VISIONARY DESIGN SYSTEMS

ARE INCENTIVES ENOUGH?

Submitted to, Submitted by,

Dr.Mausami Sen Gupta Mohammed Rayyan

Professor PGCM-2112

SDM-IMD SDM-IMD
Case Breakup

• Introduction

• C A D i n d u s t r y.

• Old vs new system

• VDS

• B a s i c va l u e s

• Compensation system.

• PDM

• Fred Bulatao

• Bill Braton

• Conclusion
Introduction

• V ision ar y D e sig n Sy ste ms was a syste ms integ rator and Co mp ute r Aid ed
D e sig n (CAD ) hardware an d sof tware re seller lo cate d in Sun nyvale ,
C alifo rnia.

• In it s fi rst th re e ye ars, V isionar y D e sig n’s re ve nue s j umpe d from $1. 1

million in 1990, to $5. 5 millio n in 1991, to $9. 8 millio n in 199 2, to $17. 8
million in 1993, p romp t ing loc al new sp ape rs to pro noun c e Visio nar y D esig n
Systems a Silic o n Valley suc c ess stor y.

• Manag eme nt off e re d sig nifi c ant inc e nt ive s fo r g ro wing th e P D M b usine ss b ut
t he P D M e xp er ts wo uld not take t he re ins an d d rive V D S for ward in t his
ind ust r y. Thin gs we re no t p rog re ssing q uic kly e no ug h and to p
manag eme nt d id no t k now w hat to t r y nex t .
 CAD Industry

Before CAD was available to mechanical engineers, designers stood at 3x4 foot drawing boards
using rulers and compasses to design products

The introduction of Computer Aided Design in the early 1970s automated the measuring of
lines and angles, significantly reducing the amount of time it took to draw actual objects and
making alterations easier and more timely.

However the necessity of huge computers, extensive technical knowledge, and $150,000 per
package, kept CAD out of all but the largest organizations
Visionary Design Systems
• VDS had eleven satellite offi ces spread throughout the countr y that were
accounted for as separate profi t centers. Each offi ce was opened by a
Sales Representative and an Applications Engineer. The Sales Reps
were the primar y link to potential customers.

• They sold HP’s CAD hardware and sof tware along with VDS’s
integration ser vices providing customized sof tware, consulting and
training. Applications Engineers were the consultants and trainers

• In total VDS employed 20 Sales Reps, 25 AEs, 3 sof tware engineers,

20 administrative employees and 7 Specialists. Specialists were exper ts
within a fi eld and were hired to move VDS into that Specialist ’s fi eld of
exper tise
Basic Values

• The founding fathers of the company consider the workforce to be

the primar y asset that a company can have.

• Decision-making authority rests solely with the employees who are

involved in the decision. Even minor decision like spending on the
depar tment budget is up to the employees of the respective
depar tment.

• Ever y employee of the company is considered a partner. There are

no defi ned pay scales.

• The management encourages an atmosphere of friendliness and

cooperation among its employees.
Compensation System
• Their compensation system is ba sed on the principle that ever yone should
earn what they work for i.e. pay should be in line with the business
g enerated by the employee.

• Their pay scales are not ba sed on seniority or position rather they are ba sed
on the output of an employee.

• Pay package comprises bas e salar y, commission and bonus . The base sa lar y is
a lmost the same for all employees within a unit. However, signifi cant
d iff erences are created by commissions a nd bonuses.

• These bonuses and commissions are given to employees on monthly,

q uar terly and annual basis. These commi ssions and bonuses are given
irrespective of the depar tment and constitute 5 0-30 p er cent of employee
income.
PDM: A Test of VDS’s Philosophy

• Top management had spent a signifi cant amount of time thinking

about how to structure compensation and incentive plans to align
employee’s interests with those of the fi rm.

• Management expected expected employees to take the initiative

in making changes and improving the company.

• While CAD sales had surpassed their expectations almost every

year, PDM couldn’ t seem to get off the ground.

• VDS had to develop Product Data Management capabilities if it

was to become a successful systems integration fi rm.

• VDS failed to capitalize on the oppor tunities in this area.

Fred Bulatao

• VDS recognized the impor tance of this fi eld three years ago and
hired Fred Bulatao to lead VDS into the PDM market.

• Bulatao aquired signifi cant decision making autonomy, and was

rewarded through his commission and bonus plans.

• Bulatao’s commission plan consisted of: 10% of PDM consulting

revenues, 8% of training revenues, and 1.5% of PDM sof tware sales.

• Customers were more than satisfi ed with the quality of Bulatao’s

work, but the quantity of sales had been disappointing to VDS.
During the fi rst threee years, PDM revenues fell below quota by 40%,
and failed to cover PDM costs.
Bill Braton

• Both selling and implementing PDM are extremely diffi cult. The
major failure of PDM is not the technology but the customer ’s
failure to make the organizational changes necessar y to take
advantage of their new capabilities.

• Over the last ten years only a handful of companies have

successfully implemented their PDM.

• The need to build an infrastructure was ver y necessar y which was

not highlighted and it was a constant issue.
 • A proper and quick decision making
hierarchy.

• Making PDM a separate entity and

create a diff erent model for its
operations.

• Implementation of this strategy will

require that the company change its
Conclusion way of doing business, at least as far as
incentives are concerned, but the
empowerment culture could remain
intact.

• VDS could purchase a PDM company (or

the PDM organization from another
company) and integrate it into the
organization