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When conversations of interest in MANA’s LinkedIn discussion room take place, we’re quick to bring them to readers’ attention, first, just for the true informational value; and second, we want to point out what a valuable resource the LinkedIn site is for sharing information and learning about best practices. That was the case recently when two discussions got our attention. The first involved the differences in principals motivating an independent sales force vs. a direct sales force. The second conversation involved how a principal should react when a rep sells in another rep’s territory.

A MANA agent member opened the first discussion this way: “I would like to solicit help from the collective wisdom of MANA members. I have recently been invited to give a talk on the many benefits of outsourcing sales over a company-owned sales force. I have no problem espousing the many benefits of the rep model. However, part of the request was to highlight the differences between motivating the two types of sales force. Thus, I would very much appreciate any comments, wisdom, anecdotes, comparison tables and suggested reading that might be useful in this project.”

There was little time wasted before agents, consultants and principals responded.

First up was a consultant who noted that “Motivating an independent sales rep, who works on straight commission, is a lot different than motivating an employed company salesman who is guaranteed a salary, whether or not he achieved his goal. The company salesman loses only his small bonus. He still receives his salary. The independent sales representative loses total income on a project when he fails to close the order.

“I agree with you that agents are much better for manufacturers for many reasons. They actually have to be motivated to spend more time on a product or system vs. the other lines that they represent. The company salesman has to be directed and totally controlled. The only motivation for a company salesman is the loss of his job, if he does not perform too many times. The sales representative lives that threat even though he makes his goals. The agent has a 30-day contract, which can be terminated even when he is the top rep for the manufacturer. “The best way to motivate that I have found through my career is a three-pronged approach:

• Make sure the sales representative is very technically trained on your product or system.
• Make sure your commission schedule is as good — or preferably better — than his other lines.
• Nurture your relationship with the independent sales representative from a company, to a person, to a friend. Friends sell for friends much better than mere colleagues. That has proven to get more time from an agent than he gives to his other lines. And this approach results in more orders. Hope that makes sense to you.”

Another consultant offered that “Independent sales reps are entrepreneurs and self starters. They should be self motivated and treated as any partner or external service provider is. An employee is more likely to be motivated to do just enough to ensure they keep their job and pick up their monthly paycheck.

“I believe the best way to motivate your reps is to treat them with respect and as partners in your business — not as disposable or cheap labor.”

Here’s the view on the subject from a manufacturer’s national sales manager: “I have a mix of company salespeople and independent reps on my team. I have found that there is little need to actually motivate a good independent rep since they only eat what they can kill. However, I do need to work hard to make sure that I keep my products and systems fresh in the rep’s mind. If a rep has 10 product lines, I will likely get 10 percent of their time. If I do not maintain regular contact with that rep and another manufacturer does, I may lose some share of the rep’s time. I have found that the best way to keep my share of a rep’s time is to communicate with them regularly. This can be as simple as a five-minute phone call to check in, or as complex as training for a new product or system.

“On the flip side, company salespeople that have a decent base salary do require motivation from time to time. This is a topic for another day….”

Voicing agreement with that opinion was an independent manufacturers’ representative, who said “I don’t need motivation from a principal. My goal is to sell as much as I can for each principal. What I want from my principals is a true partnership, open communication, high-quality products, competitive pricing and commissions paid on time. Give me that and I will take care of the rest.”

Reps Selling in Another’s Territory

The second conversation began when a manufacturer posed the following scenario: “Rep A had a customer in a territory (Illinois) from a previous employer. Now it is not his territory with his new principal. The current Illinois Rep B has not done business with the actual customer in his territory. Are there any conditions to a situation such as that? Do you follow strict territory guidelines? Do you offer split commission, etc.?”

Thankfully, one of MANA’s attorneys was listening in and maintained, “It is typically addressed by the manufacturer, not by the reps between themselves. Of course, there often is a split commission clause in the rep agreement between the sales rep and the manufacturer.”

An experienced agent added to the discourse: “This has happened to me more than once. In each case, I told the principal that it was unethical to cut the territory rep out of the commission. I contacted the territory rep and offered him 20 percent of the commission if he would sign a sub-rep agreement with me. The territory rep agreed in all but one case after which I felt it was not a breach of ethics to get the account for the principal. In a situation where the territory rep was calling on the customer but not making headway, I offered a 40 percent split of the commission.”

Another rep offered: “As a rep, I would expect that the current rep within the territory would receive ‘destination’ credit (~20 percent, maybe 30 percent of the total commission) plus ‘order placement’ credit, if applicable (maybe 10 percent) and the other rep would receive the balance.”

It appears agents were especially anxious to provide the manufacturer some guidance, given the following from another: “You are touching a sensitive area for reps and I have seen this handled many different ways. Your specific case is clearly due to the relationship the new rep had with this customer. It does sound like you might be in the capital equipment side of the rep business and there might be more room for sharing a commission. If there is the need for follow-up, service and support of the equipment might be a way of utilizing your local rep and making him part of your company’s growth at that customer.

“There are many ways to split a commission, but your key as a principal is to keep your reps motivated to sell for you. Our motivation comes from our successes and those commission checks. I used to push principals for a standard policy for splitting a commission, some have and some have not and choose to do split commissions based on each individual case. I am an OEM rep and commissions are not that of a capital equipment rep as we have repeat (we hope) sales compared to a single sale transaction.

“Here’s an example: Full commission on first order, split commission after customer is set up for a specified period of time; then revert to the territory rep as they assume responsibility for servicing after sale.”

And finally, an agent who has also been a manufacturer explained: “I have been on both sides of this issue — as vice president of sales for a contract manufacturer and now as an independent rep. You, the manufacturer, have to decide this issue. Hopefully, both of these reps work for you and you have contracts in place, each of them with a clause in it covering split commissions. If so, follow the percentage guidelines for split commissions. From your description, it sounds like the sale may not have occurred for the new rep if the old rep had not had the relationship with the customer. That relationship is of value and the ‘specifying rep’ should get some compensation for his efforts. One thing is sure — the situation will reoccur and often in the opposite direction. Fostering good working relationships among your reps is critical to everyone’s success.”