Case Analysis: Sales Force Training at Arrow Electronics

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Case analysis: Sales Force Training at Arrow Electronics

Executive Summary

– This case focuses on the training given to the fresh, out- of- college

sales people at Arrow Electronics and the reasons on why the training programme failed to have the intended effect. Arrow Electronics was the first distributing company to recruit college graduates as a part of their sales force. To bring them up to the skill level required by field sales representatives, an elaborate training programme was put in place. By the second year the training programme proved to be really successful as the trained graduates became best in the business as field sales representatives. That was when the competitors poached them with higher salaries and promise of leadership and management roles. Attrition level among the graduates or sprouts as they were called reached a crescendo soon and Arrow Electronics had to do away with the programme. Situational Analysis – Arrow Electronics started as a radio equipment retailer in 1935. In the 1960s and 70s it started dealing in electronic equipments. It quickly progressed to being the 2nd largest distributor by 1980 and in 1993 has the highest sales in the industry with $2.5 billion in North America. Arrow ordered components from suppliers like Intel, Motorola and sold them to OEMs like IBM, HP etc. They also catered to smaller firms and start ups. They were renowned for having a diversified product portfolio. A major competitive advantage of Arrow was its extensive and strong relationship network with clients. Sales were divided into four distinct product groups viz. Commercial semiconductors, military and aerospace semiconductors, passive and connector products, computer peripherals and software. Steve Kaufman was the CEO and Chairman of Arrow Electronics and the main protagonist of the case too. Organisational Structure and Compensation & Benefits The organizational structure of Arrow was hierarchical in nature, with each sales force divided into geographic divisions. The General Manager headed each branch sales office. The Branch Office structure is depicted as follows. Branch General Managers (45) Area Sales Manager (1-3)

Inside Sales Manager

Marketing Manager

Admin Manager

Admin Personnel

Field Sales Reps (6-8)

Sales & Marketing Reps (6-12)

Product Managers (3-6)

The compensation and benefit structure at Arrows was competitive with a significant amount of variable component for the employees. Branch Office Employee General Managers (GM) Field Sales Representatives (FSR) Compensation 35% of salary is bonus based on branch performance (measured by operating profit) $300/week draw against a commission (8% of gross profit dollars shipped to the FSR’s customers) Average yearly income $60,000-$120,000

$60,000-$80,000

Sales & Representatives (SMR) Product Managers (PM)

Marketing Paid entirely on commission, earned 4-5% of gross margin dollars generated 25% of compensation based on sales & gross margin of product lines

$40,000-$50,000

$35,000-$75,000

Demerits of the existing sales force structure- The sales force of arrows was a major asset for them mainly for their skills and network. But the top management of Arrow wanted to revamp the entire sales structure because they wanted a more professional sales team. The current sales team had developed personal relations with the buyer in the client companies. So it was a 1:1 relation and when the sales person left, he took away with him the client contact and the deal. Poaching sales people of competitors was prevalent because of this. Also some W-2 Hoppers shopped themselves around to some firms for higher fixed income. Subsequently attrition was high in the sales area as there were only 20 national players who required the same kind of sales people and thus offered competitive salaries. As a result of all this there was a stagnated sales force in the industry and no fresh blood was being inducted. Nature of the...
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