Sales force training at

arrow electronics

case analysis

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

History

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

Arrows sales was divided into four operating groups

CUSTOMER BASE

VALUE ADDITION

Commercial semi-conductors
Military and aerospace conductors
Passive and connector products
Computer systems, peripherals and software

Start-ups
Small and mid-sized manufacturers of electronic products
Also handles suppliers sales of goods

Convenient access to variety of products

Allowed orders with short lead time
Credit management for customers

Company Summary

profile
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

Sales force

expectations
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

Structure
Branch General
Manager

Area Sales
Manager
(1-3)

Field Sales Reps (6-8)

Admin
Manager

Marketing
Manager

Yearly Avg: $60k-$120k

Commission: 35% of Branch
Operating Profit

Admin
Personnel

Yearly Avg: $35k-$75k

Commission: 25% of Gross
Margin
Sales & Mktg Reps (6-12)

Inside
Sales
Manager
Yearly Avg: $40k-$50k
Max Earning: $100k
Commission: 4%-6% of
Gross Margin

Product Manager (3-6)

Earns $300 weekly

Yearly Avg: $60k-$80k
Max Earning: $150k-$200k

Sales force

Comm: 25% of Gross Margin

Yearly Avg: $35k-$75k

Comm: 4%-5% of Gross Margin

Yearly Avg: $40k-$50k

Problems
Lack of sales personnel

High Turnover Rate

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

Sales force

No Standard
Training

Concept of Selling

Brief
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

Sprouts Program

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

SELF STARTERS

Changes sought
Selling based on relationship

Selling based on what the

customer needs now and in the
near future

PEOPLE SKILLS

Kind of people

NO TOP GPA
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

BUSINESS MAJORS

LEADERSHIP SKILLS

GOAL ORIENTED

Compensation
NEW

1st YEAR

$18,500

$24,000

2nd YEAR

$27,000

HIRING

Hire graduates right out

of college to join the
sales force through a
structured interview
process

Sprouts training
process

Taught about Arrows

history and values,
basics of the industry
and electronic
components

Headquarters
[1 week]

Sprouts Program

Training period over;

instated as
permanent
employees at field
office

Field office

Sales skill training

How to pick orders off

shelves, track inventory,
operate systems

Warehouse
[2 weeks]

Exposing recruits to sales,

customer support,
marketing, shipping, work
with FSR and SMRs, product
management assistance

Field office
[6 months]

Headquarters
[1 week]

Why?
Varied results across branches
Field organization didn't have time to
train people
Friction between Sprouts and
managers

Programme needed to be more

formal

IROC Idiots Right Out of College

Some of the managers just werent 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

changes
Create common bond: espirit de corps
Like an MBA program
Demanding workload
Understanding of real time computer systems

process

HIRING

Sprouts 2.0

Xerox facility
[13 weeks]

Field office
[13 weeks]

Xerox facility
[3 weeks]

Field office
[permanent]

Reasons for employees to leave arrow after the sprouts program

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

Changes made:
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.
Non Compete Agreement:
Employees were made to sign an agreement that they
would not leave to work for a competitor

Industry Training Ground

Results of the changes:

This did not works as competitors would make up
for the deferred compensation that employees
would lose by leaving Arrow

Arrow continued to lose Sprouts as non-compete

contracts had no legal binding in some states,
such as California

The pond is getting smaller

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

Pathways: The new program

What are the merits and demerits

of introducing the pathways
program?

questions

For

Against

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

Possible solution

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, its 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

What is the way

forward for
Pathways?

questions

Two tier integrated program:

1. Recruitment

2. Training

College on-campus recruitment

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

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

Possible solution

Sales 101 handbook

Recreational activities throughout the program for

heightened bonding and relaxation in a stress induced
environment

What should
Arrow do to retain
the talent?

questions

Restructure Recruitment, Training and Compensation

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 FSRs Careers
Structure Training programs on basis of
performance
Increase Awards and Recognition
over the course of Training

Possible solution

Programs

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

Can we restructure the

sales force
organization?

questions

 Giving Area Sales Managers a more focussed approach towards retaining

clients by means of regular interactions
This will reduce Arrows dependence on FSRs as the only touch points for
Customer Relationship Management

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

Possible solution

Thank
You

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