PENSION PLANS FOR OUTSIDE SALESMEN DISSERTATION Preaented In Partial Fulfillment of the Requirement* for the Degree Doctor of Philosophy in the Graduate School of The Ohio State Uhivarsity By PHILLIP MoVSY, A.B., I.A., M»B«A* The Ohio State Chivarsity 1054 Approved by s -- 1 * Advlser 1 TABLE OF CONTENTS Chapter Page Number 1 INTRODUCTION 1 Pensions as a sales management problem 1 Plan of this study 5 Cooperation of National Sales Executives, Inc* 6 The questionnaire survey 9 2 OUTSIDE SALESMEN AND THE PROBLEM OF AGE 15 Number of persons employed as outside salesmen 15 Age factors In sales work 19 Preference for older salesmen In some lines 20 Brief work experience of most salesmen on current Jobs 22 Influence of young "marginal" sales workers 26 Loss of capacity* courage and desire In later years 27 Resistance of salesmen to old-age planning 29 3 SCOPE OF PENSION COVERAGE IN THE UNITED STATES 31 What Is a private pension plan? 31 Growth of pension plans since 1942 32 Outside salesmen and the Social Security Act 37 Internal Revenue Act of 1942 42 Outside salesmen under emergency wage and salary controls 43 Decision of the National Labor Relations Board 44 II Chapter Page Number Forces indirectly stimulating the growth of pensions 47 Aging population 47 Shorter working life 48 Increasing maturity of men in management and marketing 49 Radiation of employee benefit plans 50 Values of pension plans to employers 51 4 MANAGEMENT PROBLEMS IN THE RETIREMENT OF OUTSIDE SALESMEN 52 Desire for special efforts and attitudes 52 Inability to apply usual administrative devices to salesmen 54 Nature of salesmen's earnings 55 Independent contractor status of salesmen 61 Desire for special controls over salesmen 62 5 FINDINGS OF THE NATIONAL SALES EXECUTIVES PENSION STUDY 65 Findings of earlier surveys 66 Arrangement of tabulations 67 Number and kind of firms sponsoring pensions for salesmen 69 Characteristics of covered sales forces 77 Relation of salesmen's pensions to old-age personnel policies 93 iii Chapter Page Number Eligibility of salesmen for pensions 100 Special provisions in salesmen's pension plans 109 Financing the plan 114 Benefit payments to retired salesmen 119 Effect of pensions on sales management 128 Administration of the plan 137 Costs of the plan to employers 137 6 CONCLUSIONS 142 Trends in the Use of pensions for salesmen 143 Some of the unsolved problems 145 Model pension provisions for salesmen 148 Suggestions for additional studies 150 EIBLIOGRAPHY 152 APPENDIX A THE QUESTIONNAIRE FORM 159 APPENDIX B LIST OF CONTRIBUTING COMPANIES 160 AUTOBIOGRAPHY 184 lv LIST OF TABLES ?able Humber Page Humber 1 Humber or Eiqplojed Persons by Major Occupation Group and by Age* United States* 1950 21 2 Expertenoe or Male Workers at their Current Jobs* by Major Ocoupatlon Group, united States* 1950 23 3 Experience or Sales Workers at their Current Jobs* by Sex* united States* January 1951 24 4 Humber or Pension and Profit Sharing Plans Approved by the Bureau of Internal Revenue* By Years* October 21* 1942 34 5 Humber of Companies Sponsoring Pension Plans ror Outside Salesmen* by Type or Conpany * among 508 Members of Hattonal Sales Execu­ tives* 1952 70 6 By Product Line 72 7 By Area of Distribution 73 8 By Age or Company 74 9 By Geographic Location and Humber of Salesmen 76 10 By Number or Salesmen 79 11 By Number or Employees 80 12 Number of Cong)antes Sponsoring Pension Plans for Outside Salesmen* by Average Annual Turnover of Salesmen* among 508 Members of National Sales Executives* 1949 - 1951 01 13 Humber of Companies Sponsoring Pension Plans for Outside Salesmen* by Type of Compensation Plan* among 508 Members of National Sales Executives* 1952 83 14 By Extent of Salesmen's union Membership 85 V Table Number Page Number 15 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Influence of Collective Bargaining on Origin of 269 Plans Sponsored by Members of National Sales Executives, 1952 86 16 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Range of Salesmen's Ages, among 508 Members of National Sales Executives, 1952 8 7 17 By Preferred Age for Hiring New Salesmen 90 18 By Age at Which Salesmen Reach "Peak" Productivity 9 1 19 By Years of Selling Experience Required for "Peak" Productivity 9 2 20 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Percent of Sales Force Covered by Social Seourlty, among 493 U#S* Members of National Sales Executives, 1952 94 21 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Types of Personnel Involuntarily Retired, among 508 Members of National Sales Executives, 1952 95 22 By Action Taken when Salesmen Reach Old Age 9 7 23 Number of Conpanles Sponsoring Pension Plans for Outside Salesmen, by Action Taken to Prepare Salesmen for Retirement, among 115 Members of National Sales Executives Having a Compulsory Retirement Policy, 1952 99 24 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Percent of Sales Force Retired, 1947 - 1951, Among 508 Members of National Sales Executives ioi 25 By Percent of Sales Force Expected to Retire In 1952 1 0 2 vl Table Number Page Number 26 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Type of Enqployeee Covered Under 269 Plans in Use by Members of National Sales Executives, 1952 104 27 Number of Conpanles Sponsoring Pension Plans for Outside Salesmen, by Age of 269 Flans in Use by Members of National Sales Executives, 1952 105 28 Number of Conv>anles Planning to Sponsor Pensions for Outside Salesmen, by Present Status of Plans, among 261 Members of National Sales Executives, 1952 106 29 Number of Companies Sponsoring Seven types of Enployee Benefits, by Groups of Employees Eligible, among 508 Members of National Sales Executives, 1952 107 30 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Types of Other Employee Benefits Sponsored for Salesmen, among 508 Members of National Sales Executives, 1952 108 31 Number of Cong>anles Not Sponsoring Pension Plans for Outside Salesmen, by Reasons for Refusing Coverage Stated by 261 Members of National Sales Executives, 1952 110 32 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Percent of Sales Force Participating, among 247 Menbers of National Sales Executives, 1952 112 33 By Eligibility Requirements 1 1 3 34 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Nature of the Retirement Fund In Use by 247 Members of National Sales Executives, 1952 115 35 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Method of Deter­ mining Salesmen's Contribution Used by 247 Members of National Sales Executives, 1952 117 vii Table Number Page Number 36 Number of Companlea Sponsoring Pension Plans for Outside Salesmen* by Percent of Sales­ men's Gross Earnings Contributed* among 247 Members of National Sales Executives* 1951 118 37 Number of Cospanles Sponsoring Pension Plans for Outside Salesmen* by Size of Eiqployer's Contribution* among 247 Members of National Sales Executives* 1952 120 38 By Basis for Determining Amount of Benefits Due 122 39 Number of Coopanles Sponsoring Pension Plans for Outside Salesmen* by Adjustment Made for Social Security Benefits* among 239 U* S# Members of National Sales Executives* 1952 123 40 Number of Conqpanles Sponsoring Pension Flans for Outside Salesmen* by Types of Benefit Options Authorised* among 247 Members of National Sales Executives* 1952 124 41 By Types of Limitations on Benefits 127 42 Number of Conpanles Sponsoring Pension Flans for Outside Salesmen* by Number of Retired Salesmen Receiving Benefits from 247 Members of National Sales Executives* 1952 129 43 Number of Conq>anles Sponsoring Pension Plans for Outside Salesown* by Range of Annual Benefit Payments Per Retired Salesman* among 247 Members of National Sales Executives* 1952 130 44 By Significant Advantages Experienced 131 45 By Significant Disadvantages Experienced 133 46 By Iimprovements Desired In Present Plans 134 % viil Table Number Page Number 47 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Nature of Admin­ istration In Use by 269 Members of National Sales Executives, 1952 130 48 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Officials Respon­ sible for Operation of 269 Plans In Use by Members of National Sales Executives, 1952 130 49 By Number of Employees Used to Operate 269 plans 140 50 Number of Companies Sponsoring Pension Plans for Outside Salesmen, by Annual Cost of Pensions per Covered Employee, among 269 Members of National Sales Executives, 1951 141 1 Chapter 1 INTRODUCTION Are outside salesmen "different” from other employees? Or should they be treated as nearly as possible like office and factory vorkers? Do outside salesmen share In the growing demand of Asierican wage earners for economic security measures? Or do they prefer, according to the traditional story, the risks of fending for themselves, independently, aggres­ sively? Do company old-age pension systems destroy the Initi­ ative of sales forces? Or do they strengthen selling efforts? What has been their effect on reorultsmnt, turn­ over, morale, and public relations? If the plans have value, how can they be flnanoed? Can they be fitted to the peculiar circumstances of sales­ men's pay and working conditions? The questions are Included In the scope of this study* It Is believed that factual Informatlon, taken from the experience of many conqpanies, can now be offered to replace the Intuitive judgment which has been relied upon In answering these problems* 2 Pension* >i a Sales Management Problem Success in modern sales management appears to hinge upon the breadth of vision, understanding, and inquis­ itiveness of the sales executive. There is no easily- defined limit to the topics in which he must be interested, particularly if his contact with outside salesmen is close, the nature of his work tends to prevent him from becoming a specialist.