Before leaving on a business trip, Jack Van Der Ploeg, from longtime MANA associate member Zero Zone, sent the following request to Agency Sales magazine.

Zero Zone has worked exclusively with independent manufacturers’ representatives for their sales for more than 40 years now. I am not saying the same reps are still on board for that entire time, but I will say that we have quite a number of very loyal reps that have remained with us for years. So here is the question I have for MANA: Does MANA have any guidelines for reps in order for them to perform succession planning? I personally am getting older, and that means my reps are also. I have made plans within the company for succession, but most of our reps have not. I have told my rep council that I would be more than happy to see if I could find information to pass on to any of our reps that would be interested in obtaining help in this area. In fact, I went one step further and told them that I would try to assist any of them that would like help in setting up something in their agency. That part was easy for me to say, but now I need some professional help and advice to provide me some guidance:

• What recommendations does MANA make in cases like this?
• Is there a guideline that you have published like you have done with contracts?
• Are there other rep associations that may have done something like this if MANA has not?
• Do you have access to a qualified professional that I could talk to about this topic?

This is not only important to the rep agencies, but also to the manufacturers that they represent.

Editor’s Note: Not only was this inquiry a reaffirmation of this manufacturer’s commitment to manufacturers’ representatives, it also showed care that the sales and marketing process it had established over the years would continue into the future.

In response to Van Der Ploeg’s request for information, we were able to come up with several articles on the subject of succession planning that have appeared in Agency Sales. In addition, we were also able to put him in touch with MANA personnel that were more than willing to answer any questions he might have on the subject.

Resolving Disputes

A MANA seminar devoted to resolving disputes between manufacturers and their reps was the perfect venue to develop a dialog on a number of issues that accompany the manufacturer-rep relationship.

Commissions

The reps that took part in the half-day discussion emphasized that overwhelmingly their experience with their principals was that checks were accurate and sent on time — there were some occasional exceptions, however. According to one rep, “If you have a principal that regularly sends his commission checks late, that’s just one of many indicators that perhaps this isn’t the best relationship for you.” Other reps added that when mistakes were made in commission payments, they almost always favored the manufacturer. In addition, when late payments occurred, they usually came from repeat offenders. Overall, however, the reps on the panel indicated commission payments were not a major problem.

The principals that took part in the seminar were quick to address the subject of commissions. The tone of the discussion was set by one manufacturer, who offered, “If commission issues arise, the manufacturer must address and correct any problems immediately. And, by the way, shame on any manufacturer who by his actions would create any such negative working environment for his reps. If a situation evolves whereby the rep will be paid late, the principal must keep the rep in the loop and work it out so the problem is solved as quickly as possible.”

Writing Big Checks

A subject that got more than its share of attention from both manufacturers and reps in attendance at the seminar was that of the size of commission checks. The question was posed: Are there occasions where you — the manufacturer — have to write a check to the rep that exceeds the salary of your company’s CFO?

The initial response from one manufacturer was “If the rep earned it, he’s entitled to it! End of subject.” Another manufacturer added: “I’d love to write a check that’s bigger than our executive’s salary. It’s simple — all that means is that the rep is doing a great job, and more of our product is being sold. That’s what this relationship is all about.”

An attendee at the seminar then offered the following concerning what manufacturers ought to keep in mind when they’re writing those “big checks.” “The manufacturer has to appreciate the fact that the check doesn’t simply go into the rep’s pocket. Remember the rep has to pay all the business expenses that the manufacturer doesn’t, since he’s not employing a direct sales force. That check gets spread around to salaries, insurance, travel and entertainment, office expenses, etc. The more a manufacturer appreciates that fact, the easier it is to write the check.”

Helping With Collections

Growing out of the discussion of paying commissions was the question of whether the principal prefers to involve the rep in situations where the customer does not pay for an order. The three principals who made up the panel discussion shared the view that when such a situation develops, they would never take money back from the rep. From there, however, they varied on whether to involve the rep in the collections process.

One manufacturer offered, “If the customer has not paid his bill, I prefer to get the rep involved as quickly as possible. My thinking is that he might have knowledge of why the bill has not been paid or, via his contacts with the company, he could better aid in gaining payment.”

Another manufacturer said, “I haven’t used the rep for collections unless it was absolutely needed. If we can’t remedy the problem, we’ll just close the account.”

The third manufacturer followed with this approach: “I make every effort to not get them involved. My approach is to keep the rep focused on all the positive aspects of selling. If needed, I may ask them to call the project engineer, for instance, instead of the accounting people. That way they can alert the engineer that an integral product for a specific project may not be delivered. They can provide a ‘heads-up’ to their contact. I’ve found that approach gets us paid better than any other method. And, it goes a long way toward enhancing their relationships with customer decision-makers.”

Sliding Commission Scales

When it came to the subject of changing commission rates, the manufacturers agreed that communicating with the reps and making sure that “the pain is shared” is the only way such a tactic should be employed. For instance, as stated by one manufacturer, “When there’s a major project that may be lost to the competition because of price, we’ll ask the rep the best way to proceed. If it comes to the point where we agree a reduced commission might assist in gaining the order, we’ll both equitably give up something.”

While that’s how commissions might be decreased, another manufacturer described how he employed a plan whereby the rep can increase his commissions by improving his agency’s performance. “While we generally pay a 4.7 percent commission on the sale of our products, the rep can increase that by making use of a performance-based system that takes into account various wild-card factors. For instance, a rep getting his salesmen certified in a certain area can result in his commission being increased. Likewise, he may be able to convert new sales opportunities. When these variables are considered, the rep can look at what his commission is for this year, and he’ll know ahead of time what he can earn next year by completing various steps. This approach has worked well for us and our reps have been very enthusiastic.”

Communication

When one rep at the seminar bemoaned the fact that he was positive principals never read his call reports, manufacturers weighed in with their views on the need for reps to communicate with their principals. The rep maintained, “It is frustrating and unacceptable to have to file regular call reports or even monthly sales reports. I have one principal that asks us to submit monthly reports and include our comments and questions. In all the time I’ve been doing that I’ve never received an answer to a question. Once I even inserted in my report the question, ‘Is anyone reading this?’ Naturally, it wasn’t answered. That tells me something.”

Here’s how the manufacturers responded:

• “It’s not reports I want — it’s communication. My biggest concern for my reps is their time in front of the customer. If he’s writing reports to me all the time, he’s not going to be selling. Just let me know what’s going on.”
• “No formal reports — please. Just provide me with some feedback and let me know how projects are progressing. I go to the trouble of developing leads for the reps. As a result, I want to know how they’re doing with the leads.”
• “I want zero reports. I’ve found that my reps are great at calling in when there’s something to report. Just keep that up. I’m well aware of the fact that some contracts will take a year or two to develop. That’s okay. Just call once in a while and bring me up to date.”