Tuesday, August 7, 2018

Life is Not Fair, Part 2 - Salesmen Get Swindled

How Salesmen Get Swindled

Selling is a talent; selling is a skill.  Selling is vital to companies because not every product sells itself.  Some people might think that the sales profession is inherently dishonest, which is untrue.  Sales is a hard job and a difficult job, but there is nothing inherently dishonest about it.  What people might not realize is that salesmen are frequently swindled by their management.

Territory Reduction

One of the ways a salesperson gets swindled is by having the sales territory reduced.  If a salesman makes more money than his manager, the manager can get jealous and take business away from a successful salesman in order to cut his pay.  Consider the unfairness of this action.  As a salesman you develop a territory and cultivate regular customers.  Then the fruits of your labor are taken away and given to someone else.  One of my neighbors once told me this happened to him.  This is pretty common.

Ewing Marion Kauffman was one of the wealthiest men in Missouri.  He started Marion Laboratories, a pharmaceutical company.  Marion Labs merged with Merrell Dow in 1989, which was then bought out by Marion Roussel Hoechst for $7.1 billion in 1995.

The reason Ewing Kauffman started his business was that he was a successful salesman with a pharmaceutical company, but got swindled.  His company cut his sales territory because Kauffman was so successful that he was making more money than the president of the company. He decided not to look for another job. Instead, he made his own mark on the pharmaceutical industry by starting his own company and doing things his way.

In the book Father, Son & Co.by Thomas J. Watson, Jr., Watson Junior describes how he started his career at IBM by becoming salesman of the year.  His father, Watson Senior, who ran the company, knew of a salesman who had scored a big sale.  The father took the sales territory away from the salesman who worked that territory and gave the territory to his son.  So Watson Junior became salesman of the year without lifting a finger.  Indeed, life is not fair.

Commission Reduction

I remember a story about Circuit City, the bankrupt and defunct consumer electronics store.  At one store a salesman called in for a special meeting before the store opened could see all the top salesmen were called in for the same meeting.  He thought they were going to get some special reward.  The reward they got for their hard was to get fired.  The company decided to cut their commissions, thought the best salesmen would be unhappy about reduced commissions, so Circuit City fired them -- their best salesmen.  The expression, "cut your nose off to spite your face," comes to mind.  Greed and stupidity are boundless.  This story was printed many years ago in the Wall Street Journal.

One former salesman told me directly that after a banner year of sales where he hit all his targets he expected a huge bonus and instead was fired because the owner of the company could not bare to part with the bonus he had promised the salesman.  That is a commission reduction down to zero!

It is incredible to imagine that a salesman would be punished for being a good salesman, but that is greed at work -- the greed of a business owner or a sales manager. 

If your child goes into sales, your child must understand that salesmen do get cheated.  I have only scratched the surface of the unfairness salespeople face.


PS:  Everyone should know that Ewing Kauffman started the Ewing Marion Kauffman Foundation to promote entrepreneurship.  Also, the book Father, Son & Co. is an excellent book.  I recommend it.

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