Sales & Distribution Management: Sales Force Training at Arrow Electronics - Case Analysis

1. 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

2. 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 fouroperating groups
• Commercial semi-conductors
• Military and aerospace conductors
• Passive and connector products
• Computer systems, peripherals and software
History
CUSTOMERBASE
• Start-ups
• Small and mid-sized manufacturers of electronic products
• Also handles suppliers’ sales of goods
VALUEADDITION
• Convenient access to variety of products
• Allowed orders with short lead time
• Credit management for customers

3. 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

4. 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

5. 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 Selling
No Standard
Training

6. 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

7. 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

8. 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
office
Sprouts training
process

9. 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 Xeroxfacility
[13 weeks]
Xeroxfacility
[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

10. 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
Reasonsfor employeesto leavearrowafterthesprouts’program
Changesmade: Resultsof 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

11. 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
Thepondis gettingsmaller

12. questions
What are the merits and demerits
of introducing the pathways
program?

13.  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

14. questions
What is the way
forward for
Pathways?

15. 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
Twotierintegratedprogram:

16. questions
What should
Arrow do to retain
the talent?

17. 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,Trainingand Compensation

18. questions
Can we restructure the
sales force
organization?

19.  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 for
Customer Relationship Management
 This will also de-risk Arrow from potential loss of Clients when FSRs leave
Possible solution

20. Thank
You
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