Issue link: https://www.e-digitaleditions.com/i/571132
September/October 2015 11 A Dealer's Story Not too long ago, it was the question of effectiveness that prompted Oswalt Restaurant Supply's Vice President Huff Harper and his partners to rethink their sales compensation plan, which had been based on straight salary for years. Initially the practice made sense, says Harper. In the late 1980s, when Jim Oswalt founded the business, he was the business, until pairing his resources with a handful of others. "We started out very small and as we grew everyone got a salary," explains Harper. "At that time, we had more inside salespeople than outside salespeople, so the structure of our company allowed us to continue trudging forward. I don't think any of us thought that it was the best plan. It's just how it evolved. "The high performers probably weren't quite as happy as they should have been, and the low performers were prob- ably content because it didn't matter how hard they worked. They were going to get paid regardless of what their sales were." Oswalt is not alone, says Kahle, who has heard numerous versions of the same scenario while helping others revamp their strategy. Why do many companies end up with the com- pensation plan they have? "It's historic," says Kahle. "That's what their father did when he started the business. Therefore, it sort of has a hands-off feel to it. Another reason why com- panies struggle, when it comes to updating their plan, is because people come at it from different perspectives. The sales manager wants to make sure his/ her salespeople are getting paid enough and the whole idea of efficiency, Kale's Kalculations, is probably not on the radar. While the CFO, on the other hand, is concerned with the expenses and trying to rein in costs, so we have these conflicting positions jockey- ing for ownership. It's a huge project and it's scary because it has such a great impact on so many aspects of the business." Coming from the bid business, no one has ever had to remind Oswalt of the stakes. The majority of its sales have always flowed from the project side, followed by outside sales and then inside sales. So top of mind was project management, the area where change could have the greatest impact--that and how to effectively incent and compete. "Everyone knows that when you're bidding a large project, you're basically bidding it no mark up; that's not a secret," says Harper. "So how do you incentivize some- one on gross profit when you're going to tell them that they can't put any gross profit on it or you're not going to win the bid?" Problem solving started with their needs. "In today's continued on page 28 A Dealer's Story Not too long ago, it was the question of effectiveness that prompted Oswalt Restaurant Supply's Vice President Huff Harper and his partners to rethink their sales compensation plan, which had been based on straight salary for years. Initially the practice made sense, says Harper. In the late 1980s, when Jim Oswalt founded the business, he was the business, until pairing his resources with a handful of others. "We started out very small and as we grew everyone got a salary," explains Harper. "At that time, we had more inside salespeople than outside salespeople, so the structure of our company allowed us to continue trudging forward. I don't think any of us thought that it was the best plan. It's just how it evolved. "The high performers probably weren't quite as happy as they should have been, and the low performers were prob ably content because it didn't matter how hard they worked. They were going to get paid regardless of what their sales were." Oswalt is not alone, says Kahle, who has heard numerous versions of the same scenario while helping others revamp their strategy. Why do many companies end up with the com pensation plan they have? "It's historic," says Kahle. "That's what their father did when he started the business. it sort of has a hands-off feel to it. panies struggle, when it comes to updating their plan, is because people come at it from different perspectives. The sales manager wants to make sure his/ More on Sales Productivity and Kahle's Kalculations by Dave Kahle Suppose your sales force currently costs you 25 per- cent of your gross profit dollars. And suppose that you could cut that by 1 percent. What would happen to the money represented by that 1 percent? It could drop directly to the bottom line, which would not make you unhappy. But, you could use it in other ways. You could afford to take some strategically important business at lower margins, for example. Or, you could use it to fund some new technology improvements in other aspects of your business, or purchase a beginning inventory for some new product line. The opportuni- ties are endless. The point is, improving sales produc- tivity will free up cash that can be used in a number of critical places. In an effort to respond to decreasing margins and competitive pressures, you've probably worked on some of the other aspects of your business. You may, for example, have invested significantly in computers. Most progressive distributors are on their second- or third-generation computer systems to help manage their internal functions. Why did you buy those computers? Bottom line—to become more productive. Competition would have put you out of business by now if you hadn't. You may have streamlined your customer service function, tightened up your purchas- ing and inventory controls, even figured out how to turn your receivables more quickly. All in the cause of becom- ing more productive or trying to stay profitable in the face of competitive pressures and shrinking mar- gins. But, if you're like most distribu- tors, you have not done much to improve your sales productivity, in spite of the fact September/October 2015 11 probably not on the radar. While the CFO, on the other hand, is concerned with the expenses and trying to rein in costs, so we have these conflicting positions jockey- so we have these conflicting positions jockey- so we have these conflicting positions jockey ing for ownership. It's a huge project and it's scary because it has such a great impact on so many aspects Coming from the bid business, no one has ever had to remind Oswalt of the stakes. The majority of its sales have always flowed from the project side, followed by outside sales and then inside sales. So top of mind was project management, the area where change could have the greatest impact--that and how to effectively incent and "Everyone knows that when you're bidding a large project, you're basically bidding it no mark up; that's not a secret," says Harper. "So how do you incentivize some- one on gross profit when you're going to tell them that they can't put any gross profit on it or you're not going to Problem solving started with their needs. "In today's continued on page 28 put you out of business by now if you hadn't. You may have streamlined your customer service function, tightened up your purchas- ing and inventory controls, even figured out how to turn your receivables more quickly. All in the cause of becom- ing more productive or trying to stay profitable in the face of competitive pressures and shrinking mar- gins. But, if you're like most distribu- tors, you have not done much to improve your sales productivity, in spite of the fact continued on page 12