Big Dumb Companies Just Don’t Get It

The big companies don’t get it any better than their little competitors. What is “IT” you say? What is “IT” they don’t get. Pure and simple they don’t get the fact that highly trained and skilled employees, especially sales reps and sales associates, are a company’s most valuable asset. They are the foot soldiers in the battle for market share. These foot soldiers spend countless hours educating, assisting and interacting with potential customers and buyers. Decisions may be made in a corporate board room but they are implemented by the foot soldiers. And successful implementation can only be achieved by having a highly trained and skilled army of foot soldiers who know how to sell.

Unfortunately, most companies through either ignorance or stupidity refuse to invest the necessary time and money to recruit, hire and train an effective sales force. They view such training as an expense and a luxury that is nice to have but not necessary. They fail to “get it” that effective training is an investment not an expense. Therefore, when things get tough and they need to save a few bucks they immediately look to eliminate the training budget- if they even had one to begin with – and the second thing to go is the advertising and marketing budget. See the three examples below and you will notice a pattern.

On January 17 Wall Street Journal writer Sarah McBride writes:

Clear Channel to cut US work force by 7%

She writes, “Clear Channel Communications plans to lay off about 7% of it US staff and replace more local shows with syndicated content, moves that could affect the broader radio and outdoor advertising business for years to come.”

On Tuesday, Clear Channel, which employs about 20,000 people in the US, will lay off about 1500 employees mostly in ad sales, and implement other cuts aimed at saving close to 400 million.

Writes McBride, “The bulk of Clear Channel’s job cuts will be in sales, dropping those who aren’t top performers. The focus is on rewarding the very best salespeople, and letting them maximize their own compensation,” in part by picking up accounts of their less stellar peers.”

Doing this will ensure that the top performers, who receive the corporate handout of new accounts, will become complacent and lazy and lose their hunger to open new accounts on their own. In a year or two I can hear the lament from sales managers and directors of sales now, “our veterans are not motivated and aren’t opening enough new accounts.” Why should they when they have been trained that the company will feed them new business.


Why this is a DUMB move

In the same issue of the Wall Street Journal Jonathan Rockoff writes,

Pfizer plans to lay off up to 2400 in sales

Rockoff writes, “Pfizer plans to lay off as many as 2400 salespeople in the US. This represents one third of its field force according to a person familiar with the matter.

The cuts are likely to knock the drug industry’s leading employer of sales representatives from the top spot, said Jaideep Bajaj, managing director of ZS Associates, a sales and marketing consulting firm.

In a statement, Pfizer said it wouldn’t comment about rumors or speculation but it added that it was continually looking to operate in a more effective and efficient way. The cutbacks will include sales representatives and middle managers in order to be completed by this quarter the person familiar with the matter said.

Pharmaceutical companies have been slashing sales jobs built up more than a decade ago, when blockbusters like Pfizer cholesterol fighter Lipitor were prescribed mainly by primary care doctors. Companies hired so many sales reps that as many as a half a dozen might end up calling on the same doctor to tout the same product.


What manager is responsible for that dumb strategy? Don’t blame the reps because they were doing what they were told to do.

Sales jobs in the US drug industry have dropped to about 90,000 now from a peak of 105,000 in first quarter of 2006.”

What would have been the result if they had used the money they spent on the 15,000 that they laid off and invested it in their top reps to make them a more valuable asset? This is a classic example of DUMB. I am glad I don’t own Pfizer stock.

On Monday, January 19, USA Today writer Jane O’Donnell writes in an article entitled:

Demise of Circuit City traced back to layoffs

She writes, “as the second-largest electronics retailer after Best Buy, Circuit City was once well positioned. But most experts point to the chains 2007 layoff of thousands of its highest-paid and more experienced sales clerks as the start of its rapid decent. Many went to Best Buy, which consistently ranked higher in customer service scores in recent years”.

“Circuit City miscalculated when they decided to price the ultimate factor in customer’s choice of electronic retailers”, says Robert Richardson president of Associates interactive which specializes in retail training programs.” Want to know why they lost customers to Best Buy

“As a result they suffered immensely and ultimately because they were vulnerable to multiple category retailers and wholesale clubs with better prices as well as competitors that offer better sales trained associates.”

Here we have three companies from three different industries who all made similar mistakes of not hiring selectively and then investing properly in the sales training and education of those assets.

During the good times when money flowed easily these problems were masked but as Warren Buffet says, “when the tide goes out we see who has been swimming naked.”


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