When the Soft Sell Needs a Hard LookBy PAMELA RYCKMANACTION AMBULANCE provides ambulance and transportation services to hospitals, nursing homes, rehabilitation facilities and special-education programs within school systems. Based in Wilmington, Mass., 17 miles north of Boston, the company has 260 employees and annual revenue of about $17 million. The company’s chief executive, Mike Woronka, who has worked in emergency medical services for 25 years, said his company fell squarely in the middle of seven direct competitors in terms of size and performance.

THE CHALLENGE To take a more aggressive approach to sales in an industry where most companies focus on service for existing clients, pushing gently and gradually for new business.

THE BACKGROUND Mr. Woronka became chief executive in 2006 after having worked at the company for a decade. During that decade, the ambulance business became increasingly competitive as rising health care costs led to hospital consolidation and as customers demanded dedicated resources with optimal response times. This drove up the cost of service, and Mr. Woronka sought a way to differentiate Action from its peers.

The company had two account managers who, in the course of serving current customers, might also help develop new accounts. At industry events, they would meet health care providers looking to switch transportation companies, or they would network with hospital decision-makers to seek a greater percentage of their business. The company set no goals for landing new business, and account managers were paid a straight salary without commission. They had no incentive to cold-call or to pursue prospects actively.

Mr. Woronka said this approach was typical in his industry, but he believed that through targeted outreach Action could both lure business from competitors and expand its territory. “Historically our business was based upon relationships, but times have changed and you can’t rely on them to grow your business anymore, or even keep your current base,” Mr. Woronka said. “So many people said you can’t sell ambulance services, that we were crazy to want to do things differently.”

THE OPTIONS Mr. Woronka’s first option was to train his existing, salaried account managers in more aggressive sales tactics. This was the lowest-cost option, but it was also risky. His employees did not necessarily have the skills or motivation to chase new clients.

Mr. Woronka also considered hiring a full-time sales representative to pursue additional accounts in expanded territories. This was more ambitious, as he saw no precedent among his competitors. Mr. Woronka would need to develop a detailed compensation plan to motivate the sales rep, who would most likely be paid about $100,000. Both the sales rep and the account managers would report directly to Mr. Woronka, even though he lacked experience in sales.

Finally, Mr. Woronka could hire both a full-time sales rep and a sales manager. The sales manager would be paid about $150,000 — an expensive choice, when added to the rep’s

salary. But the sales manager would oversee the sales rep and the account managers to ensure all employees with client interaction were working together as a team, freeing Mr. Woronka to focus on his chief executive duties.

THE DECISION Before deciding whether to invest in a sales force, Mr. Woronka wanted to define reasonable expectations and quantify the opportunity. How long should it take to acquire leads, hunt them down and close deals? If a sales rep were to make 50 cold calls, how many appointments or meetings should result? How many proposals? And, ultimately, how many closed deals? Was the additional revenue a sales rep could generate enough to justify the cost of a salary and commission?

Mr. Woronka decided to hire Suzanne Paling, a consultant and former sales manager, to help develop a sales strategy and performance metrics. Ms. Paling designed a sales reporting system and segmented Action’s different markets, reviewing sales cycles and establishing discrete goals for each type of client. For instance, a sales rep might be able to close three special-education deals in a month, but large, high-margin clients like hospitals might require more than a year.

After establishing productivity standards, Ms. Paling advised Mr. Woronka to hire a professional sales rep who would earn most compensation through commissions, bonuses and incentives.

While many chief executives agree to higher base salaries for seasoned sales reps, Ms. Paling says she believes this sends the wrong message. Instead, she recommends that owners offer a base salary that is 20 to 30 percent higher for a specified training period. During this time — which could be three to six months, depending on the length of an industry’s sales cycle — the rep gets acclimated and builds a pipeline. After training, Ms. Paling said the sales rep should transition to a lower base salary and begin to generate about 60 percent of his or her $100,000 compensation through commissions.

But Mr. Woronka went against Ms. Paling’s advice. Before committing to a new hire, he decided he wanted to see if his existing account managers could assume the additional responsibilities. Ms. Paling agreed to work with Action’s account managers to coach and train them in sales.

ANALYSIS:

- WHAT IS THE ADVANTAGE OF KEEPING A FULL TIME PERSON?

- WHAT IS THE ADVANTAGE OF KEEPING AN EMPLOYEE ON COMMISSION?

- WHAT IS THE PROBLEM IN ORGANISATIONAL HIERARCHY?

- WHAT IS THE PROBLEM WITH INCENTIVE SYSTEM?

-

=THEY CAN HIRE NEW EMPLOYEES

=INCENTIVE SHOULD BE PROVIDED

=RIGHT KIND OF JOB SHOULD BE GIVEN TO THE RIGHT PERSON

=