case analysis

Sales force training at

arrow electronics Aashita Jain 081

Aniruddh Choksey 090

Anu Radhakrishnan 094

Aritrika Das 096

KV Saurabh Kamalakaran 114

Nikhil Saraf 124

Paarmi Modi 127

Saarini Bagga 139

Surabhi Anand 152

Vasundhara Adukia 158

Company Summary

• Arrow electronic - A broad line distributor of semiconductor & electronics components to OEMs (Original

Equipment Manufacturer)

• It began as a radio-equipment retailer in 1935

• Listed in NYSE in 1979

• Became the second largest distributor in the US by 1980

Arrow’s sales was divided into four operating groups

• Commercial semi-conductors

• Military and aerospace conductors

• Passive and connector products

• Computer systems, peripherals and software

History

CUSTOMER BASE

• Start-ups

• Small and mid-sized manufacturers of electronic products

• Also handles suppliers’ sales of goods

VALUE ADDITION• Convenient access to variety of products

• Allowed orders with short lead time

• Credit management for customers

Sales force

expectations

30 – 40 year old

No college

degree/technical training

High energy

Highly aggressive

Monetary motivation

Relation based selling

Did their own thing –

difficult to inject new idea

•Achieve sales goals and deliver good

performance

•Manage the territory

•Understand the customer strategy : Knowledge

about company, products in pipeline, demand

creation for the same , need analysis of consumer

and supplier

•Make cold calls

•Overcome objections and persuade

•Close the sale

profile

Branch General Manager

Inside Sales

Manager

Area Sales Manager

(1-3)

Marketing Manager

Admin Manager

Admin Personnel

Field Sales Reps (6-8)Sales & Mktg Reps (6-12)

Product Manager (3-6)

•Earns $300 weekly

•Yearly Avg: $60k-$80k

•Max Earning: $150k-$200k

•Yearly Avg: $35k-$75k

•Commission: 25% of Gross

Margin

•Yearly Avg: $40k-$50k

•Max Earning: $100k

•Commission: 4%-6% of

Gross Margin

•Comm: 25% of Gross Margin

•Yearly Avg: $35k-$75k

•Comm: 4%-5% of Gross Margin

•Yearly Avg: $40k-$50k

Structure •Yearly Avg: $60k-$120k

•Commission: 35% of Branch

Operating Profit

Sales force

Sales force

Problems

• Lack of sales personnel

• Hiring by and from competition

• No employee loyalty

• Sales were tied to personal relationships

• Attrition of employees lead to losing customers

• Sales people from competitors are hired for their

loyal customers

High Turnover Rate

Concept of SellingNo Standard

Training

Sprouts Program

Hire students from college campuses and train them to sell the way “modern salespeople” should sell.

3 fold objective

Needed more

salespeople

Only 300 people before

Sprouts started

Change the make-up of

the salesforce

No quality in hiring from

competitor, people lower

down in arrow had even

less rich backgrounds

Improve the culture

Move them to

managerial positions in a

due time

Brief

Selling based on relationship Selling based on what the

customer needs now and in the

near future

Selling parts selling solutions to customer

business problems

Personal relationship with buyer Relationship with the whole

customer

Having relationships and

product knowledge in tool kit

Well equipped tool kit with

territory management,

understanding strategy, making

cold calls, overcoming

objections, how to close sale

etc.

Sprouts Program

Changes sought

Kind of people

SELF STARTERS BUSINESS MAJORS

GOAL ORIENTED

PEOPLE SKILLS LEADERSHIP SKILLS

NO TOP GPA

NEW 2nd YEAR1st YEAR

Compensation

$18,500 $27,000$24,000

Sprouts Program

HIRING

Field office

[6 months]

Warehouse

[2 weeks]

Headquarters

[1 week]

Headquarters

[1 week]

Field office

Hire graduates right out

of college to join the

sales force through a

structured interview

process

Taught about Arrow’s

history and values,

basics of the industry

and electronic

components

How to pick orders off

shelves, track inventory,

operate systems

Exposing recruits to sales,

customer support,

marketing, shipping, work

with FSR and SMRs, product

management assistance

Sales skill training

Training period over;

instated as

permanent

employees at field

officeSprouts training

process

Sprouts 2.0

•Varied results across branches

•Field organization didn't have time to

train people

•Friction between Sprouts and

managers

•Programme needed to be more

formal

Why?•IROC – Idiots Right Out of College•“Some of the managers just weren’t good trainers” •Sprouts had different expectations•Sprouts given – “ROW” (Rest of the World Accounts –Not wise as it required best selling skills )•Used as Clean up staff

HIRING Xerox facility

[13 weeks]

Xerox facility

[3 weeks]

Field office

[13 weeks]

Field office

[permanent]

changes

•Create common bond: “espirit de corps”

•Like an MBA program

•Demanding workload

•Understanding of real time computer systems

process

Industry Training Ground

• For better compensation: Sprouts who were in first year were offered guaranteed annual salary of $30,000

by the competitors. And those in their second year and had their own sales territory (with a salary of $25000

- $30,000) were offered $40,000 to $45,000

• To move up the management ranks: Since sprouts were fresh out of college, their career advancement to

management positions was slow. However, other competitors recognised their management potential and

Sprouts were offered faster career growth

Reasons for employees to leave arrow after the sprouts’ program

Changes made: Results of the changes:

Deferred Compensation Program:

A part of salary was given a commission rate and put

to individual accounts, a percentage of which was

given out every quarter and at the end of two years.

This did not works as competitors would make up

for the deferred compensation that employees

would lose by leaving Arrow

Non – Compete Agreement:

Employees were made to sign an agreement that they

would not leave to work for a competitor

Arrow continued to lose Sprouts as non-compete

contracts had no legal binding in some states,

such as California

Pathways: The new program

•Arrow Electronics is a bigger company with a sales force of 1,000

•As a result of consolidation, only 5 major players remain in the market

•Arrow Electronics, with a turnover of 25%-30% each year requires to grow its pool of sales force by 300 every year

•As there are only 5 players in the market, Arrow does not have many choices in hiring industry professionals

•With Pathways, it looks to revive their college recruitment program to satiate their imperative requirement of a larger sales force

•The objective of this recruitment program was also to bring new energy and professionalism to the sales force

The pond is getting smaller

questions

What are the merits and demerits

of introducing the pathways

program?

It is essential in order to counter the constantly

reducing sales force pool

Arrow has acquired four of the top ten distributors

and the size of company has increased which

would need a uniform training programme

Although they had a sales force of 1000, their

turnover was around 26 – 30%

To attain competitive advantage and become

the benchmark in salesforce in the industry by

creating a consistent talent pipeline

Since the recruits are fresh out of college, it is

essential to train and bring energy and

professionalism

For

× A rigorous training pattern is making them the

most sought after sales people in the industry

and hence being offered higher pay package

and management ranks which in turn leads to

attrition

× Training was an additional cost to company

× According to Kaufman, “it’s more reasonable

to hire somebody from a competitor at $40,000

than to give somebody a 30% increase inside

your own company.”[1985 figures]

× The compensation set by competitors was very

high ($40,000), so an increase in sales pool

would require huge investment [1985 figure]

× It led to clashes between General Managers

and newly trained sales force due to stark

difference in their ideologies which caused

internal HR issues

Against

Possible solution

questions

What is the way

forward for

Pathways?

Possible solution

1. Recruitment

College on-campus recruitment

Inter-industry recruitment to break-free from the

clutter of the industry

Scout for potential employees from within the

industry

Procedure for efficient recruitment :

•Hiring profile

•Application scrutiny

•Interview

•Psychological testing

•Reference check

•Physical examination

•Job Offer

2. Training

Expand the scope of Pathways into a professional

training program for employees in other ranks of the

organisation.

• Theoretical frameworks

• Scenario based

• Gamification

• Voluntary quality circles

Sales 101 handbook

Recreational activities throughout the program for

heightened bonding and relaxation in a stress induced

environment

Two tier integrated program:

questions

What should

Arrow do to retain

the talent?

Possible solution

Differential Recruitment Process

•Hire from Ivy League and non-Ivy League

Colleges

•Differential pay packages

•Non-Ivy League graduates expected to

stay for longer satisfied with pay and work

Staggered Training Module

•Avoid excess investment in short span of

time

•Step-wise Training Program spread over

first 3 years of FSR’s Careers

•Structure Training programs on basis of

performance

Increase Awards and Recognition Programs

over the course of Training

Include Stock Units to employees

Fringe benefits like the following should be offered :

•Compensation

•Medi-claim

•Recreational centers

•Campus/ hostels during training

Loans with reduced interest rates should be offered:

•Educational, Home and Car loans

Sabbatical Leaves can be provided

Restructure Recruitment, Training and Compensation

questions

Can we restructure the

sales force

organization?

Giving Area Sales Managers a more focussed approach towards retaining

clients by means of regular interactions

This will reduce Arrow’s dependence on FSRs as the only touch points forCustomer Relationship Management

This will also de-risk Arrow from potential loss of Clients when FSRs leave

Possible solution

Thank

You

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