We have learned that the principal-agent
model is traditionally considered bilateral. However, in reality it seems to be
more like a triangular situation if you consider all of the parties it
concerns. For most of us in this course, this is a model that we should learn
well as we will most likely be experiencing it in a real world scenario as soon
as we enter the business world. It is common in business, regardless of the
industry, to be managing both your relations/outcomes with either multiple
clients or clients and the business you work for. Both of these scenarios
require a unique management of your resources in order to achieve the desired
outcome for all parties.
As already established, the
principal-agent model consists of three parties. The agent has a variety of
choices he can make which can have a direct effect on the overall outcome. He
can optimize his own outcome, maximize the outcome of the principle (client),
or maximize the outcome of another party (hiring manager/business). There are
also variations to these listed choices. Ideally the most efficient outcome is
one that benefits all three parties. If the main principal receives the
majority of the benefit then the agent will most likely receive nothing in
return for his work. Where as if the agent receives the majority, the principal
will be disappointed in his results and most likely not return for more
business. Most importantly the principal must not feel as he is being taken
advantage of or he will look to move his business elsewhere. There is a fine
line that the agent must stay on in order to get the best overall outcome.
I’ve personally been in the middle
of many principal-agent relationships throughout my life and expect to continue
to be a part of them in the future. Most notably, I am applying for a lot of
sales positions for after graduation. If I end up going into a sales position,
I will be engaging in this activity on a daily basis. One of my main
responsibilities will be to achieve my monthly sales quota in order to make
money for the company I am working for. In addition to this I will also want to
make even more sales in order to earn benefits in the form of commission. Most
importantly, I will need to be able to back whatever I am selling. This is
easier achieved if I am working for a company with a solid reputation that delivers
the product/service I am selling. This means that the principal client will
need to be satisfied with whatever I am selling him. Hypothetically I could
sell as much as I want of a given product/service and not care about the
overall outcome of the principal, but this could do more harm than good in the
long run. Part of building a solid business is having a good reputation with
clients. I believe it would be in my best interests to not only sell a lot of
business, but also be able to achieve all around beneficial outcomes in order
to have a good reputation with my clients. I could just sell as much as
possible and not worry about the outcome, but would have to worry about the
client taking his business elsewhere the next time he needs the good or service
I am providing. It would be in my best interest to sell marginally less if that
means being able to achieve greater outcomes. Hopefully this would mean that
this client would come back for more business so I would be able to spend less
time giving sales speeches and more time servicing a larger client base later
on.
The principal-agent model can be
looked at as an art that can be mastered. I believe that doing this could be a
key in being successful in the business world. In my example I applied this to
a sales position, but realistically It could be applied to any other business
sector, for example accounting.
A few of your classmates also wrote about sales jobs. I wonder if nowadays this is done on a team basis, so that there is a group of people from the company who make contact with the client, rather than an individual sales rep. Of course, this depends on the nature of the business. What I tried to indicate in class is that for significant items one tries to build a relationship between the buyer and the seller, so sales become something like relationship management and repeat sales are the the heart of the business.
ReplyDeleteOf course, there still is the old style type of sales job where in some sense the idea is to cajole the customer into purchase, whether that is good for the customer or not. I would think that sort of job would burn out the people doing it. The first type of sales job, in contrast, is performing a necessary function that makes the economy better. I wish you good luck in landing that sort of work.
Thanks for the encouragement in my search for a job after I graduate. I don't know if sales is where I want to ultimately end up down the road, but I do think it is a great place to start a career.
DeleteTo answer your question regarding sales teams versus individual reps, I do think that it depends on the company and the nature of their business. So far I have found a few different jobs on I-Link that list in their descriptions that I would be working as part of a team as well as individually. For example there were some companies that would have me cover my own district. I would then be responsible for earning sales in that area while others had there own areas as well. I can also think of a few examples where individuals might not work as part of a dedicated team, but both reach out to the same client. For example companies that do a lot of cold calling I expect would have multiple sales reps attempting to gain business from the same clients.
I like how you pointed out that sales can become sort of like relationship management. This is something that I hadn't realized until recently.
William,
ReplyDeleteGreat post. I can relate to your current experience in the job market and searching for a sales job when it comes to this prompt as I am doing the same thing. While hitting quotas/ commission structures are important for the job structure, I agree with you about not slacking off on service. Personally what I have learned through my job experiences is clients return to a place because of the service and they want to establish a longterm, laid back relationship. Ignoring the clients needs and just selling in volume may work for a short time but all of those leads will eventually dry up if you are not servicing them well. Taking the loss in the short run and kindling a relationship for the long run with a client I believe is the best strategy in this model.
William,
ReplyDeleteGreat post as I am beginning to look for jobs in the business world as a junior at UIUC. I am seeing that a good way to get a foot in the door in the business world is through starting with a sales position. You made a good point about the relationship between a customer and the salesman. Long term relationships in sales is much more important than short term successes because you will have loyal customers for years to come and build a reputable reputation. This is basically a principle of life: sacrificing short term pleasures for long term success.