That's the question distributor salespeople want their bosses to answer. But our survey shows more than half of sales managers fail to conduct regular performance reviews.

by Richard Vurva

Greg Johnson (not his real name) is an inside salesman for an industrial distribution company. When asked to rate his overall satisfaction with his sales manager, he gave him a four on a scale from one to 10. Why does Johnson give his manager such a low score?

“He doesn’t give me any real feedback,” Johnson says. “He promised to give me a performance review every six months. It has been two years since my last review.”

Unfortunately, Johnson is not alone. Most distributor salespeople are hungry for feedback from their managers about how well they do their jobs.

A recent survey of distributor salespeople by Progressive Distributor magazine and W. R. McCleave and Associates shows 54 percent say their managers are poor/adequate in conducting regular performance reviews. Forty-six percent say their managers are good/excellent.

The survey indicates that, in general, distributor salespeople think highly of their managers. For example, most salespeople give their managers high marks for personal traits and skill sets such as flexibility, judgment, fairness and impartiality, and problem-solving abilities (see chart below).

Yet many salespeople would like their managers to do a better job of conducting regular performance reviews, communicating performance expectations and providing a compensation system that tracks performance.

What the numbers mean
What disappoints Johnson most about his sales manager is a lack of direction. He says his manager sets company-wide goals, but doesn’t provide individual goals for salespeople to meet in order for the company to reach its target.

Even when salespeople have clear goals, distributors often neglect to establish a system to measure how well employees meet company expectations.

Jimmy Walters is an inside salesman for Hose and Fittings of Houston. Like many salespeople who responded to our survey, he wishes his company did a better job explaining individual goals he’s expected to meet, not just company goals. He also wants regular performance reviews.

“At my previous job, they did performance reviews every six months,” Walters says. “I wish they would do the same here.”

It’s this lack of clear direction that can wreak havoc on the morale of a sales force.

Another potential source for trouble is when distributors lack effective compensation plans. Asked to rate how well their company’s compensation system tracks their individual performance, 50 percent of salespeople gave it a poor or adequate rating. One-third say their company’s compensation systems are good and 17 percent rate them excellent.

It comes as no surprise to sales experts that half of the distributor salespeople in our survey feel their company’s compensation plans are poor or merely adequate.

“The majority of distributor salespeople do not get clear direction from their managers, do not get clear feedback and are not strategically compensated for their efforts,” says Dave Kahle of the DaCo Corporation, a Grand Rapids, Mich., consultant who works with distributors and their suppliers to grow sales.

He adds it is rare for distributors to have effective compensation plans that reward salespeople for carrying out management’s directives.

“I would say roughly 80 percent of distributors have ineffective compensation plans,” he says. “They do not directly compensate salespeople for the kind of performance the company wants. It’s a universal malady.”

Consider this typical scenario: Most distributors pay salespeople a commission based on a percentage of gross margin. Yet companies plead for salespeople to bring in more sales to new customers.

The compensation system rewards them for the easy sale, while management urges them to go after new customers, which is a much harder sale.

“That is a conflict,” Kahle says. “Any commission-based salesperson will go to the easiest sale first.”

It frustrates salespeople and their managers.

A salesperson from a Southeastern U.S. distributor complains because his company is revising its compensation plan for the third time in as many years. He says the current plan is too heavily weighted toward a salary and does not provide enough rewards for salespeople who exceed sales goals. Even though he will bring in 50 percent more in gross profit dollars this year compared to last, he’ll only earn about 5 percent more this year.

“We ought to go more toward an incentive system based on gross profits,” he says. “I’m afraid the attitude of the top management is they don’t want the salesmen making too much money.”

Kahle believes the best compensation plans typically pay a mix of salary and personal incentives. Incentives might reward salespeople for penetrating key accounts, for bringing in sales of key manufacturers’ products, acquiring new business or for absolute dollars of gross margin per invoice.

“The more sophisticated your information system, the more finely tuned you can direct salespeople via sales compensation,” Kahle says.

A plan that works
Richard Kerman, president of Steiner Electric in Elk Grove Village, Ill., recognizes the importance of having a compensation plan that rewards performance. He says compensation is the hottest topic of discussion in all of the marketing groups and associations to which Steiner belongs.

Account managers in Steiner’s electrical division are paid a straight commission. On the industrial side, established when Steiner acquired Crown Supply Company, an industrial distributor in Chicago, account managers are paid a base salary plus commissions for meeting specific incentives, such as selling strategic product lines or selling targeted manufacturers’ products.

“There is no single plan that works for every distributor,” Kerman says. “Every market is different. There are no right or wrong answers when it comes to compensation plans. The key is to come up with a plan that’s right for your company.”

You also have to provide regular feedback and create an environment that breeds success.

Steiner’s industrial division sales manager and vice president of sales hold monthly one-on-one meetings with account managers to review individual goals.

He adds the key to managing an effective sales force is to treat individuals fairly.

“The secret is, if they’re successful, the company will be successful. My job is to make sure they’re successful,” he says.

The following story illustrates the effectiveness of Steiner’s strategy: A group of the company’s top electrical division account managers recently approached Kerman and said, “We’re taking you out to dinner. We want to know what else we can do to help carry your message through to the rest of the sales force.”

How can other distributors achieve similar results?

“The bottom line is sales managers must continue to hone their coaching and mentoring skills,” says Sam Wermuth of W.R. McCleave and Associates. “They should ask themselves if they’re spending enough time with the right employees and providing feedback and direction.”

He adds that sales managers also must develop clear and consistent performance measurement systems, such as monthly sales meetings where individual strengths and weaknesses can be discussed.

“Most importantly, distributors should make sure their compensation systems complement their company’s vision and strategy,” Wermuth says.

This article originally appeared in the July/August 1999 issue of Progressive Distributor. Copyright 1999.