assets - 4 8 17 21 43 82 382 163
Total Assets - 11 45 69 116 346 592 1,036 1,109
Total Current Liabilities - 5 6 15 29 51 113 219 216
Total Liabilities - 5 6 15 30 51 114 232 250
Total Shareholder Equity - 5 39 54 86 296 479 804 859
Source: NetApp SEC Filings, 10-K forms, Capital IQ, July 2007.
Exhibit 9
NetApp’s Financial Metrics
Basic Metrics (as a percent of revenues)

60%
40%
Gross Profit
EBITDA
20% Net Income
0%
1996 1997 1998 1999 2000 2001 2002
Fiscal Year (ends in April/30)
Historical Valuation Multiples

300
Average TEV/Revenue (LTM )
250 Average TEV/EBITDA (LTM )
200
150
100
50
0
Q2/96 Q1/97 Q4/97 Q3/98 Q2/99 Q1/00 Q4/00 Q3/01 Q2/02
Fiscal Year (ends April/30)
Exhibit 10
NetApp – Quarterly Results
Financial Results for 2001 Q1/01 Q2/01 Q3/01 Q4/01 Year

Total revenues 231.2 260.8 288.4 225.8 1,006.2
Gross margin 141.7 161.5 174.6 126.7 604.5
Net income 5.0 35.4 34.1 0.5 74.9
Financial Results for 2002 Q1/02 Q2/02 Q3/02 Q4/02 Year

Total revenues 200.4 194.7 198.3 204.9 798.4
Gross margin 112.3 113.7 123.3 131.1 480.5
Net income (loss) (0.5) (11.2) 7.0 7.8 3.0
Comparative Results, 2001-2002 Q1 Q2 Q3 Q4 Year

Increase (drop) in Revenues 2001-02 -13.3% -25.3% -31.2% -9.3% -20.7%
Net Income in 2001 (percent of revenues) 2.2% 13.6% 11.8% 0.2% 7.4%
Net Income in 2002 (percent of revenues) -0.3% -5.8% 3.5% 3.8% 0.4%
Increase (drop) in Net Income 2001-02 -2.4% -19.3% -8.3% 3.6% -7.1%

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CASE: E-263

NETAPP: THE DAY-TO-DAY OF A DM

CHALLENGING MARKET ENVIRONMENT

NEW DM FOR NORTH SILICON VALLEY

Positions in sales are very visible to the company’s senior management,

my team in that I expected them to send me updated weekly forecasts, called

I know that you’ve inherited a mixed bag of talent. Hyper-growth companies—or

SETTING FY2003 QUOTAS

o He could not prioritize or qualify leads effectively.

CUSTOMER ADVOCACY OR LACK OF ETHICS ?

ROUGH START TO THE NEW QUARTER

Region Covered by District

Named Accounts in North Silicon Valley District

• 36 chip design/manufacturing companies

Vangard Technology, Denver CO

Parity Systems Inc., Los Gatos, CA

Highland Digital, Palo Alto, CA

Harris/3M San Francisco, CA

Source: NetApp internal documents, July 2007.

Employee Name: Manager:

Performance Summary High Performance Culture Behaviors

Development Actions and Timing

Please upload your completed review forms to the Focal HQ website.

Source: NetApp internal documents, July 2007.

• Projected Forecasts greater than Quota and agreed to by your DM

Source: NetApp internal documents, July 2007.

Sales Force Motivation and Dynamics:

Source: Management interviews with District Manager Jim Wilson.

Salaries and Annual Quotas

Todd DeSchutes 70,000 90,000 7 9

Patty Thompson 65,000 80,000 5 6.5

Victoria Knapp 65,000 80,000 5 6.5

Brian Smith 60,000 60,000 3 4

Bing Chasen 60,000 60,000 3 4

William Frank 60,000 60,000 3 4

Total 380,000 430,000 26 34

Basic Metrics (as a percent of revenues)

20% Net Income

Historical Valuation Multiples

Financial Results for 2001 Q1/01 Q2/01 Q3/01 Q4/01 Year

Financial Results for 2002 Q1/02 Q2/02 Q3/02 Q4/02 Year

Comparative Results, 2001-2002 Q1 Q2 Q3 Q4 Year

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