This is the final in a number of articles serializing The Sales Force — Working With Reps by Charles Cohon, MANA’s president and CEO. The entire book may be found in the member area of MANA’s website.

Several years had passed since Troothe hired William Carl’s company as its first rep. The changes Troothe had made in its operation seemed gradual as they occurred, but, in retrospect, looked more dramatic.

© mast3r | stock.adobe.com

Troothe employees who had been its direct sales force had made a transition from having day-to-day direct account responsibility to being regional managers charged with supporting and providing oversight for Troothe’s national network of manufacturers’ reps. The head count of Troothe’s sales force had dropped as several of Troothe’s salespeople chose to start or join rep companies. Only one of the salespeople had been so adamantly opposed to the changes that he refused to become either a regional manager or a rep, fighting to maintain his status as a direct front-line Troothe salesperson.

With the national rep network in place, that position ceased to exist, and having made a firm stand that no other position would be acceptable, he left the company. “That was unfortunate,” Jim thought, “but when an employee absolutely refused to participate in our new structure, what else could we have done?”

One other thing that had happened in the years since Troothe started using reps was that Jim and the regional managers had taken full responsibility for managing the rep network, allowing Harold to concentrate his attention on plant operations. With retirement imminent, Harold realized he hadn’t been kept up-to-speed on the rep system’s progress at Troothe, so he asked Jim to give him an update before Harold left for San Diego.

“Sometimes I have to chuckle when I think that our whole rep network can trace its roots to the fact that several years ago we ran out of catalogs,” said Jim. “It’s been a great experience, Harold. I can see why our competitors have worked with reps for years — there are all kinds of hidden benefits.”

“Such as…?” Harold asked.

“What I’ve found,” Jim said, “is that reps occupy a valuable gray area between manufacturer and customer. They have an allegiance to the manufacturer, because we’re the ones that sign the commission checks, but also to the customer, because it’s the customer’s orders that determine the size of that check, and in a lot of cases the same customer buys from many of that rep’s principals, so they won’t let one marginally performing principal jeopardize their business for all their other principals at that account. So I guess I’m saying that reps are neither fish nor fowl. When they go to see customers, they go as our representatives, and when they make contact with us, they do so as the customers’ representatives. The other thing I’ve discovered is I think reps are the thyroids of the sales process.”

Harold gave Jim a quizzical look. “Thyroids?”

Jim smiled. “I’m stretching, I know, but hear me out. When there is some sort of nuclear fallout, radioactive isotopes that were released end up concentrated in local residents’ thyroids. So thyroids are the place you check if you’re looking for evidence of fallout. Again, it’s a stretch, but I’m suggesting that problems in commerce tend to concentrate in the reps. When a rep has the same problem reported by two or three customers, the rep is more vigorous in his or her complaints than the customers. The customers usually don’t know about each other’s problems, but the reps know that several of their customers are experiencing the same problem and that this problem will affect their own income, so if there is a systemic problem, reps complain earlier and more vigorously than most customers. Or maybe it would be fairer to call them the canary in the coal mine.”

“Now you’re talking my language,” said Harold. “I remember that before there were gas analyzers in coal mines, miners used a caged canary to check for dangerous gasses. Because of the canaries’ sensitive respiratory systems, they keeled over long before the gas reached a concentration that would incapacitate a human, which gave people time to escape asphyxiation. The early warning system that reps provide is a lot like the canary in a coal mine, with the reps giving manufacturers enough advance notice to fix a bad business practice before customers start to defect en masse.”

“There are some other attractive elements of the business model,” said Jim, “Philosophically, it appeals to my own feeling that free market economies optimize results because resources tend to flow to the location where they best will be used, what an economist would refer to as ‘optimal allocation.’* If we share a rep with 11 other principals, but we outperform that rep’s other principals, the rep gets greater future return from promoting our products than from promoting other products — and we’ve earned mindshare from that rep disproportionately high relative to the current commissions we pay. A manufacturer that is doing a great job gets more resources — in other words, if we’re outperforming most of the manufacturers in our industry, we’ll be rewarded with extra time from our reps. The flip side of that isn’t all bad. If we have some insurmountable but temporary problem that interrupts our ability to ship, we don’t necessarily lose our sales force right away. The rep can divert his sales resources to manufacturers who are shipping satisfactorily, and if we get back on line in a reasonable period of time we can pretty much pick up where we left off.

“It hasn’t been easy to assemble a national rep network,” Jim continued, “but the important things usually are not easy. I’ll tell you this — knowing what I know now about reps, I would not want to be a manufacturer that fields its own direct sales force but has to compete with companies that use reps. And the flip side of that is I think reps give us a competitive advantage against manufacturers who still have direct sales forces.”

Harold could see Jim was passionate about the topic, so he settled back in his chair to hear what else Jim had to say.

“It’s attractive not just to us as the manufacturer; it’s good for the rep as well. You know how we all try to diversify our stock holdings to limit our portfolio’s risk. Reps accomplish this same diversity in the income of their own companies by representing a variety of manufacturers. Those principals cluster in the same type of industry, to be sure, but lack of close correlation among the fortunes of those manufacturers usually achieves a pretty good diversity.

“The other thing that impressed me was reps’ business ethics,” Jim continued. “Back when I first started looking for reps, I started by contacting our competitors’ reps, and the ones whom I reached were uniformly polite, but pretty much shut down any conversation about switching to a competing line as soon as I explained the reason for my call. Reps seem to be pretty loyal to their principals. I hope our own sales employees would be that dismissive when headhunters call to try to steal them away.”

“What’s next?” asked Harold.

“I’m going to start that rep council,” Jim replied. “Our reps have been exposed to the best practices of a wide range of companies in our industry and they have a financial interest in our success. I’m going to tap into that knowledge and make Troothe the best company it possibly can be.”

“It sounds like you’re on the right track,” answered Harold, “but it also sounds like you have a long way to go. I’m half sorry to be retiring — I think it’s going to be an interesting ride.”

MANA welcomes your comments on this article. Write to us at [email protected].

* Wharton Professors Erin Anderson and Len Lodish, http://knowledge.wharton.upenn.edu/articles.cfm?catid=4&articleid=502&homepage=yes.