Time was that reps sold products and received a commission check. It was as simple as that and the arrangement seemed to suit both sides — manufacturer and rep. But times have changed and so have what each side expects from the other.

That scenario served as the beginning of a conversation with Craig Lindsay, CSP, CPMR, founder and president, Pacesetter Sales & Associates, an independent manufacturers’ representative agency selling safety and industrial supplies to the industrial market across Canada. As the conversation progressed, however, several variables were thrown into the mix and the relationship isn’t quite as simple as it used to be.

According to Lindsay, “What has changed in our relationship is what a manufacturer wants a rep to do; and, what the rep wants to do for that manufacturer. Historically, if I go back more than 25 years at my start in the business, the relationship was that a manufacturer would come to us and say ‘We need help in your market. We don’t have any customers — maybe a few — but we’re maintaining them. Where we need help is in selling products to new customers and seeing if we can get something going.’ If I accepted their offer, I’d make my calls, and we’d be paid a commission on the sales we made. If at the end of the year, things went pretty well, then we’d continue the relationship and I’d get a forecast developed with the manufacturer. There was nothing wrong with the terms of that relationship, which is fine.”

He notes, however, that things changed a number of years ago. “What we found is that manufacturers would say to us that they wanted us to perform additional functions. For instance, they would maintain that a part of the selling process should be things like surveys of the customers’ facility — which we would conduct. The survey would necessitate the creation of a report for which the manufacturer would provide the software. After creating the report, we would follow up with the customer and present various levels of detail that we felt had to be worked on. Already, you can see how this effort is growing.”

Effective Business Practice

At this point, Lindsay is quick to add, “Honestly, I don’t want anyone to think that these are bad things to do. Very frankly, this approach to conducting business can be very effective. In many cases now though, some principals want to be more directly engaged in the sales process.”

Adding to his concerns, he notes that some manufacturers have gone so far as to maintain that a specific number of activities should be conducted each year. “On top of that, we may be told that the manufacturer then wants us to track the results that come back from each of these opportunities. What that has resulted in is that the selling process has begun to change, but our compensation model with the manufacturer hasn’t changed. There’s been no alignment of the compensation model with the activities that we’ve been required to perform. It would seem only logical that you should have an alignment of expectations and activity with the compensation.”

As he’s outlined his concerns, Lindsay is careful to not attribute blame for this changing situation. “You want to be careful here, because I don’t want anyone to think I’m whining. But what we need is a conversation with some manufacturers because I’m not sure all manufacturers know what has to be done to correct the situation. Based on my experience, I’d say some manufacturers are willing to have this conversation, while others are not.”

Tie Some Compensation to Tasks

If he’s lucky enough to get the ear of a willing manufacturer, Lindsay explains what he would propose. “At the outset, I would have to agree that the functions manufacturers are asking us to perform do sell more products. But what we’ve got to do is to tie some compensation to the tasks to properly affect behavior.”

As an example, he cited the reaction of one manufacturer that had a program in place whereby the agency had to annually complete an assigned number of surveys per rep. For this particular line, the manufacturer paid a commission of five percent on all sales. He explained, “If every rep has six closes per year, the manufacturer would give them an extra percent back to dollar one. In addition, if the reps hit their overall sales target for the year, they’d receive another percent back to dollar one. Their thinking was that they should offer a commission that was needed to drive the behavior.” Lindsay added that at the end of the year, all reps had hit their targets. “We’ve discussed this compensation model with a couple of other manufacturers — one accepted it and the other did not. Sure enough, with the manufacturer that accepted it, we hit our annual targets.”

Based on that historical sales track record, Lindsay was asked why he thought a manufacturer wouldn’t accept an updated compensation model. “They see more potential cost and work for them to properly track this. It’s an added expense for them. However, from the rep’s perspective, if we’re going to go out and perform additional functions with no additional revenue to offset our costs, performing those functions is hard for us to justify.

“I’m not seeing that there’s a great willingness on the part of the manufacturing community to take that step, however. Why? Because the straight commission rate is easy to calculate and that’s the way it’s always been done. Bottom line, I feel that the traditional rep compensation model has room for improvement when the duties are no longer traditional.”

Complicated Selling World

Lindsay continued that he believes there is no cookie-cutter approach to fixing the problem. “When it comes to selling and reporting, today’s world is much more complicated than it’s ever been. To a large degree we definitely have a responsibility to provide feedback to the manufacturer about what’s happening in the territory. After all, we are their eyes and ears as to what’s going on. That’s what’s expected of us. ”

A contributor to the ever-more complicated selling world we live in today, according to Lindsay, is technology. “Technology can be seen as both a pro and a con. On the one hand, technology has advanced our ability to communicate back to manufacturers. On the other hand, however, manufacturers want a return on their investment for that technology when they provide it, which is understandable. That’s why they provide us with an ‘app’ that we can use to gather more information about what our customers want and need.”

Ultimately the Canadian rep maintains the realignment between what the manufacturer wants the rep to provide and the compensation model that the rep requires will only occur when the rep and manufacturer engage in that conversation on the subject. When asked if manufacturers are interested in having that conversation, he says “I’ve had it with any number of manufacturers—typically at the beginning of a new relationship. You want to test the relationship early on in order to determine if your mutual expectations match. If they don’t, then you have to ask questions and come up with answers in order to firm up the good-working relationship.”

Meeting Customer Needs

If Craig Lindsay holds a positive view of what might be considered an evolving way of conducting business, he’s hardly alone. Echoing a number of thoughts that Lindsay offered, former MANA Board member Tom Hayward, CPMR, QSSP, stresses that ultimately, “It’s the principal — who is the rep’s real customer — that is maintaining that many of the services manufacturers are assigning their reps are exactly what the customer needs. And, what better feedback can you get than that which comes directly from your customer?”

Hayward, who heads United Sales Associates, Cincinnati, Ohio, stresses that what is being spoken about here is not some sort of developing trend. “Overall this is the real marketplace that we’re dealing with. This is the way it is today. What I’m finding is that the more progressive principals (i.e., manufacturers) are assigning tasks to their reps and they’re letting us know what they’re willing to pay for. For the rep who is used to and still wants the status quo, this isn’t good. For those reps who are willing to accept change and work with it, it’s a positive.”

United Sales Associates is a Cincinnati, Ohio-based firm that represents manufacturers of industrial safety products in the industrial, construction, sanitary maintenance, and public safety markets in the states of Ohio, Michigan, West Virginia, Indiana, Kentucky, Tennessee, western Pennsylvania and western New York.

Hayward continues that in speaking with his rep peers, acceptance of what is happening isn’t necessarily across the board. “There are some reps, regardless of age, who possess what I’d refer to as an older mind-set. Their view is that ‘I remember the days when the manufacturer came to us and said that the three most important things are — sales, sales and sales of new products. In those days you could count on your distributors to go out and multiply your efforts. Those days are gone and that mentality is one from the past. It’s probably those reps who are frustrated when their manufacturers require them to perform assigned tasks. Then there are the other reps who might be considered as progressive thinkers. They’re looking at ways that they can be entrepreneurs and are constantly on the lookout for ways to perform well, to do the job better, and for ways to enhance their relationship with manufacturers and customers.”

Pay for Tasks

The question remains: Should reps be paid for performing these additional tasks? That’s a question that Hayward addresses by saying, “It depends. Is it a task that results in an actual cost outlay by me? Can I afford to incur that cost? I only have time to do what we do. Should I now take on an additional assignment that might take time away from what I do and require an expense (e.g., purchase of some sort of a program) to perform a task outside of what I normally do? These are questions that are fair to bring up with your manufacturers.”

It’s fair to bring up the subject of compensation with principals, he maintains; but it’s also time to take a fresh look at this subject. “We’ve got to consider all aspects of the sales process and realize that different people should pick up different costs.”

Then there’s the question of whether the rep possesses the skill set necessary to perform the task that the manufacturer desires. As an example, Hayward asks, “What if the manufacturer singlehandedly decides their reps are going to be responsible for accounts receivable? In my opinion that’s a problem. That’s a bad plan. Although we can assist in collections by exception, performing that task obviously takes the rep away from what he does best — selling. It’s a whole different function from what we do. That is unfair. We have to address that with the manufacturer. We are being tasked to do something that is not part of the sales process. There are some other tasks, however, that are part of a good plan, and they are tasks that will help us do our jobs better. They might very well be considered tasks that will allow us to differentiate ourselves from other agents or reps in the field.

Help From Principals

“As the rep considers the task being assigned, the hope is that you have really good principals in those situations where you don’t necessarily have the skill set to perform the function. Your message to the manufacturer should be that ‘We really believe in this but we need your help in terms of training.’ The training in question could be provided through your principal’s internal personnel. The best situation would be that your principals would provide the assistance needed to master a given skill set.”

What happens, however, if the rep takes that fresh look and decides it’s not in his or his customers’ best interests that these tasks are performed. Should the rep push back on the manufacturers’ request? “That’s a sensitive subject,” Hayward says. “The rep has to be smart in keeping in mind that the person he deals with isn’t always the person who has originated the task. I think the rep’s response should be based on his relationship with the manufacturer and his relative strength with that manufacturer. If the rep is in a weak position and regularly misses sales targets, I don’t think his negative response will be very well heard. On the other hand, if there’s a strong partnership, a solution agreeable to both sides is probably possible.”

In the end, according to Hayward, the rep has to ask and answer the question, “Does the performance of this/these tasks enhance our relationship with manufacturers and customers?” In answer he offers that “It’s really quite simple. If we perform the task and it results in greater sales, then it’s good for our relationships. On the other hand, however, if we perform the tasks very well and it doesn’t result in increased sales, then the relationship can be harmed. There’s obviously going to come a time when we need to look at the assigned tasks, engage in a conversation with our manufacturers and reassess what we’re doing. We may have to give it some time — three or six months — but we can’t just say we’re going to do it when the results don’t justify the effort.”

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