Environment Matters … A Lot!

Credit: Bill Gillespie

A while back I was asked to jumpstart a company. They were twenty plus years old but stuck. Sales were just north of $12 million and had been for several years. The rising cost of operations was eroding margins. They needed new sales.

I took the job. I was assigned a salesforce of eleven. There were three reps carved out. They didn’t answer to me. They were two owners and the top rep. These guys accounted for 65% of the top line sales and virtually all of our margin.

My first day on the job the CEO took me to lunch. He kept personal P&L reports on each rep. These reports showed their topline sales, margin, expenses and commissions. It was easy to see what each contributed to the financial health of the company.

Over lunch we reviewed the reports. He had flagged three as problems. He said, “you’re going to want to fire these three.” I asked if I would be allowed to decide for myself and he assured me I would. Still, he was confident of his words.

I set about interviewing my reps. That was a valuable step. I probably won’t surprise any of you that they had opinions on why the company was stuck.

“We’re here to fill gaps” was a common opinion. “When the big three don’t have work, we’re supposed to provide orders. The rest of the time we’re supposed to stay out of the way.”

“We don’t enjoy the same service levels” was another. Estimates, proofs, press schedules and deliveries in general were reportedly less timely for my team. They couldn’t contribute like the big three because they didn’t have access to the same company.

When I shared what I was told with ownership they were offended. They refused to believe it was so. I was escorted down the hall to the General Manager’s office. It’s important to note that this company was run by estimating. That is to say, the head of operations was also the estimating manager.

This guy was also offended. He pointed out that my eleven sold at rock bottom prices. It was common for their work to be offered at “cost.” Of course this made it the least desirable work. It had an impact on sales comp and service levels.

I stewed on it for a few days. I pitched a new sales comp (markup/commission rates) idea to ownership and the GM. There was plenty of resistance, but I did earn approval.

I met with the reps. I outlined the new model. It was a sliding scale. Their commission rate was tied to the markup they used. They had control of their earnings.

I also assured them that I would run interference on service. Their work would not take a backseat to anyone else. We would always cater to large clients and companies that paid on time, but no order would be allowed to languish.

Finally, I challenged them. I said, “you guys claim that you’re here to fill gaps. Sell up the plant and force ownership to compete for time. Make your work the most profitable.”

They stood the company on its ear. The comp plan was the main thing. The work they sold forced the company to improve every facet of service. We added $2 million in the first year and $3 million in year two. We doubled the size of the company in five years. The big three’s sales were diluted and we became a much healthier organization. The company sold to a consolidator in my sixth year.

There’s lots more to this story. Space won’t allow for everything we encountered, invented or accomplished. These are the takeaways, however.

• Making reps responsible for their pricing and earnings increases sales & margin.
• If estimating runs your company you will sell less at lower prices.
• Sales-led organizations are more successful.
• If you create a culture of winning (possibilities) the best clients and employees find you.
• There is no tonic or potion like making money!

The three reps the CEO told me to fire? I did indeed let one of them go. One of the others improved his numbers but still sold marginal work. The third became our top and most profitable salesperson.

A level playing field, an exciting company and a mechanism to earn money make a lot of difference.