Manage Your Sales Reps Better
Rebecca Herwick is tough enough to look at home on her Harley. But even she was thrown when seven of her nine sales reps walked out on Aug. 8, 2006, in the midst of a sales reorganization. "I knew it was coming, but the day it came I felt sucker-punched," says Herwick. "If I was a girl, I would have cried."
Herwick, the owner and CEO of Global Products, a Harley Davidson licensee that makes everything from bandanas to coffee mugs, knew her sales strategy wasn't working. Herwick had been using independent sales reps rather than an in-house sales force to sell her wares to 800-odd Harley dealers nationwide. That kept fixed costs low—independent reps are paid commission-only—but it also meant Herwick's reps all sold products from other companies as well. While those products didn't compete directly with her $18 million, 115-employee company, Herwick didn't think Global was getting the attention it deserved. There were other headaches: Not all the reps entered orders directly into Global's computer system, creating more work for the company's customer service team. And some reps didn't do a good job explaining custom orders, so when those jobs couldn't be turned around fast enough, customers got frustrated and Herwick looked like the bad guy.
Herwick thought she might do better with an internal sales force. "I wanted my power back," she says. But the independent reps helped keep payroll costs down. In the end, Herwick found it was cost-prohibitive to move sales in-house. Daniel McQuiston, director of education for the nonprofit Manufacturers' Representatives Educational Research Foundation, estimates that a 10-person sales force for a $10 million company could cost $2 million annually in training, salaries, and bonus, compared with less than half that for reps earning 7%. The reps also gave Global broad geographic reach, and they covered their own travel expenses. But managing a contract sales force requires clear expectations, effective systems for tracking performance, and penalties for those who don't play by the rules.
That meant Herwick needed more out of her reps. In November, 2005, she laid down some new ground rules. Reps would only get commissions on orders they put into Global's computer system. Instead of the 8% commission they had been receiving, reps would start earning 4%. To get back to 8%, they'd have to get calendars of special events and promotions from each customer, visit dealers and take photos of Global's products, and deliver feedback surveys from each dealer, four times a year. That's when the reps rebelled, with seven of the nine walking. The others quit within a year.
In hiring a new team, Herwick insisted on a passion for motorcycles and a comfort level with her technology. She only considered reps who had three or fewer other lines that they would be selling to her clients. By January, 2007, Herwick had a new group in place.
Certainly there were some bumps in the road. Two of the new hires left after Herwick found they were selling competing products. Herwick decided she needed to cut down on paperwork, so reps now send in customer calendars and showroom photos just twice a year. Global "has a more formal structure" than many other companies, says Bill Scharr, a rep who signed on in November, 2006. "You either bought into the program or you didn't."
The experience was nerve-wracking, but Herwick would do it over again. "I will not let history repeat itself where someone is controlling me," she says.
The disruption, and the changes, have been worthwhile. Sales are only growing at about 3% a year, compared with 9% in 2005. But Herwick says that 9% was unsustainable, especially since the growth in motorcycle sales had already started to slow that year. Given the overall state of the economy, she thinks she's doing well.
More important, customers notice a difference. Brandi Hamel, motorclothes manager for Bruce Rossmeyer's Boston Harley-Davidson in Everett, Mass., says that before the overhaul she didn't know the name of her Global Products rep. But the new rep, Scharr, "helps out at some of our events, consistently updates us on where our orders are, and is in touch with me at least biweekly," says Hamel. "We now have a personal connection to the company, and everything is so much easier." For Herwick, too.
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