A few months ago I posted a blog on the dangers of getting sales retainers wrong.
Are we paying salespeople not to sell?
This issue has come into closer focus in recent times and have raised a number of important factors that were not clear in the past but perhaps should have been. The biggest issue is;
Why does management persist in making this mistake even when they know it undermines their sales efforts?
In the past I thought that the main reason was the desire not to rock the boat with the existing sales team as a change may see some of the team walk. The argument being that you can’t dramatically change how a person is paid at the drop of a hat and expect that there will be no consequences. The problem with this is that you can’t implement a new remuneration policy with new sales recruits while the rest of the team are on the old "high retainer" package. To do so would immediately demotivate and devalue the new recruit. This meant that many companies just didn’t change at all; the pain simply wasn’t enough.
Since writing that original blog, I have encountered this problem with a number of clients each of whom have chosen to address the issue in different ways, which has uncovered a whole new understanding of ways in which to bring the new remuneration structure into being but each with it’s own unique problems. I’d like to bring you two of these stories (one this week and one next).
The simple learning that I have picked up from these experiences is that implementing this type of fundemental change to sales remuneration is HARD! No matter what the long term benefits, in the short term it requires a great deal of courage and determination from the CEO and the Sales Managers.
Case Study 1:
Our client had a long established business that sold services to clients in a significant niche market. These services were quite extensive and were all on long term contracts. The problem was that new sales had stagnated and none of the team members were hitting their sales targets. We evaluated a sales team earlier this year and found that almost every member of the team possessed poor sales skills and had many hidden weaknesses but rated highly as account managers.
When we looked at how they were remunerated we found that they had a very high base salary, one that most people could live on quite comfortably and that their performance based component was based on a percentage of sales revenue generated by their existing accounts on an ongoing basis.
This showed our client that not only were they paying their salespeople not to sell by paying a high base salary with no performance hurdles, they were actually discouraging their salespeople from actively hunting for new business while rewarding them for account managing the existing business. In short, their sales team were doing exactly what they were being paid to do, not do what the company strategy wanted them to do. The only answer was for the remuneration to reflect their strategic intent.
This is where the senior leadership of the company showed great courage and commitment to their objectives. They worked with us to devise a remuneration structure that would encourage and reward the acquisition of new clients while separating the roles of salespeople from that or account managers.
Under the new regime, those salespeople that hit their sales targets would earn significantly more than they could under the existing model however their base salary was reduced by 40%. The upside was all in the performance elements of their package.
The account manager packages on the other hand offered overall remuneration less than the existing sales salary but was not focused on generating new business. It had a smaller performance element reflecting the importance of retaining existing account but didn’t require any active selling.
The entire sales team was offered the opportunity to remain in their current sales role and move to the new sales remuneration structure or take on one of the new account manager roles at a reduced overall salary. Only two out of ten salespeople chose to take the new performance based sales package. Some people left while the majority chose to become account managers for less money rather than having to “Back Themselves” as sales people.
From a management perspective such a move, while beneficial in the long term, took a great deal of courage. To have to rebuild a sales team is not easy however to achieve the long term objectives of the company, they saw this as the best way forward.
We were then given the task of recruiting to rebuild their national salesforce. Once again this took a great deal of courage and hard work. No longer would they have a pool of literally dozens of applicants for a sales role with a high base salary and almost no accountability through performance payments. The new payment structure meant that they had to find people who met all of the tough sales criteria that comes with proven sales success and were prepared to accept a base salary that they could barely live on with the guarantee that if they hit their targets they would make an outstanding living.
The first problem that this creates is attracting such a high quality salesperson. People with these qualities are in strong demand and you need to offer more than just money to get them. Once you have qualified them, you need to work fast to really attract them to your company and lock them in without delay.
You also have a reduced pool of candidates which means it can take longer to find the right person. This can be frustrating but is often unavoidable if you want the right outcomes.
The third and most vital challenge for the client is how to manage a high performing salesperson. In this case they hadn’t seen a top sales performer before and found these new salespeople a challenge to manage. The sales managers had to undertake training that would enable them to motivate, coach, challenge and hold these new team members accountable while making their jobs rewarding in the long term.
As you can see, a fundimental change of this nature requires bravery, persistence and commitment but the results are worth it. The early signs are that this new approach is reaping early rewards and will continue to get better for the company and the new sales team.
Next week I will tell you about the second company with a similar problem, how they chose to approach it and what their outcomes were.
Gary Delbridge
I have been doing a lot of work lately on strategy. Given that a great deal of my work generally is more focused on Sales Force Development, the opportunity to go back to my strategic roots is quite rewarding.
What drew me back into the area of strategy was initially a request by a very good friend who was planning a strategic workshop for his leadership group. As I’ve been involved with his company for a number of years he wanted me to facilitate the workshop and give an outsiders perspective on what they could do differently to achieve their long term goals. This workshop is an annual event and while they had established clear objectives for the company for the past year and had made some advances, they were still a long way from where they should have been.
The one thing that really stood out at the workshop was how easily everyone can get so caught up in the day to day operational issues of their jobs that they simply don’t have the time to do what they need to do to achieve their long term objectives. Their management meetings were focused on these operational issues and their strategy was in fact never discussed.
This came up again yesterday when another dear friend wanted to talk to me about their forthcoming Strategic Planning Workshop and how to get the most out of it. She explained to me that the team was totally committed to building the organisation but once again they just couldn’t seem to find the time to do the things that they needed to do to achieve their goals, either in their own jobs or in their Executive Meetings. I asked about the structure and tone of their meetings and found that it was all about the day to day challenges of running the business instead of their progress towards achieving their goals.
Both of these discussions highlighted to me why most businesses find it so hard to achieve what they know their business is capable of achieving; they get caught up in treating symptoms of their problems rather than seeking the underlying cause. I went back to the teachings of Demming and his principles of Total Quality Management where he identifies how much time is wasted in organisations through rework brought about by poor systems.
In the workshop that I referred to above, we found that up to 50% of the work done by some of the leadership team was in fact waste. That’s not to say that it wasn’t important, but it was only important because the systems were so poor that everything had to be checked and even double checked before it could go out. This is rework which in turn is waste.
The team came to the realisation that they needed to fix their systems and take the waste out of their jobs if they are ever to have the time needed to focus on their strategic goals.
Have a think about you and your job. Are you focusing on fixing the underlying causes of problems or are you treating the day to day symptoms as they arise. Only when you fix the cause thus stopping the problems from ever happening again will you have the time and energy to really grow the business.
Next week I want to share with you some of the other important outcomes from these strategy discussions, in particular how you can get so much more out of your executive meetings.
For many years in corporate life I was a great proponent of “Systems Thinking” which looked at the underlying cause of problems and how any solutions had intended and unintended consequences. One of the primary underlying principlesof Systems Thinking is to avoid treating symptoms as, in all likelihood, you may temporarily feel better but the underlying cause of the problem remains and it just might kill you. Another problem is that you tend to become addicted to symptomatic solutions, letting the disease grow uninterrupted.
This principle has come to the fore a number of times recently where we have been advising clients who are looking at upgrading their sales forces. The common element is that they look at the lack of sales performance from their salespeople and think that by changing the salespeople they will get a better outcome…the fact is that generally they couldn’t be further from the truth.
Underperforming salespeople is normally a symptom of a much deeper and more ingrained problem with organisations. CEO’s should be looking at many primary causes of poor sales performance in addition to the quality of the salespeople. These include:
- Lack of sales leadership
- No accountability
- Salespeople left to their own devices.
- Accepting excuses for a lack of results.
- Poor or non-existant training
- The wrong remuneration structure.
- Inability to differentiate value for your product or service
- A corrupt corporate culture
etc.
It is important when looking at problems with your sales organisation that you understand that cause and effect are unrelated in time and space; looking at the symptoms alone won’t show you the cause of the problem.
I was working with a salesperson recently in preparation for an important sales call they are making the following week. He outlined for me his strategy for the meeting and what the outcome was that they wanted. In listening to him talk, a number of warning bells started going off in my head.
The first alarm went off when he said that he would focus on presenting what the company could do for the prospect and educating them on the benefits of the companies services.
The next alarm started ringing when we discussed the outcome that he wanted from the meeting and it came down to getting another meeting to discuss the offering in more detail as we “Only have an hour” for this meeting.
Finally all the bells went off when he said that he would ask the prospect how they wanted to proceed from here. It became clear to me that this salesperson was unlikely to gain any real commitment from this sales call while he would in fact consider it a hot prospect within his pipeline. I was in no doubt that this salesperson would say they had a long sell cycle and that they must educate their prospects; in his opinion if he did this he would be doing his job.
I’m sure that many of you reading this will agree with the approach taken by this guy as it is probably what you would do. The problem is that it will most likely not end in a sale. You will find all sorts of reasons to justify why it didn’t end in a sale but these will be excuses.
The elements of a successful sales process that this guy was missing were:
- The prospect needs to emotionally engaged in order for them to make a purchasing decision. People buy with emotion and justify the purchase with logic.
- He needs to ask meaningful questions that will uncover the criteria that the prospect will use to make a buying decision i.e. what’s important to them about fixing the problem that his product or service will address. He needs to dig deeply to uncover the real reasons that will motivate the prospect to buy (one thing I guarantee is that it won’t be logical).
- He needs to present his product or service only after he has established the criteria that the prospect will use to buy and ONLY show how his product or service will address these criteria.
- He needs to ask for a commitment once he has gained agreement that his products do in fact meet the clients criteria.
Success in sales comes from understanding and executing sales strategies that are aimed at uncovering how and why prospects will buy and using this information to gain a commitment from them. There’s no doubt it is easier to stay within your comfort zone and simply do a presentation and not create the opportunity to close the sale but it wont succeed. You get a bloated pipeline with opportunities that never or rarely close.
Sales Training is one of those “motherhood” things, you know that you need to do it but how much of it actually sticks? We all know that good sales training is not cheap which makes the value proposition and even bigger issue.
The core of our business is evaluating the effectiveness of sales people and sales teams. This invariably leads to the need for some or all of the sales team to undertake training. How effective that training is depends on three things:
- Whether the person is actually trainable; do they have the desire and commitment necessary to grow and develop as a salesperson.
- Having a clear understanding of the areas of weakness and being able to address these areas in the training.
- The effectiveness of their sales manager in embedding the new behaviours following training by coaching to the new behaviours and holding the salespeople accountable for their performance.
The OMG Evaluations provide us with the information necessary to address the first 2 critical issues however the third, that of embedding the new behaviours, has been our biggest challenge. We have been searching for a way to ensure that training worked and that our clients got real “bang for their training buck”.
In June last year I saw what I believed to be the answer to this problem at a Learning & Development conference where Michael Papay from The Fort Hill Company spoke about their “Learning Transfer Management System” called the Results Engine. This is a learning embedding process, supported by fantastic software, which ensures that training participants and their line managers are totally engaged in the embedding of new behaviours from training and are held accountable for the outcomes.
I found that this system is used by many of the worlds largest companies and it has seen a massive increase in the benefits obtained from training programs. In real world terms it ensures that the number of people that achieve meaningful results from training increases from 1 in 7 to 6 out of 7.
We are now working with The Fort Hill Company to introduce their programs here to support the sales training that our clients undertake. To us their is no greater value that we can offer to our client than delivering salespeople that really can sell and training that really works in the long term.
Imagine business life with sales rolling in as they should? This requires a top sales team operating at peak performance. A question to CEO’s, what then is the most important predictor of business success?
How many CEO’s would have answered the most important document in the company is the sales pipeline? How does the sales information in the pipeline support this assertion??
Usually I find sales pipelines suffer from “bloat”. Huge numbers are quoted that are never achieved, it is usually a document to demonstrate that the world is fine, don’t worry.
To make sure your company has a dynamic pipeline, it requires “hunter(s)” to fill it, “qualifier(s)” to establish feasibility of each opportunity, (it’s not that I do not believe what the hunter has told us) and “closers” to assure that the promised business is generated.
This is particularly important in long lead time sales processes. Do not expect the “hunter” to monitor progress for any period of time, they are too busy chasing the next lead.
If you have a self centred Sales Manager then you need to take a close look at their beliefs, actions and outcomes. Are they self focussed or sales staff focussed?
As a result, if you have a “prima donna” the sales staff will not get what they need in terms of motivation, recognition, direction, support, coaching and accountability. There simply is not enough “oxygen” in the room for everybody involved.
Worse, when the sales team perform, the manager takes the much of the credit if not all. When the sales team fails, the sales team may even get the blame.
I find talking to CEO’s about Sales Management performance as a coach varies enormously. Some think the Sales Managers role is to do the paper work and present reports while others expect them to close major deals and everything in between. Let us consider the Sales Manager as a coach.
A football coach has a much clearer defined role, they review last week performance, they intimately know how each of the team members is performing as they prepare for this week’s game. At no time does the coach expect to run onto the field and outperform any team member.
There are parallels for the role of the Sales Manager as a coach. Every day they should coach the team, discuss the upcoming prospects with a pre call strategy discussion and follow up with a post call debriefing. The Sales Manager in their role as a coach manages people on the most important event in the company – the sale! Life is sales, the rest is details.
Dave Kurlan the world authority on sales after 25 years of evaluating the performance of over 500,000 Sales Managers and Sales Staff has released further outstanding information (see link)
http://www.omghub.com/salesdevelopmentblog/tabid/5809/bid/12318/Latest-Sales-Recruiting-Breakthrough-Download-the-New-White-Paper.aspx
- 20% of sales managers have need for approval – the need to be liked – and shy away from confrontation.
- 30% of sales managers accept mediocrity, and tolerate poor performance
- 61% of sales managers aren’t inclined to upgrade their sales force.
- 60% of sales managers have less than 65% of the attributes of accountability.
CEO’s are these the attributes of your Sales Managers in charge of your most important Department at a time when sales are so difficult to achieve?? If you would like to discuss the situation, please give me a call.
I recently spent the morning with a company that has let their sales culture and performance decline into such a terrible state that it had put the entire company at severe risk. In my discussions it was clear that the company knew that they had major issues more than 18 months ago but chose to handle the problems internally and waited until they were on the brink of collapse to bring us in to see if we could “save” the situation. Had they called us in when they first identified that they had a problem, they could have avoided massive pain and retained much of their now lost market.
If you have a sales problem, it is no good just acknowledging that it exists; this won’t change anything. You must know why it exists and, more importantly, what caused it in the first place. Only then can you start to fix the problems.
It is important to understand a basic rule; “the person or people that caused the problem are not the ones that can fix it.” These people will have underlying behaviours that have led to the current situation; behaviours which need to be identified and addressed before meaningful change can occur.
When a different strategic approach is needed, you need to remember that “hope” is not a strategy: hoping that your current team can “pull up their socks” or hoping the sales manager can get the team firing. The fact is that there needs to be material change in any number of key areas for there to be a different outcome.
All too often we see management attacking the symptoms of poor sales performance:
- Cutting prices to become competitive
- Paying their salespeople more or introducing short term incentive programs in an effort to motivate them
- Putting their salespeople through a sales training program
- Threatening the team with dismissal should they continue to underperform
- Spending more money on marketing or advertising, etc
This is like treating a heart attack with an aspirin; while you might get some very short term pain relief, unless you treat the heart attack itself you will still die.
As the CEO you need to be asking much deeper questions:
- Why is price an issue for our products?
- Why are the sales team underperforming?
- Why has the Sales Manager been unable to dramatically improve performance of the team?
- Do I have the right people in sales roles?
- Can my salespeople change from order takers into Hunters and Closers?
- Which members of my team will improve with training and by how much?
- What type of sales person do I need for my specific product, service and market?
- Why are my competitors successful?
- Do my sales systems and processes support the sales organisation?
- Is my sales remuneration structured correctly? ETC.
These are the questions that CEO’s need answers to and they won’t get them from their own people. Their sales Manager can’t answer them as they themselves may well be a major part of the problem. The salespeople can’t answer them as it’s not in their best interests to rock the boat. The fact remains that the CEO needs these questions answered if there is to be meaningful change to the revenue and profit outcomes. These are the questions we are now answering for this client.
