This is the eighth 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.

Jim felt well-prepared for his visit to see Enrique and Maria Gonzales. Maria met him in the lobby and walked him to the distributorship’s conference room. “Jim, we appreciate your coming back to discuss how Bigglie’s compensation plan affects your distributors,” she said as they made their way through the bustling inside sales department toward the meeting room. Enrique joined them just as they were sitting down.

Thanks to Harold’s PowerPoint presentation, the discussion went very smoothly. Once it was over, they sat quietly for a moment, until Enrique broke the silence. “Jim, I understand how a salaried sales force addresses our concerns about salespeople fighting over customers and territories, and eliminates the need for Bigglie salespeople to compete with each other on price for the same piece of business, but I don’t see how it works for Bigglie. Salespeople are competitive by nature. They want the big salaries, the perks and the recognition. How can Bigglie be successful without performance pay?”

Before Jim could start, Maria broke in. “Father, I can see it. Performance pay makes sense where the salesperson’s performance is very closely aligned with results — where all of the other variables are closely controlled and the sales cycle is short. The most obvious example would be beer vendors at the ballpark. The more the vendor hustles, the more beers he can sell.”

“A hot day is probably even more important, daughter,” commented Enrique.

“True, father, but I’d bet the heat has more impact on how many vendors show up. If the right number of vendors show up based on the temperature, the top seller for that day probably is the one who worked the hardest. Maybe a door-to-door encyclopedia salesperson would be a better example. He makes the call and either closes or he doesn’t. It’s the shortest possible sales cycle, and the skills of the salesperson, how hard he works and how well he picks neighborhoods full of children are the things that make the difference.”

Jim knew enough to let Maria keep making his argument for him, and sat by while the father and daughter discussed the topic.

“Daughter, we are in agreement that beer vendors and encyclopedia salespeople should be on commission. I will even grant you that a waiter or waitress controls the customer experience to a great degree, and that tips are a variable pay like commission. But what happens when Bigglie puts the salespeople on salary? The top salespeople who make big commissions will leave, and the bottom will stay and enjoy the salary.”

“Father, I think you missed Jim’s point. The top salespeople and the bottom salespeople, if they are within the system, are not top and bottom because of their skills, they are top and bottom due to variances beyond their control.”

Jim let the two family members keep talking. At the end, Jim wasn’t sure if Maria had convinced her father or had just worn him down, but it was clear he was ready to defer to her. When he was sure they were through with their discussion, Jim spoke.

“Enrique, Maria, this is the only solution we could come up with to address the distributor council’s concerns. If you can support it, I’ll go back and propose it to David Buchanan. If you don’t feel you can get behind it, we’ll go back to the drawing board, but I don’t have an alternate ‘Plan B’ at this time.”

“I can’t speak for the council without discussing this with them,” Maria said, “but I’ll schedule a conference call with the group as soon as possible and I will recommend that they support the plan.”

Sometime Later

Even though Maria was calling to tell Jim that the distributor council would support his plan, Jim was disappointed with their lukewarm endorsement.

“Jim,” Maria said, “we have agreed that if Bigglie used a salaried sales force our concerns would be addressed, but the members still worry that you will have trouble policing ‘free riders’ who will take the salary but coast through their jobs. The bottom line is that we agree with your logic enough to support testing the proposal at Bigglie, but I would be lying to you if I said we found your arguments so compelling that we are going to try salaried salespeople ourselves.”

The ball was back in Jim’s court, but without the distributor backing he’d expected. “If Buchanan reacts like the distributors,” Jim thought, “my chances to become sales manager are zero,” so he scheduled a meeting with Harold to rework the material.

“I thought we had a killer presentation,” Jim told Harold, “but the distributors just gave it a yawn. Where did we go wrong?”

“I don’t understand it either,” Harold replied. “No offense intended, Jim, but could there be anything about the way you gave it that could be responsible?”

“It seemed to go pretty smoothly, but I suppose anything is possible.” Jim answered. “Why don’t I give the presentation to you right now. You be the audience and tell me honestly how it sounds.” Jim repeated the presentation he’d given to the Gonzales, then dropped into the chair next to the projector and looked at Harold expectantly.

“I see one big problem,” said Harold, “and it doesn’t have anything to do with your presentation skills. We claim that the traditional ways sales numbers are used to assign rewards and punishment are flawed, but we only get as far as ‘Don’t do what you’ve been doing.’ If the old ways to assess a salesperson’s effectiveness are wrong, what is the right way? Buchanan hates problems that don’t include solutions and he is a fanatic about having measures for everything.”

“Good point,” Jim said. “I’ve heard him many times say ‘The things that get measured are the things that get done.’”

“I’ve heard him say that too,” replied Harold. “I keep wanting to correct him, because that’s not the way the world really works. The truth is that the things that get measured are the things that get distorted.”

Jim paused. “Excuse me — I don’t think I follow that.”

“Have you ever noticed how things change in a room when the boss walks in? People drop what they’re doing, quickly try to figure out what the boss would like to see them doing and do that instead. I call this the Heisenberg principle of management.”

“Heisenberg?”

“Heisenberg was a physicist who came up with a revolutionary theory in 1927. Until then, it was widely accepted that you could measure both the velocity and position of an electron.” Harold pulled an old newspaper clipping from his desk, unfolded it in front of him and smoothed out the wrinkles. “Here’s an explanation I particularly like. ‘…it is mechanically and therefore logically impossible for anyone ever to know at any given moment the velocity and position of an electron — two fundamental properties of any particle — because, roughly speaking, if you shine enough light on an electron to see it, the light itself will alter the electron’s velocity. Assuming there is some kind of bedrock material, it is in a profound way not anschaulich, as Heisenberg put it — not seeable.’”¹

Harold sat back in his chair and continued. “Sometimes this can be a good thing. If we have an employee who seems to be slacking, it may help to reorganize the work area so he or she is close to the foreman. Shirking right under the foreman’s nose is not an option, so in this case Heisenberg makes the problem go away.

“Heisenberg also can work against productivity. If we shine a light on some aspect of a salesperson’s behavior, the salesperson knows what management is scrutinizing and gives that part of his or her job higher priority than it had before. We already have discussed what happens when we make random changes into a system — adding variability undermines the outcomes. Shining a light on some portion of the salesperson’s activities increases the salesperson’s focus on that area. They adjust their priorities to their perception of our metrics, so if we pick the wrong metrics or they perceive our metrics incorrectly, we introduce new variability into our system that reduces their effectiveness.”

“I’ve been guilty of that,” Jim acknowledged. “When the company makes a push on getting new accounts, I pretty much ignore our current customers. I just work on improving my new account numbers, because that’s the number Buchanan uses to decide if you’re a hero or a zero.

“It also means that the reports I submit sometimes are not completely accurate. Like the time I had to sneak into the dentist during normal business hours because I’d chipped a tooth. I know what Buchanan would say — ‘Why can’t you find a dentist who has evening appointments?’ Hey, I was in pain and I took the appointment I could get, but I wasn’t going to submit a call report that would guarantee a reprimand. I just reported the calls before and after the dentist as 45 minutes longer than they were and ‘poof’ my dental visit disappeared. Frankly, by the time I get around to writing my reports, it’s always a month after the fact. By then, I couldn’t remember where I’d gone, so it isn’t much of a stretch for me to write the reports based on where I thought the boss wanted me to go.”

“You’ve proven my point,” said Harold. “Ham-fisted measurements either send our salespeople into unproductive tasks or encourage them to lie about where they’ve been. We need to offer some alternative measurements that are subtle and unobtrusive, so they won’t add variability into our systems or encourage cheating.

“The only way salespeople ever will tell us they took time for a dental emergency is if they are comfortable they can make that report without reproach,” Harold continued. “Maybe the manager would prefer the salespeople seek dental care on the weekends, but that can’t be enforced on salespeople making outside sales calls beyond our direct scrutiny. The sales manager has two choices. The first is to graciously accept occasional personal errands as part of an honest account of the salesperson’s day. The second is to insist on 100 percent business use of the day, which won’t eliminate errands from the salespeople’s days, just from their reports.”

“I can see where honest call reports completed on a very timely basis would be a good start on those alternate measurements we need to find,” Jim agreed, “but there are more things we can do. The sales manager can join the salespeople for a day of calls and see firsthand how the customers react to them. Answering the phone in customer service and talking to the customers about their salesperson would be a good measurement. And, of course, there has to be some sort of relationship between a salesperson’s tenure at the company and his or her effectiveness. Someone who has spent five years learning our products and systems usually will be better equipped to take care of our customers than a novice.

“We could measure things like how many quotes are generated or how many samples are given away,” Jim continued, “but we have to be careful that the salespeople don’t know we are looking at those things. If they did know, they would start sending out unnecessary quotes and samples just to pad their numbers,” Jim concluded.

“Talk about a change in our corporate culture,” Harold replied. “Can you imagine Buchanan responding to a call report with a gentle suggestion instead of an edict? This definitely is going to take Buchanan a while to get used to, and then he has to last long enough at it so that the salespeople no longer feel the need to hide their activities.

“This is going to be a job to sell to Buchanan,” Harold said, “because we aren’t collecting the kind of hard data and hard numbers that he loves. We’re proposing qualitative evaluations, so our sales manager is going to have to render a professional opinion based on experience and expertise, and then stand behind it.”

Once recommendations on how to measure the salespeople’s effectiveness were added to the presentation, Jim felt better about taking it to Buchanan. He was even more enthusiastic when Harold volunteered to take the podium for the statistical parts of the presentation.

After the PowerPoint slides had been rewritten, Jim’s confidence started to build again, so on Wednesday he asked Buchanan for an appointment to present his findings.

“I’m interested in hearing your opinions, Jim,” Buchanan had said. “Why don’t we schedule it for Friday first thing.”

“Thanks, David. Harold and I feel we’ve got a really useful story to tell.”

“Oh, will Harold be presenting as well?” asked David. “You know Jim, my Friday might be a little bit tight. Let me get back to you in a day or two.” Jim puzzled over the reason for Buchanan’s quick change of heart, but didn’t discover the cause until he stopped by Harold’s office Friday afternoon. Harold was emptying the contents of his desk drawers into a cardboard carton under the watchful eye of a security guard.

“I’ve been riffed, Jim,” said Harold. “As in Reduction In Force. Buchanan won’t talk to me, but the H.R. people tell me that a smooth-running plant like ours doesn’t need a high-powered, high-priced plant manager. They think they can let one of the foremen coordinate things in the plant and they won’t need me. I wonder how they think the plant got to be so smooth-running in the first place, and who kept it that way,” Harold said resentfully. “I guess if I’d left myself some fires to put out, I’d still have a job putting out fires. My bad luck to be very efficient in a place where you’re only valuable if you’re fixing something that’s broken. No points get scored for keeping things from getting broken in the first place.”

Back at his desk, Jim checked his voice mail and things went from bad to worse. Buchanan’s voice mail started, “Jim, I would like to see that presentation Monday, but you’re going to need to do it solo. Oh, and our new sales manager is starting Monday so I’m asking him to sit in on your presentation. Give me a call back ASAP to confirm that you got this message and that you’ll be all set up and ready to go in the conference room at 8:30 Monday morning. Oh, and would you mind picking up the doughnuts?”

Jim felt like his feet had been kicked out from underneath him. His friend and mentor was not going to be there to help him at the meeting and the job Jim had been pursuing already had been filled. How could it get any worse?

Jim got the answer to that question on Monday at the beginning of the meeting when David introduced Ernie Brocaw, the new sales manager. Brocaw had managed the sales force of a fastener distributor, and was confident that his experience would transfer well to the flange industry.

“I grew our sales of nuts, bolts and screws by 20 percent last year,” Ernie told Jim when David introduced them. “The way I see it, flange salespeople are pretty much like the fastener salespeople I was managing, so I think we can get the same growth at Bigglie that I got at my old company.”

When Ernie started to drone on about fasteners, Buchanan interrupted him. “Ernie, Jim has been working on addressing our distributor council’s concern that our sales force compensation program adversely impacts the way we interact with distributors. Jim, why don’t you show us what you’ve come up with?”

Jim noticed that Buchanan had bypassed Harold’s contribution and that now this report had become completely Jim’s. Even though Jim had taken Harold’s name off the presentation, the style was so clearly Harold’s that Jim wondered if Buchanan was uncomfortable looking at Harold’s handiwork the day after Harold’s ouster.

Jim had planned to let Harold handle the statistical points and to cover the more qualitative slides himself, but Harold’s presentation was so well laid out that Jim made it through the whole presentation without faltering.

Buchanan let Jim finish without any major interruptions, but clearly he was not pleased with what he’d just seen. “Jim, I can see you did a lot of work on this and it’s all very interesting, but you’re missing the main point. When salespeople leave the office, the only reason they go out and see customers is because, if they didn’t, then they wouldn’t earn any money and they wouldn’t make their quota. A commissioned salesperson has to go out and call on customers or he doesn’t eat. A salaried salesperson would just go to the movies, or go home.”

Jim knew that commissioned salespeople did those exact same things, especially when their bosses frustrated them, but he bit his tongue. It would not help his case to tell Buchanan that he and his fellow salespeople often dealt with real or perceived injustices by taking unauthorized afternoons off.

Brocaw had remained silent to be sure he knew his new boss’ position before making any comments on the presentation. Once Buchanan had rejected Jim’s ideas, Ernie chimed in and took an identical position. “Jim, after you’ve got more experience, you’ll realize that one of the sales manager’s main jobs is to prevent ‘free riders’ from taking advantage of company programs. The reason we grew so well at my old mechanical fastener company is because I structured compensation to encourage growth. We paid a reasonable commission on sales up to last year’s level, and a higher percentage on sales over the previous year, so the salespeople knew that they had to beat their previous year to make any real money. Variable pay is the key to success managing salespeople. Plus they had specific objectives and goals, and gave me weekly reports on key accounts. That’s how you whip a sales force into shape. A salesperson who is allowed to feel secure in his job and his income gets complacent.”

Buchanan smiled broadly at Brocaw’s comments. “That’s why I hired you, Ernie. You understand how to keep the sales force jumping. Look, Jim, I appreciate the effort you put into this but there is no way I am paying a salary to a salesperson. Ernie, you contact the Gonzales’ and let them know we appreciate their concerns and will give them every due consideration, and that we will look forward to seeing them again at the next distributor council. Jim, now that Ernie is on board we won’t need to take you away from your customers with distributor council business any longer. You can turn over your notes to Ernie and devote yourself 100 percent to making sales calls.”

To be continued next month.

---

¹ Daniel Menacker, “The Radical Thinker,” The New York Times Magazine, October 17, 1999, p.96.

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