Merrill To Lay Off 400 Brokers In Training Program

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WealthManager's picture
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What's the word at the ML offices?  Have they cut everyone or just the lower quintiles?  What about people who are no longer in the program? --WM

MERRILLBANKER's picture
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They have been cleaning house of our trainees. Most of the remaining POA's are gone and many of PMD's have been released last week. I think it was because they missed their goals. It sounds like many had brought in the assets but the market has taken them below their goals.

WealthManager's picture
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MERRILLBANKER wrote:They have been cleaning house of our trainees. Most of the remaining POA's are gone and many of PMD's have been released last week. I think it was because they missed their goals. It sounds like many had brought in the assets but the market has taken them below their goals. The news article hit the Dow Jones Newswires today at 3:59 today.  It's subscription only so I can't post a link.  There is even mention of reducing newer graduated advisors.--WM

bullinachinashop's picture
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WealthManager wrote: MERRILLBANKER wrote:They have been cleaning house of our trainees. Most of the remaining POA's are gone and many of PMD's have been released last week. I think it was because they missed their goals. It sounds like many had brought in the assets but the market has taken them below their goals. The news article hit the Dow Jones Newswires today at 3:59 today.  It's subscription only so I can't post a link.  There is even mention of reducing newer graduated advisors.--WM
 
Can you cut and paste the article?

WealthManager's picture
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bullinachinashop wrote:Can you cut and paste the article? I am not one to violate copyright laws, especially against my former employer.  Look on the Dow Jones Newswires.

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WealthManager wrote: bullinachinashop wrote:
Can you cut and paste the article? I am not one to violate copyright laws, especially against my former employer.  Look on the Dow Jones Newswires.
 
Rules were made to be broken.  See current financial situation.  Everybody's doing it.  Do it, do it, do it now (said in a Starsky & Hutch way).

albert's picture
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They have done that before during a bad market. Fire all the trainees.  Nice guys. 

Hank Moody's picture
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albert wrote:They have done that before during a bad market. Fire all the trainees.  Nice guys.  You do understand that they are running a business, don't you?

fritz's picture
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Hank Moody wrote: albert wrote:They have done that before during a bad market. Fire all the trainees.  Nice guys.  You do understand that they are running a business, don't you?
 
I know, but what they dont understand is that almost every bigger producer ive seen the main reason he is not doing 500K gross or less is because he stayed in one spot and leached off the accounts from trainees and younger brokers who could not or did not stick it out.  If they get rid of this avenue than the bigger guys will realize they really dont know that much about how to build their business.

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fritz, I honestly think you're on to something. I believe that the business is headed toward the point that only HUGE producers are tolerated at big wirehouses (and will reap the benefits as the attrition mounts. I'm afraid it will be the previously "respected" $500-650k+ folks who will simply join the ranks of the "attritted" (Yes, I made that word up. If the made-up shoe fits...)

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fritz wrote: 
I know, but what they dont understand is that almost every bigger producer ive seen the main reason he is not doing 500K gross or less is because he stayed in one spot and leached off the accounts from trainees and younger brokers who could not or did not stick it out.  If they get rid of this avenue than the bigger guys will realize they really dont know that much about how to build their business.
 
Are you serious?  If say 1 in 20 trainees makes it to year 5, then that one guy obviously knows what he's doing.  How does a senior broker who has built a big business doing 500k+ not know much about building a business? 
 
You're crazy.  They have a big business because they built it.  They were smiling and dialing and winning new clients.    It's not an easy thing to consistently do. 

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YHWY wrote:fritz, I honestly think you're on to something. I believe that the business is headed toward the point that only HUGE producers are tolerated at big wirehouses (and will reap the benefits as the attrition mounts. I'm afraid it will be the previously "respected" $500-650k+ folks who will simply join the ranks of the "attritted" (Yes, I made that word up. If the made-up shoe fits...)
 
Agree with you 100% Think it may take a year or two to play out, i am not even sure the guys calling the shots know it yet since many of them do not know anything about what its really like to be in production..but do think if things continue as is, there will only be a small % of the current people at the wirehouses.  Not sure what happens to the other 90% of the people (Indy, working at call centers etc) that become "attritted."  Think I'll fit into that group eventually, but maybe depends on how the market does, 5000 DOW and I am ATTRITTED

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YHWY wrote:fritz, I honestly think you're on to something. I believe that the business is headed toward the point that only HUGE producers are tolerated at big wirehouses (and will reap the benefits as the attrition mounts. I'm afraid it will be the previously "respected" $500-650k+ folks who will simply join the ranks of the "attritted" (Yes, I made that word up. If the made-up shoe fits...)
 
I don't think this will happen to the extent you do.  I would actually prefer it to, as I would have less competition, but if the wirehouse industry consolidates to only big producers, there would come a point where personal relationships are lost because the advisor has too many clients, older advisors will have retired, and no young guns would be there to prospect and bring in new money.
 
The wirehouses will consolidate and their work force will shrink.  But things are cyclical and some things will never change.  This isn't new...

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Any confirmation of this news story? My personal theory is that ML/BofA wants to shrink the advisor force.  Figured the comp plan will take out allot of lower producers, and was waiting to see what they do with the trainees.

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snag, The one factor that I think has changed (and NO, I'm not saying that it's "different this time").Is that individual investors are now so ubiquitous, that the vast majority of them understand that there are different ways to get their investment advice. I don' t think that firms like Merrill have leverage of exclusivity that they once had. Mostly, I just continue to see FCs with very profitable books being treated as though they are not profitable (enough). The past year+ on the indy side has only reinforced that notion in spades. HUGE wirehouse folks will always kill it, but their model is not the only way anymore.

bondo's picture
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Glad to see Mother Merrill is alive and well!

Hank Moody's picture
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YHWY wrote:snag, The one factor that I think has changed (and NO, I'm not saying that it's "different this time").Is that individual investors are now so ubiquitous, that the vast majority of them understand that there are different ways to get their investment advice. I don' t think that firms like Merrill have leverage of exclusivity that they once had. Mostly, I just continue to see FCs with very profitable books being treated as though they are not profitable (enough). The past year+ on the indy side has only reinforced that notion in spades. HUGE wirehouse folks will always kill it, but their model is not the only way anymore.
Please say "african-americans" instead of "spades." Thank you.

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I apologize for the oversight and thank you for potentially saving me from HUGE liability. 

albert's picture
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Hank Moody wrote: albert wrote:They have done that before during a bad market. Fire all the trainees.  Nice guys.  You do understand that they are running a business, don't you?

Not the kind of business I want to run.  How can a manager take on the responsibility of hiring a trainee and then the firm we just punts  all trainees? The same firm that suggested we should find some trainees? Oh. I am sorry about that career change I encouraged you to make.

I had 2 potential hires. One joined us and the other ML for a higher training salary and some sort of a "safety net". Market got bad and ML fired all the new guys including this guy. Guy that joined us same time ,and we did not just sweep anyone new, is a big producer now and a good broker.

ABOM's picture
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New FA's are a huge put to firms in this bear market. Especially now a days where they have such big salaries spread over almost 3 years. When I was a newbie (only 13yrs ago) my salary was gone after about 6 mo's. And new FA's where profitable a lot faster because they where propritary fund distribution machines (remember B shares)!

In todays fee based world it takes forever for a new FA to be anywhere near profitable for a firm. You guys are talking about cuts - I can tell you in my branch the break even on an FA is around 350k anything under that is costing the branch money.

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ABOM, Are you in Manhattan?

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Personally, it looks to me like wirehouses are going to be a collection of teams. As it is, I know a few teams that operate so independantly of their BD (Merrill in this case), that some of their clients refer to them as the "XYZ Group" rather than being with Merrill. The real powerhouse teams really identify themselves by their team, rather than their BD. And I think this is the wave of the future - you either come on with a team, or you don't come on at all. Now, it may be that you have to prove yourself to the team, but that would be the team's issue to deal with internally. In essence, the team is responsible for the newbies performance and paying them (obviously through their added production or servicing). Not only do I think this is the way of the future, but I think it makes sense. Basically, newbies have to be "sponsored" by existing teams. Just a thought.

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If powerhouse teams establish such a strong brand (a fact about which I have no doubt), why would they then settle for a sub 50% payout?

Swordoftruth's picture
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The business is definitely getting worse.

It's not as fun as it used to be. I get tired of these cronies who mastered there chops in the 90's act like they walk on water. I feel like I'm starting to hate the job.

Anyone notice - there is no good way to leave the brokerage business. It's not like a normal job. The firm has to make you feel like crap on the way out. Firms always blame the brokers when things don't work out. Sure, the young brokers have some of the blame. The firms should take a look in the mirror as well.

Sometimes I wish thing thing would get nasty enough to take a few of the fatcats down too. I don't really wish that because then the economy would be even more horrible. I just get tired of the untouchables.

Sorry for the ramble. I feel like beating the crap out of somebody. Time for the gym.

ABOM's picture
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The old under 50% payout argument.

If FA's look at total comp (benefits, 401k match, marketing budget) not to mention paying salaries of CSA's its a much higher payout. Also you have technology, manager (if yours does not add value than that sucks), ops department, back office, supplies (man that toner adds up), state registrations, legal, postage, real estate, etc...

Im sure the indy guys will retort this but there is a reason you find the biggest producers at big firms. It because they can focus 100% of time on wealth management and growing the biz.

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ABOM, Don't want to fight, but the "old below 50% payout" argument is only "old" because it's always been true. No argument that most HUGE producers are with wirehouses (mostly because they've been in the biz for 20+ years). But, trust me, if you can, that honest-to-goodness net payout to indys is WAY, WAY above 50% (stipulating a floor at around $250k).

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YHWY wrote: If powerhouse teams establish such a strong brand (a fact about which I have no doubt), why would they then settle for a sub 50% payout?

For big producers at almost any firm, the total payout is over 50%. I can tell you, just at Jones, the payout (around 40%), the bonus (on $1mm producer) is probably 7-10%, the profit sharing has averaged in the 4-4.5% range, and you don't pay for your assistant(s), your rent, utilities, software, hardware, licenses, ticket charges, seminars up to $300, basic office supplies (printer, toner, paper, fax, etc.), you don't pay the employer FICA, your assistant's benefits, the employer kicks in for some of your benefits, you add it all up and it compares fairly well to being independant, especially when you don't have to do any of the bookkeeping, billpaying, etc.

The payout is smaller for small producers, so there's more incentive for smaller producers to go indy. But at $1m+ (at all major firms), why would you want to waste your time on all that? The only way you can produce that much as an indy is with a team of people you are paying.

I'm not getting into the indy vs. captive argument, but the payout is not as far apart as some suggest.

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B24. Sure was far apart for myself. I think I'll believe my "lying eyes" over your words. End of vendetta on my part. To each his own.

WealthManager's picture
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Phan2om wrote:Any confirmation of this news story? What?  My word is not good enough?   Here is the headline and author.  Maybe you can find the full story."Merrill To Lay Off 400 Brokers In Training Program"

By
ANNIE GASPARRO

A DOW JONES NEWSWIRES COLUMN

tmoney47's picture
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is this article true?  its very believable.  there was an article in wsj today about b of a firng a significant amount of senior executives.  i'm in the training program but almost out of it. i also work on one of the top teams in the firm.  if this article is true, i wonder how this impacts me and everyone else.  oh well.  i learned when i first started to control what i can control and to not worry about what i can not.  despite what happens, this is still a great time to be in the business especially after the new year.
 

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tmoney47 wrote:is this article true?  its very believable.  there was an article in wsj today about b of a firng a significant amount of senior executives.  i'm in the training program but almost out of it. i also work on one of the top teams in the firm.  if this article is true, i wonder how this impacts me and everyone else.  oh well.  i learned when i first started to control what i can control and to not worry about what i can not.  despite what happens, this is still a great time to be in the business especially after the new year.
 [/QUO
MERRILL TO LAY OFF 400 BROKERS IN TRAINING PROGRAM

Merrill Lynch is laying off roughly 400 brokers in training who have been with the firm between six months and two years.TE]

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Swordoftruth wrote:The business is definitely getting worse.

It's not as fun as it used to be. I get tired of these cronies who mastered there chops in the 90's act like they walk on water. I feel like I'm starting to hate the job.

Anyone notice - there is no good way to leave the brokerage business. It's not like a normal job. The firm has to make you feel like crap on the way out. Firms always blame the brokers when things don't work out. Sure, the young brokers have some of the blame. The firms should take a look in the mirror as well.

Sometimes I wish thing thing would get nasty enough to take a few of the fatcats down too. I don't really wish that because then the economy would be even more horrible. I just get tired of the untouchables.

Sorry for the ramble. I feel like beating the crap out of somebody. Time for the gym.No good way to quit?Dude...save us all the grief...go into the office tomorrow and resign.  That way you there will be no reason to post your whiny drivel here any more.  It's tough out there...we're all working through it.

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This is what happens when a company giving investment advice somehow forgets how to managed their own investments.  Hmmmm....  seems that their is a lot of this going around.  Would you give your hard earned money to an advisor representing one of these companies?

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Yes. I was told there were 1500 POA's in the company but that was before the put a freeze on hiring and it looks like they did start letting them go last week. We'll see if there's more to come.

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ABOM wrote:New FA's are a huge put to firms in this bear market. Especially now a days where they have such big salaries spread over almost 3 years. When I was a newbie (only 13yrs ago) my salary was gone after about 6 mo's. And new FA's where profitable a lot faster because they where propritary fund distribution machines (remember B shares)! In todays fee based world it takes forever for a new FA to be anywhere near profitable for a firm. You guys are talking about cuts - I can tell you in my branch the break even on an FA is around 350k anything under that is costing the branch money.
 
This statement doesn't make sense  to me.
 
How could an office that houses numerous--or even just a handful--producers be so expensive to operate?
 
With EDJ's business model, it baffles me that we've not yet started closing offices. It seems to me that the wirehouse model would be far more economical and easier to maintain during recessions.

Hank Moody's picture
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Borker Boy wrote:ABOM wrote:New FA's are a huge put to firms in this bear market. Especially now a days where they have such big salaries spread over almost 3 years. When I was a newbie (only 13yrs ago) my salary was gone after about 6 mo's. And new FA's where profitable a lot faster because they where propritary fund distribution machines (remember B shares)! In todays fee based world it takes forever for a new FA to be anywhere near profitable for a firm. You guys are talking about cuts - I can tell you in my branch the break even on an FA is around 350k anything under that is costing the branch money.
 
This statement doesn't make sense  to me.
 
How could an office that houses numerous--or even just a handful--producers be so expensive to operate?
 
With EDJ's business model, it baffles me that we've not yet started closing offices. It seems to me that the wirehouse model would be far more economical and easier to maintain during recessions.Don't know for sure, but they might allocate some of the corporate overhead to the branches. Attached to each broker are costs like compliance, registrations, marketing, research, etc... Maybe a BOM can chime in and shed some light on it.

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Borker Boy wrote:ABOM wrote:New FA's are a huge put to firms in this bear market. Especially now a days where they have such big salaries spread over almost 3 years. When I was a newbie (only 13yrs ago) my salary was gone after about 6 mo's. And new FA's where profitable a lot faster because they where propritary fund distribution machines (remember B shares)! In todays fee based world it takes forever for a new FA to be anywhere near profitable for a firm. You guys are talking about cuts - I can tell you in my branch the break even on an FA is around 350k anything under that is costing the branch money.
 
This statement doesn't make sense  to me.
 
How could an office that houses numerous--or even just a handful--producers be so expensive to operate?
 
With EDJ's business model, it baffles me that we've not yet started closing offices. It seems to me that the wirehouse model would be far more economical and easier to maintain during recessions.Jones didn't have to write down (er. lose) 50-plus billion in the subprime debacle.Also, I don't think their branches are as costly to operate as their numbers indicate.

bullinachinashop's picture
Joined: 2008-07-18

Borker Boy wrote:ABOM wrote:New FA's are a huge put to firms in this bear market. Especially now a days where they have such big salaries spread over almost 3 years. When I was a newbie (only 13yrs ago) my salary was gone after about 6 mo's. And new FA's where profitable a lot faster because they where propritary fund distribution machines (remember B shares)! In todays fee based world it takes forever for a new FA to be anywhere near profitable for a firm. You guys are talking about cuts - I can tell you in my branch the break even on an FA is around 350k anything under that is costing the branch money.
 
This statement doesn't make sense  to me.
 
How could an office that houses numerous--or even just a handful--producers be so expensive to operate?
 
With EDJ's business model, it baffles me that we've not yet started closing offices. It seems to me that the wirehouse model would be far more economical and easier to maintain during recessions.
You work from home and get paid peanuts as a trainee at EDJ.
 

jmatt's picture
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Can anyone shed some insight as to how this will impact potential FA trainees/hires?  I've been in 4 interviews in the last 3 weeks with them, meeting with everyone on up to the complex director and it has gone very well.  But this news doesn't sound good.
 
So, are they just kicking the lowest quintile or two or canceling the trainee process entirely until the economy rebounds?

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buyandhold wrote: Borker Boy wrote:ABOM wrote:New FA's are a huge put to firms in this bear market. Especially now a days where they have such big salaries spread over almost 3 years. When I was a newbie (only 13yrs ago) my salary was gone after about 6 mo's. And new FA's where profitable a lot faster because they where propritary fund distribution machines (remember B shares)! In todays fee based world it takes forever for a new FA to be anywhere near profitable for a firm. You guys are talking about cuts - I can tell you in my branch the break even on an FA is around 350k anything under that is costing the branch money.
 
This statement doesn't make sense  to me.
 
How could an office that houses numerous--or even just a handful--producers be so expensive to operate?
 
With EDJ's business model, it baffles me that we've not yet started closing offices. It seems to me that the wirehouse model would be far more economical and easier to maintain during recessions.Jones didn't have to write down (er. lose) 50-plus billion in the subprime debacle.Also, I don't think their branches are as costly to operate as their numbers indicate.
 
BH, I've torn apart my P&L to verify every number.  Other than the infamous "technology" costs (though I've seen the actual breakdown, which makes sense), I can verify almost every single number.  But my background is in accounting, so P&L's are easy to decipher.  They are legit.
 
If I am not mistaken, don't POA's make a pretty lofty 3-year salary at ML?  That's the biggest nut for them.

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BH, I've torn apart my P&L to verify every number.  Other than the infamous "technology" costs (though I've seen the actual breakdown, which makes sense), I can verify almost every single number.  But my background is in accounting, so P&L's are easy to decipher.  They are legit.
 

 
Won't argue with that. I'm not a conspiracy theorist and I don't even look at my PNL.
...
I just don't think we're (new FAs) are the 'put' the some people say. If a firm hires 10 and two make it, wouldn't the future revenue provided by the two succesful ones easily pay for the training costs of the eight who failed? And even the eight who fail bring in SOME clients who provide future revenue and/or provide a boost for the next FA to make it.
 
Using a sports analogy, if the Los Angeles Dodgers wanted to save a few dollars, they could just release all those minor leaguers who don't produce any revenue and just sign free agents. Probably would be a major hole  in their major league team in a few years, though.
 
 
 
 
 
 
 
 
 

Phan2om's picture
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Heads rolled in my office today !

snaggletooth's picture
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Phan2om wrote:Heads rolled in my office today !
 
Out of curiosity, how many and at what LOS? 

YHWY's picture
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Also out of curiosity, what's the scuttlebutt regarding the Client Associates? Re-assigned to retained teams or jettisoned with their FC?

bondo's picture
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Phan2om wrote:Heads rolled in my office today !
 
Am I safe to assume they were not on goal?

chrisrd22's picture
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2 of the 3 in my office were over goal.  3 had to go, so...

bondo's picture
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chrisrd22 wrote:2 of the 3 in my office were over goal.  3 had to go, so...
 
Are you telling me they let go of guys who were on goal, hit their numbers but had not yet graduated POA?  That seems amazing!

ALK80's picture
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Joined: 2008-12-16

i am on track to hit my goals and management says things i have nothing to worry about... did poa's who were on track to meet their hurdles really get let go?

chrisrd22's picture
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Amazing but true.  Also the rest us were basically told our numbers are now measured monthly, no target = no security.  Guess how December numbers look...

Reggin's picture
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i have a friend that has been in production at ML for a year. hope he will be ok.

ALK80's picture
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I know our sales manager has wanted us to always hit the monthly numbers regardless of our 3 month hurdles. My guess is that management is given a bonus from our monthly performance. What really is upsetting is that we just hired a few new PMD's... If they are off the hook because they are in the new program, I would be so pissed... What management should do is take the successful POA's and give them the option to stay in the POA program or enter the PMD program at a similar month. The POA program has proven to be a failure anyway.

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