Call Reports for Manufacturers' Reps: A Deal Breaker?

Working with independent manufacturers reps can be an extremely effective and risk free way to generate sales for a product line. However the operative word in their title is independent. Ignoring this aspect of the relationship and expecting to these folks to behave like your employees is a major mistake.

Requiring written call reports is a typical requirement for captive sales reps. But for independents, they can undermine the relationship. Exemption from this requirement is often included in any contract or agreement with a manufacturer.

Qualifications

My opinions are based on my experience with both the performance dynamics of sales people and the legal and business aspects of agency-principal relationships. As a manufacturer in two diverse industries, I have experienced both successes and failures with rep agency relations. As an industrial manufacturer, we were a dues-paying member of MANA, the Manufacturers Agent’s National Association. MANA has spent decades developing standards and practices for successful principal-agency relationships. They have developed standards for agency-principal contracts and/or letters of agreement. In their typical agreements, sales reps are expressly exempt from the responsibility of submitting written call reports. There are two primary reasons for their findings:

Manufacturers need to protect their interests by complying with IRS rules for independent contractors that specify that the manufacturers can not govern or monitor the behavior of their 1099s. If they do, they can potentially be liable for paying back taxes and penalties for FICA taxes and perhaps be exposed to lawsuits for payment of back employee benefits.
Successful sales agents must maintain their independence and act in their own self interest. To make a reasonable living, independent reps must represent the interests of multiple manufacturers. If an independent rep had to prepare reports for a dozen or more of their principals, there would be too little time for the activities needed to make their living. Time consuming reports are counterproductive to their core activity: customer contact.

Getting Results

It may help to share that I have successfully built and managed rep agency relationships in mass market consumer products and several sub-markets. In effectively doing so, we tripled the sales of our acquired company and gained the #2 market position. In those marketplaces, we competed to secure and nurture relationships with “A” reps as fiercely as we competed for shelf space. We sometimes had to settle for “B” or “C” caliber reps. I believe that if we had required reps to submit call reports, we risked losing their coveted mind share, loyalty and enthusiasm. As a non-dominant line, I chose not to take that risk. Our agencies also rep-ed the likes of Crayola, Fellowes and Avery, who paid them six to seven figures annually. But even those dominant lines did not require written call reports. Our ability to succeed with those wealthy “A” reps was a result of our strong personal relationships, not any additional paperwork that we might have requested. That said, I believe the best way to handle “C” calibre reps is to replace them as soon as its feasible as opposed to attempting to manage them.

If legal and business standards considerations weren’t enough of a reason to nix call report requirements, there are behavioral and motivational considerations. While I no longer manage reps, I now work with clients to assess the talent and performance potential in their recruitment of sales people. So, I share my insight into the behaviors, motivators and inherent skills of successful sales people as offer even more compelling reasons why call reports for independent reps are a counter-productive tool. Report requirements can serve to de-motivate and emotionally derail the very people you hope to inspire. Here is the why, what and how…

The How

The best sales reps thrive by being around people. They are skilled at building relationships and influencing the buying decision. Most get their results despite rules, not because of them. On the DISC behavioral scale, top sales performers are typically High D’s (decisive and assertive) and/or High I’s (optimistic, but detail agnostic). They don’t mesh well with rule orientated types of the world. Attempting to add rules and rigor can potentially hinder their enthusiasm or even anger them.

The Why (Motivation)

Research shows that top sales people have two primary drivers: results orientation and individualism. They are driven by results (a.k.a commissions and success) and the by their desire to call their own shots. They love to be rewarded for their achievements. Unproductive activities are a turn-off for them. Ignoring their independent nature can be hazardous to both your wealth and their desire to produce for you. These folks have choices. Emotion plays role in their daily decisions. In every appointment, they choose when to present your product line. Will they choose first, middle, last or not at all? How does a manufacturer help to influence that choice? It’s safe to conclude that adding rules and perceived inefficiencies can result in either pushing your product line to the end of the meeting or omitting it from the presentation list. When working with top sales performers, increasing their mind share is best attained by fueling your reps’ enthusiasm for their potential to make money and empowering them to do so on their own terms. You can and should keep score and communicate their results, not their activities.

The What

People thrive in their jobs when they are able to use the skills they enjoy most. In my experience with creating sales job benchmarks and assessing candidates for star potential, detailed report writing skill is seldom considered a primary desired attribute of a top sales performer. We instead seek traits like self-starting ability, self-management, empathy and resiliency.

Because of the independent nature of reps, manufacturers need to choose between building their rep’s enthusiasm and mind share vs. trying to manage their time and actions.

The latter is a losing battle with “A” (top performing reps) and over time will damage the former. The top performers (“A” reps) will never act like your employees. The reps who do and who seem to need more managing will likely be your lack-luster performers. They likely value activity over achievement. I believe that the secret for principals in an agency relationship is to recruit proven achievers, support them with resources that make them more efficient, avoid ruffling their feathers and stay out of their way. If manufacturers ruffle the feathers of their uniquely motivated top performers, they risk having them fly away. Before flying away, they may relegate your line to last out of the bag status. If a manufacturer senses that a rep needs to be managed to perform, they need to examine the quality of the rep, the quality of the relationship and the effectiveness of the line’s value proposition.

Uncommon Sense

For Manufacturers / Principals

I believe it is unrealistic for manufacturers to expect your independent reps to take time from their productive and/or enjoyable activities for a task that they inherently loathe which produces no apparent tangible benefits, threatens the independence they cherish and that virtually none of their other principal relationships require. This boils down to a decision between two conflicting elements: control vs. results. It is not realistic to expect both unless you hire your own “captive” sales people. And even then, sales management can be like herding cats. Over the long term, you may win some battles, but you can not win the war by attempting to control independent A-Reps. Why devote scarce resources toward a losing proposition? Hold them accountable for results, not activities.

For manufacturers, doesn’t it make more business sense to inspire these highly independent, people-orientated folks by allowing them to do more of what they do best and helping them develop a positive attitude about your line vs. their 10 or so other principal relationships? Isn’t this the battle you both can and ultimately must win?

Reps / Agents

In absence of a win-win business case, my advice to any rep is that call reports are a deal breaker. They are proven to be a counterproductive element in pursuing the true purpose of the relationship: optimizing sales results.

Instead of finding ways to control them…

Seek to feed their inherent enthusiasm
Show them new ways that they can make more money by providing bigger gains and better solutions for their customers’ problems
Acknowledge and reward them with additional recognition
Create internal competition between rep territories to connect with their competitive nature