Paying the Rep for Work Done


A recent court decision reinforced long-standing tenets of the rep-principal relationship. According to Tom Moore, an attorney with the Minneapolis, Minnesota-based Watje & Moore law firm:

  • “An important lesson for the principal and the rep in this case is that if the rep successfully performs the work the principal asks him to perform, then he should be fairly compensated for his efforts.”
  • Sometimes having only an oral agreement between the rep and principal is preferable to a written contract. Concerning the latter, Moore explained, “If a contract existed that was worded in such a way that the termination of the rep was allowed, the rep could be at a real disadvantage. Written contracts are not always the best for the rep. In a case such as this, the oral agreement served him better.”

The case the attorney refers to involved a rep that was working with an importer of rugs. It was the rep’s job to call on retailers in order to convince them to sell the manufacturer’s rug program. Once the retailer signed on to the program, reorders occurred automatically via computer. “My client did exactly what he was supposed to do,” explains Moore. “It took him some time to get the job done, but once he was successful, the principal terminated him.” The program he was successful with called for an automatic reorder for as long as the program remained in place. “It was a case of the principal saying ‘Thanks for the effort. Goodbye. The program will go on without you.’”

Moore continued that the court determined that it was “unreasonable to cut off the rep’s income stream when an automatic reorder process was set in place.” Ultimately, in February the court awarded a dollar amount to compensate the rep through the end of the year. “While the dollar amount wasn’t all that great, attorney’s fees and court costs also were awarded.”

Moore concluded that this serves as “a classic case where the program the rep was responsible for generated future revenues for the principal. It was the rep who provided his time and effort, and he should be compensated for that contribution.” The court agreed.

How Reps Can Help/Hurt Sales Growth

When an executive with North America’s largest distributor of industrial maintenance, repair and operation replacement parts addressed attendees at this year’s PTRA Conference in Tampa, he found an audience eager for his views on how reps can anticipate and meet the needs of their distributor customers. While his comments were directed to reps, in general, he made several important points that can guide manufacturers in their relations with reps.

According to Tom Robertshaw, senior vice president of sales and strategic planning for Motion Industries, Inc., “Motion Industries sells nothing that someone else doesn’t already sell. To sell our products, we work with a lot of very good suppliers. What we’re looking for in those suppliers are the same things we look for in our employees. One of the key attributes we seek in a supplier is trust. You’re only going to be as successful as you can be if you have trust between yourself and your suppliers — in this case the manufacturers’ representatives you work with.”

With that as an introduction, the executive then asked his audience how reps could assist in fueling sales growth. Among the answers that were offered were:

  • Always do what you say you will do.
  • Fix problems with the factories.
  • Always treat Motion Industries as you would treat any other distributor.
  • Always make and keep appointments.
  • Keep literature up to date.
  • Bring ideas to the branch.
  • Always tell the branch the truth about your dealings with customers and others.
  • Develop that trusting relationship.

Conversely, Robertshaw asked his audience of reps what they should avoid doing to “kill sales growth.” Here are some serious business/relationship faux pas that reps should avoid:

  • Treat us unfairly — offer a bigger discount for the same inquiry to another distributor.
  • Take business direct without consultation.
  • Make a call with another distributor on the same customer that you went in initially with Motion.
  • Make a call with Motion on one line and then go to the same customer to sell a competitive line to one that Motion is selling.

Keys to Replacing a Marketing Director

Toward the end of his presentation earlier this year, a manufacturer asked his audience of manufacturers’ reps for their input, including any questions or problems they had with their principals. One of the first subjects asked covered how this manufacturer went about selecting a replacement for a marketing director.

Here’s how the rep described his predicament to the manufacturer: “A principal that is among my best and most long-standing had to replace their existing marketing manager. The person they had to replace had been there for years, and if anyone served as the rep’s ‘champion’ it was this man. Unfortunately they replaced him with someone not nearly as experienced, and more to the point, with someone who didn’t truly appreciate the reps’ contribution to the manufacturer’s success. Perhaps given some time he can begin to fill his predecessor’s shoes, but in the meantime, what are we supposed to do?

“As it is now, we’re spending an awful lot of time and effort explaining things to the new man and trying to bring him up to speed.”

Obviously the manufacturer who was speaking to the reps couldn’t solve this problem for them, but he did offer some advice to other manufacturers that might find themselves in a similar situation. “I would have done one of two things:

  • “Put someone in place who already had a track record of working with reps.
  • “Or hire a replacement well in advance so he could learn from his predecessor the in’s and out’s of working with reps.”

Tips From Rep-Savvy Manufacturers

As we related the preceding exchange to a group of three other manufacturers, the conversation that ensued covered a few things those rep-savvy manufacturers had learned over the years about working effectively with their marketing partners.

  • Don’t demand conformity from all your agents: According to one of the manufacturers, “Assuming that conditions are the same for all your reps in all your territories could be disastrous. Sure, a certain amount of control is sometimes needed in order to prevent salespeople from reacting to conditions that can relate to critical corporate issues; but rigid control prevents your salespeople from reacting to conditions that can be beneficial or harmful.”
  • An absence of long-range planning: “Just as we expect our reps to exhibit an ability to plan short- and long-term, we’ve got to be willing to do the same. If more companies performed better long-range planning and let their agents know about their plans, there would be far fewer problems and much better sales results.”

Gaining a Foothold with Large Clients

After several months of unsuccessful efforts to gain a foothold with large corporate prospects, one relatively small manufacturer abandoned its direct sales effort in favor of reps. The immediate results of this change in course were beyond their expectations.

According to the manufacturer, “Our direct salespeople were very professional and worked hard, but the results just weren’t there for us. When we made the switch to reps, here’s what we experienced:

  • “Reps immediately got their feet in the door because they had existing relationships with the large customers we were looking to contact. In fact, not only did they have relationships, they had already been selling their other product lines to these customers.”
  • “In addition, when we had our direct people in the field, they were our only presence in the territory. Many of the reps we’re working with presently have two or more people in the field. This provides us with the needed luxury of having a sales force in place that makes calls much more frequently than our direct people could ever do.”

The Value in Reps Speaking to Each Other

One manufacturer reports to us that networking opportunities that started among the reps that comprised its rep council have grown into something much larger — and more beneficial. “When we conducted our annual rep council meeting, we always put time aside for our reps to meet with each other to exchange problems, solutions to problems or simply to share some of their best practices. It didn’t take us long to realize the benefits that came out of these sessions. As a result, what we’ve done is to take this to the next level. We’ve suggested to our entire rep network that they make an effort to stay in touch with each other. We’ve provided each of our reps with everyone’s name and contact points. The result is that many potential problems have been headed off and many of our reps report they’ve been able to employ a new business practice that prevents them from having to ‘reinvent the wheel.’ Bottom line is that there’s never too much communication.”

End of article

Jack Foster, president of Foster Communications, Fairfield, Connecticut, has been the editor of Agency Sales magazine for the past 23 years. Over the course of a more than 53-year career in journalism he has covered the communications’ spectrum from public relations to education, daily newspapers and trade publications. In addition to his work with MANA, he also has served as the editor of TED Magazine (NAED’s monthly publication), Electrical Advocate magazine, provided editorial services to NEMRA and MRERF as well as contributing to numerous publications including Electrical Wholesaling magazine and Electrical Marketing newsletter.