.. . The reason the commissions were out of balance was because the commission rates had been based on the stations’ budgets, which had seemed reasonable at the time. Ed and the previous general manager decided the solution to the problem was to hire a local sales manager for KRQO who had some expertise in direct, retail selling and to split the staff. They felt that pursuing direct, retail business was the best strategy, because the KRQO couldn’t compete effectively at the agencies for 25- 54 business, and with most of KRQO’s numbers being 44+, the salespeople couldn’t sell very much on a combo with The Z.
They also decided to have one salesperson from each staff call on agencies and clients, and when a buy was up, to have the two salespeople work together and make a joint sales presentation to get both stations on the buy. They offered a twenty-percent discount on both station’s rates if a buyer would by an equal schedule on both stations. Ed hired Oscar, who had a good track record of increasing direct, retail business at a station in another top-ten market, and Ed split the sales staff. Ed actually hired Oscar the week after Tyler Saunders joined the station as general manager. Ed gave Oscar three of his better, more experienced salespeople–the ones that he felt were more adept at direct selling.
When Ed made out the budgets for the two stations, he worked painfully through a number of scenarios. He looked at billing figures going back several years for the combo. He looked at rates for each station and the number of combo buys that they had gotten. He looked at the current ratings for the two stations. Finally, he came up with a sixty-forty revenue split, based on his estimate of what the two stations could bill–about sixty percent of the total would come from The Z, and about forty percent would come from KRQO.
When he and Tyler, who had just been on the job for two weeks, made their budget presentation to corporate, the top brass agreed that the budget projections for the two stations were reasonable, and the numbers were locked in. Now, nine months later, Ed knew the numbers were out of whack. The Z was sailing along way ahead of budget and ahead of last year. KRQO was impossibly behind budget and expectations. The system of making cooperative presentations was not working well. Oscar was so highly competitive with Olivia that he’d insist that the KRQO people go after an unrealistically high share of the budget.
In fact, there was virtual warfare between the two staffs, much to Ed’s dismay. But was it Oscar’s fault or the fault of poor budgeting? In either case, What do I do now? Ed thought as he looked out at the setting September sun. Do I admit I made a mistake and fire Oscar? If I fire Oscar, do I hire another local sales manager and keep the staffs split, or do I go back to one staff selling combo. Oscar is a good closer; do I keep him and let him and a couple of retail people report to me and have them sell only KRQO, and have the rest of the staff sell a combo with realistic, appropriate rates for both stations? Do I fire Oscar and several salespeople, and then have a nine- or ten-person staff sell only a realistically priced combo (understanding that most of the remaining salespeople used to give away KRQO for ten percent extra and don’t know how to sell its specialized format)? How do I establish a budget for next year for each station or both stations in combo? What is the best compensation system, and is the one I’m using now fair? What comes first, structuring the sales department(s) realistically or backing into the budgets I know I’ll be facing (corporate always wants ten percent more, regardless)? Ed hated backing into budgets. He remembered several years ago when the company was under severe pressure from bankers, that he had to back into some pretty ridiculous budgets.
As Ed looked out of the window over the setting September sun, he decided to hire a consultant from the Marketing Communication Group, a consulting and sales training organization he had dealt with in the past. Ed had formed an outline in his mind of what he thought was the optimum solution, but he felt he needed an objective, knowledgeable outside opinion. He picked up the phone and left word for the consultant to call him. AUTHOR’S NOTE While the incidents in this case are not factual, they do represent a composite of real situations and common industry practices. The case was prepared to use as a teaching tool.
As we discussed, Oscar is a real problem. Morale on the KRQO staff appears to be quite low. There is a perception among both staffs that he is unfair and shows decided favoritism to one person–for no apparent reason (there is rampant speculation, of course, but it is only speculation). Oscar is not an effective manager; his people skills are poor. He is very competitive with Olivia and The Z staff, which causes counterproductive attitudes and feelings among everyone.
The poor morale and apparent poor performance of KRQO is in stark contrast to the excellent morale and performance at The Z. The Z salespeople love Tyler, love you and love Olivia–for all the right reasons. You help them, coach them, encourage them and make them feel like winners. I’m afraid that Oscar spends a great deal of time making his people feel like losers–thus it’s little wonder they are losing. It’s sort of a self-fulfilling prophesy.
I feel that you have waited too long to address the Oscar problem. The fall buying season is coming up and you must get the KRQO staff organized and cracking immediately in order to maximize fourth quarter business. Of course, your motives for waiting to move on Oscar are beneficent, which is typical of your company’s culture; however, I would move immediately on Oscar. Talk to him right away and tell him it isn’t working and it’s time for a change. Give him until the end of the year to find a job, if you can, but get him out of the station now (perhaps your rep will give him a desk and a phone to use in New York).
When you terminate him, you and Tyler do it together and do not argue or give him any specifics–just be general and say it’s a style problem and be as generous as you feel you can. He will try to argue, want to go over your heads to corporate, will demand exact reasons, etc. Let him vent his anger, but do not be specific. Also, tell him he can resign if he wants to (which is a nice technicality and lets him say that he quit). On the other hand, if he quits, he can’t get unemployment compensation.
So give him a choice. You can fire him so he’ll be eligible for unemployment, but then you and he can tell everyone he quit. In any case, get him out of the station at once; he can do nothing but harm. I think your idea of taking over the KRQO sales effort is an excellent one. Let Olivia handle The Z, she can certainly do it, and you can organize and evaluate the KRQO staff. I think you ought to make one or two KRQO changes right away–certainly Mary Ann (if she doesn’t leave when Oscar does, she will be nothing but trouble if she stays; she has a terrible, negative attitude).
Unfortunately, Harry probably needs to go too, as we all seem to agree that he isn’t going to make it (how about putting him in production and creative for a while to shore up direct selling– let him do it 25 hours a week and look for work the rest of the time. His programming and production experience will be of value, particularly with your emphasis on new, direct business). After letting two KRQO salespeople go, raise the KRQO commission several percentage points (more about this later, but for now the commission rates are inequitable–the rates on The Z are more than twice KRQO’s but the commission rates are very close). Divide the lists up realistically and equitably. Make some interim decisions about account assignments.
Do not have two people go into agencies yet. Tell The Z people to pitch both stations and give them the higher KRQO commission for KRQO business. In this manner, everyone will be pumped to get more KRQO business and it won’t cost the station much more money because you’ll be saving the overhead costs on two salespeople. Next year, split the staffs completely and put two people into agencies competing for business, but not yet. The Z people will love this system for the rest of the year and will really hustle to get business for both KRQO and The Z and to make some more money this year–they like selling both stations and the challenge of it.