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.

 My opinions are based on my experience with both 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. In the world of MANA, contracts and/or letters of agreement are required. In those agreements, any requirements for call reports are strongly discouraged.  There are two primary reasons for their findings:

1.)    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.

2.)    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. 

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" 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.  Most get their results despite rules, not because of them.  Attempting to add rules and rigor will not work these folks as they are typically High D's or High I's on the DISC behavioral scale and don't mesh well with rule orientated types of the world.

The Why (motivation):

Research shows that top sales people have two primary drivers: results and individualism.  They are driven by results and efficiency and the by their desire to call their own shots.  They be rewarded for their achievements, not for unproductive activities.  Ignoring their independent nature can be hazardous to both your wealth and their desire to produce for you. These folks have choices and they will make decisions for emotional reasons.  In every appointment, they choose to present your line with the initial three lines, the bottom three, in between or not at all. 

The What:

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

Because of the independent nature of reps, I believe that 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" reps and over time will damage the former. The top performers ("A" reps) will never act like your employees.  Reps who do (the "C's") and who seem to need managing will 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, avoid ruffling their feathers and stay out of their way.  If manufacturers ruffle the feathers of those rare "A" 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 their value proposition.  

Uncommon Sense

For Manufacturers / Principals

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 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 for control with independent A-Reps.   Why devote scarce resources toward a losing proposition when you can instead opt for results?

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