Sales & Sales Management Expertise

Assessing Why Performers Perform and Non-Performers Fail – The Impact on Revenue, Profit and the Ability to Grow

Tags: pareto principle, close more sales, assessing sales talent, 80/20 Principle, effective sales management, consistent sales results

IT STARTS WITH UNDERSTANDING PERFORMANCE

Let’s start with the problem that you have seen me write about again, again and again. 

Perry Marshall’s book – The 80/20 of Sales and Marketing created a major shift in how I think and go about talking to prospects about their sales team and its ability or inability to demonstrate consistent and predictable sales growth.  Everything, and I MEAN EVERYTHING, starts with an understanding of how your sales team is performing. 

BOB_80-20.png

 

IS THERE A PROBLEM?

This exercise identifies if there is a problem or not.  It really IS that simple.  All you have to do is a little simple math and then answer the question – Is this a problem?

I recently reviewed the productivity of a group we are in discussions with.  Nothing is final yet as the company is in that early step of the process – trying to determine if there is a problem.  To help them in the process, we sign the NDA and ask for their production numbers.  I get the numbers, stack rank them and start applying the 80/20 rule.  I don’t follow the exact procedure; instead, I just take the number of people on the list and break the group into fifths.  If I have 100 salespeople, I end up with 5 groups of 20.  Then, I just do the math.

  • What percentage of the total is being produced by the top quintile?
  • What percentage of the total is being produced by the middle quintile?
  • How much is being produced by the 5th quintile?

 

ACTUAL NUMBERS MAY BE DISTURBING

The findings were not startling in and of themselves because the top two fifths closely resembled what you would expect from the 80/20 rule.  What was interesting (and what would interest you) was the discussion about the bottom two fifths.  When we discovered that the bottom two fifths generated less than 5% of the total revenue, we then got into the compensation/revenue discussion. 

  • How much is 5% of the total revenue?
  • How much in compensation alone is it costing to generate that 5% of revenue?

 

TIME FOR THE “LET’S PRETEND” EXERCISE

I won’t go into all the details, but when we played “let’s pretend”, then everyone in the room got real serious.

  • “Let’s pretend that we fired all of those people in the bottom two fifths, how much would that save in compensation alone?”
  • Subtract the revenue
  • What’s the profit?

I assure that in most, if not all, companies (I suggest you stop reading and do this right now) the profit is significant.  So much so that it starts a really good debate that starts with the question:

Why in the heck are those people still with us?

 

GET RESULTS WITH AN ESTABLISHED PROCESS

The discussion was robust, honest, helpful and productive. And, yes, they all agreed that they have a “have to fix” problem. But my post today isn’t just about getting to a point where you can determine a problem and the severity of the problem, but more about the cost of the approaching the solution the right way.

Understand we don’t get to close all the opportunities we engage in.  We don’t get them all because, at the risk of sounding arrogant, not everyone qualifies (We just failed to make the cut on a recent opportunity because of our commitment to the process).  Our process, just as yours should be, follows a fairly strict set of guidelines. We follow these guidelines because we know we can guarantee results when they are followed. We have experiences from early on in our business when we didn’t follow the guidelines – we didn’t get results and we didn’t keep the relationship.

 

INVALUABLE DATA FROM THE RIGHT ASSESSMENT TOOL

The primary step in our approach is the use of an assessment tool.  Specifically, we use the Objective Management Sales Effectiveness and Impact Analysis (SEIA).  It gives our new clients and us everything we need to impact revenue, profit and growth.  Let me explain by using one of the tools we get from the SEIA.  (see chart below)

SEIA_Data.png

 

This chart represents those people in a sales organization that are succeeding and failing the most.   Assuming for a minute that you don't understand the meaning of the headings, just look at the colors:  Green is good, red is bad, high numbers good, low numbers bad.  The first column identifies if the people are performing to goal or not.  The only anomaly in the group is the third person from the top.  I inquired about this and there are two pieces of information that are good to know. 

  • The data we collected on performance was based on the previous years sales.
  • The manager answering the question “Is this person performing as expected” answered the question for the current year.

So, what we have is someone that performed exceedingly well in one year and is now failing.  What the graph helps the manager do is have a very significant discussion on “why” there is a change.  I won’t go into all the details as to what that discussion should sound like, but now the manager has some interesting data to look at and digest in order to help frame the narrative of the required intentional coaching session to be scheduled. 

 

TIME TO GET REAL - THE BOTTOM LINE

What I believe is most important is to get arms around the total picture provided by hard data and assessment data.  What we know is the following:

  • Coaching the top group will be effective because they are coachable and have the will to sell
  • Investing in the bottom group will bring little or no return:
    • They lack desire
    • They lack commitment
    • They have a poor outlook
    • They won’t take responsibility
    • And they are not motivated to succeed in selling
  • You can assume (because I did further analysis) that at least one of the other fifths in the organization looks like the top group and one looks like the bottom group.
  • The one fifth that looks like the top group may not hit the top ranking because they lack tenure in the company or in the business.
  • There is at least one other group that looks like the bottom quintile. They may or may not be new.  In this case, the bottom quintile we are illustrating is NOT at the bottom of the ranking because they are new. They are at the bottom because they suck at what they do!
  • The question(s) you have to ask about the entire team is:
    • Did I hire them this way?
    • Did I make them this way?
  • This applies to every quintile that you look at.

 

So, getting back to the title – The Impact on Revenue, Profit and Growth - consider the following:

  • What is it costing you to carry those that are failing to perform – in real dollars and lost opportunity? You MUST calculate the cost as if you were reporting this to the board!
  • What would the impact be to the bottom line if you fired them all today? Certainly, sales would not suffer.  Also, you have to consider that if they are this bad at selling, what else are they bad at and what is that costing you?
  • What is the financial impact of those that looked like your worse performers but have exited over the last 12 to 24 months? Those that you fired or exited? What did that cost you in time, training, recruiting dollars, on boarding, compensation AND lost opportunities?
  • How many training dollars will you pour down the rat hole attempting to fix people that are un-trainable or un-coachable? What impact could you have if those resources were redirected to sales management improvement, more focus on developing new hires with skills and true potential, recruiting talent that mimics your current top performers?
  • What is the impact of keeping non- and low performers on the team? How do those in the middle react to the stack ranking knowing that those on the bottom are not at risk of losing their jobs? Why should they worry?

 

Okay, so maybe I’ve beat this drum enough – you got the point.  What’s the solution, what am I getting to, how do you (as the person responsible for revenue and growth) make sure you are making wise decisions when it comes to hiring, managing and developing talent?

 

DON’T GO IN BLIND

Think “doctor”.  I just completed an abdominal biopsy.  Prior to the procedure last Friday, I had a CAT scan, a Pet Scan, Ultrasound and another CAT scan plus results from the same test taken a year ago. 

I’m glad Dr. Max didn’t go in blind.  It was tough enough even with all the data he had.  Without it, there would have been virtually no chance to get it right.  That’s the point. Don’t go in blind.  Assess your talent, assess your new candidates, know what makes your current successful people successful and know why those that are failing are failing – DON’T REPEAT.

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The Best of the Best, Sir!

Tags: managing salespeople, hiring better salespeople, Geoff Smart, Randy Street, recruiting sales talent, 80/20 Principle

In a scene from Men in Black, Will Smith’s character, Agent J, asks, “Why are we here?” (He is in a meeting room with the head of Men in Black, Agent Zed, along with several other recruits all from various branches of the military.)  Agent Zed asks one of the recruits to answer the question.  The young recruit stands and declares, “We are the best of the best, SIR!” (link to watch youtube video)

Isn’t that what you should be looking for when recruiting sales and sales management talent?  Yesterday, I wrote a post about hirebettersalespeople.com.  In the post, I mentioned the book, Who.  In that book, Geoff Smart and Randy Street suggest that you create a scorecard to help in the evaluation process.  The scorecard is supposed to be used to find that someone who has a 90% chance of doing what only the top 10 salespeople can do.  I think that is a stretch and unrealistic.

Now, to be fair to the authors, I believe they do a nice job of explaining that an “A” player for a company in New York is probably different than an “A” player for a different company in Manchester, NH.  In other words, not all “A” players need be the same nor are they created the same.  But, aside from that, I still have an issue.

If you look at many great “A” players in sales, the arts or in sports, they just didn’t show up that way.  Many have been groomed and developed over many years to become that “A” player.  The key is to look for the “A” DNA in someone.  We know what that DNA is.  (Click here to request a sample of the ideal fit candidate analysis)

What I believe makes sense is to look for someone that has a 92% chance of success at helping to contribute to the 96% of your results.  Let me explain.

You may or may not have read other articles I’ve written in the past about the 80/20 of the 80/20 and Perry Marshall’s book – The 80/20 of Sales and Marketing.  If you follow the method I’ve described (based on Marshall’s book), you arrive at the following in Figure 1:

8020-talent-chart.pngFigure 1

If you have revenue of $20,000,000 generated by 50 salespeople and then conduct the 80/20 of the 80/20, you discover that $19,200,00 of the 20,000,000 (96%) is generated by 18 of the 50 salespeople (36%).  Based on this, I believe that your best recruiting strategy is to find people that look like your top 36% or have the same DNA as that top 36% that are generating 96% of your revenue.

I’m sure the authors of Who would question the wisdom of this.  “Why…”, they might ask, “would you settle for salespeople that are less qualified than those that are at least as good as your very best?”

It’s not a matter of settling.  It’s a matter of understanding the today’s marketplace and understanding that talent has to be developed

First… the market place:

There has not been a single prospect or client that I’ve talked to in the last 5 years that has not shared with me the challenge of finding, recruiting, hiring and successfully on-boarding new talent - with the biggest challenge being the “finding.”  There are a couple of reasons for that huge challenge:

  • Most companies don’t work at it consistently and so they suck at it when it comes time to recruit.
  • There isn’t a process/system in place that utilizes filtering processes to attract the right candidates.
  • The pool of available candidates is smaller today than it was with the boomer generation.
  • Those available in the candidate pool today have a tendency to find jobs other than sales.
  • The un-steady economy has kept experienced salespeople from seeking other opportunities for fear of “last in, first out”.

Next… talent development.

As stated above, talent just doesn’t fall off of trees and, unfortunately, everyone in your market is vying for the same “A” talent.  If you cannot offer the same compensation as some of your competitors to attract and hire “the best of the best”, then you have to make great selections from the talent that is currently available.  In order to do this, you should have a very good understanding of what your talent looks like. Specifically, you should start looking at the 36% of your current talent that is generating 94% of your results and stop looking for and hiring people that look like your bottom 64%.

  • Identify the results being generated by the top 36%.
  • Identify the activities and behaviors of this top group.
  • Identify the following:
    • Will to sell
    • Sales DNA
    • Figure-it-out factor
    • Trainability and coachability
  • Determine if you have the talent in the management role to:
    • Coach
    • Motivate
    • Manage performance
    • Mentor, grow and develop people

I grew up on a farm where we primarily grew peaches and blueberries.  I just visited the old homestead and, though many things have changed, one thing has not changed.  In the farm acreage, there are various plots of blueberry plants.  Some plots contain plants that are mature enough to be harvested while others have plants that are still being developed and grown to produce.  In the nursery plots, there are plants with solid DNA that are being cultivated, fed and cared for so that, at the right time, they can be productive.  The same should be done with the talent in your organization.

For further assistance, call us at 513.791.3458 and ask for Alex – our expert at hiringbettersalespeople.com. 

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Wacky Idea for Sales Management - Terminate Underperformers NOW!

Tags: hire better sales people, Sales Tracking, sales management, performance management, 80/20 Principle

I’m finally going to finish the book, American Icon.  It's the story of Ford and how Alan Mullaly helped the auto dealer regain its swagger. Time after time, Ford and Mulally had to make tough decisions on underperforming business units and automobiles. If the car or unit wasn’t performing, if the buying public was no longer buying and if the manager of the unit wasn’t getting progress or growth, they got cut.

ford_logo

The first time I applied the 80/20 rule was when I was asked to attend a meeting with Anthem Blue Cross Blue Shield of Ohio. I was going to conduct a workshop with the reps in the state on how to more effectively build productive broker relationships.  One of the principles of the process is to identify (using the 80/20 rule) those brokers that were getting most of the business and those brokers that were licensed but essentially doing nothing.  The idea was to spend more time with those doing more and less time with those doing nothing.

Jim Barone, sales manager for Anthem in the state of Ohio at that time, provided me a list of all the wholesalers in attendance. In addition to the list of names, there was information about their production year to date. Just for the heck of it, I applied the 80/20 rule to his group to see what I would come up with.

The group consisted of somewhere between 25 and 30 wholesalers.  When I did the math, sure enough, Pareto’s principle held true. About 7 of the wholesalers were generating about 80% of the premium.  When I took another piece of the remaining group, I found that about a total of 12 people were responsible for over 90% of the total premium. When I arrived at the meeting, I found Jim and shared this information with him.  His response was something like “holy crap”.

The problem that Jim had (and the problem that anyone has in the channel development business or in business where you have to have representation wherever you have a "branch") is that there is a belief that you have to have a body in the seat where a desk is. Twenty years ago, when I was working with companies like Anthem, that was true.  With technology today, I’m not sure it is anymore.

Here’s my wacky idea for sales managers: Terminate those bottom 20% that are not producing.  Not in 30 or 60 or 90 days.  Right now. Ohio is an employment-at-will state. Meaning that, unless you have a contract for a stated specific time period, an employee can be terminated without cause. If you have to, give them 30 days to find a new job, but get rid of them. They are costing you time, money and effort.

Now, start replacing the bodies. But don’t replace them with high cost sales people that won’t be any better than what you just terminated and take a long time to break even.  Instead, look to your top producers and those in the 2nd and 3rd quintile and ask yourself this question: How much more effective/productive could this group be if I provided them with the right sales support?

Why would you do this? There are several reasons, but the one I’m thinking of is this - to build your own sales team instead of trying to draft one.  Think about how hard it is to find really good, solid sales people that can have an immediate impact on your current sales people.  Think about all the "stuff" you’ve heard from your top tier sales people about support, paper work, meetings etc.  Yes, I know they are excuses, but suppose you put an end to them?

Suppose you went out and found people that were talented at account management and farming books of business? They know the technical side of the business, but maybe they aren’t great at hunting, networking and developing new relationships. Or, maybe they can become that, but they are new in their professional careers and just need exposure and experience to sales!

To do this, you need to do more than just go out and hire them.  You have to have systems and processes in place and then make sure your sales people use the support talent and stop making excuses.  You have to have a development plan for these new hires so that they learn selling. You have to make sure you have data collection systems in place so that you can more effectively coach the sales people you have today that are not reaching their potential.  And, you have to have the career advancement process in place so that your new support people know what they are aiming for and your experienced sales people don’t think that the only way to advance is to become a sales manager.

I know this is wacky.  But how wacky is it to keep 33% of your team that represents less than 10% of your revenue?

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Non-Performing Sales People and What to Do With Them

Tags: hire better sales people, Sales Tracking, sales management, Sales Coaching, 80/20 Principle

I have 30 years tenure with my wife, Linda. “Tenure” may not be the right way to put it, so I’ll say it the way I do when we celebrate our wedding anniversary – 30 years of “marital (I pronounce it myrtle) bliss”. And the future is looking really good for me - based on how Linda makes decisions about when to keep things and when to discard them.

tony-linda-beach

You see, Linda hates to get rid of stuff that’s working. Except for coffee makers. She is very particular about how her coffee tastes and how long it takes the coffee maker to make the coffee. Aside from that, as long as an appliance, an article of clothing, a piece of furniture is working, is functional, is not broken – she keeps it. It doesn’t have to function as well as when it was purchased; it just has to function well enough to avoid being replaced by a newer, better model.

I celebrated by 60th birthday last December. For my birthday, I wanted a new wide screen 4k flat screen. I pained her to get rid of our 16 year old, boxy big screen Toshiba. But it still worked. The picture was… well, it was a picture from a 15-year old TV that had the “3 guns” that created the picture on the screen. It was connected to the digital box from the cable company and provided us with all the TV entertainment we needed.

The way I see it, as long as I am functional, I’m in good shape. When things stop working in our house or we finally decide that we need to “get rid of something”, we just put it out by the street in front of our house and, depending on what it is, you can generally count on it being gone before the next morning. So, as long as Linda doesn’t ask me to sit out by the street, I figure I’m good.

What does any of this have to do with you and your sales people? Plenty.

Who do you have on your team that’s just getting by? Yes, they are functional; yes, they produce some numbers that contribute to your overall success; yes, they might manage books of business that may leave if you fire them; and, yes, you need a warm body in the seat. But, does that mean you should keep them? Does that mean you shouldn’t take them to the shop for some upgrading? Does that mean you should tolerate their lack of performance just because the team, as a team, is hitting its numbers? The answer to all three questions is no, no, no.

You know the 80/20 rule right? (Perry Marshall’s 80/20 Power Curve – Must see!) Do you know the 36/96 rule? If you double click on the 80/20, that is what you get. Let’s suppose you have 100 sales people generating 1,000,000 of something. 20 of your salespeople are responsible for generating 800,000 of something. If you apply the 80/20 rule to the remaining 80 people, you get an additional 16 people for a total of 36% of the sales team. These additional 16 people are responsible for 80% of the remaining 200,000 of something – 160,000. Add that to the initial 800,000 for a total of 960,000 somethings or 96% of the total.

36% of the sales team responsible for 96% of your results. What the hell is everyone else doing and why are they still with you?

I understand a couple of things about a couple of things. If you have these 100 people and some of them are sitting in chairs in rural Ohio, Indiana, Wyoming, New Mexico, etc., then you need someone there. You just cannot eliminate the only person working the location, but that doesn’t mean you should not have someone there that isn’t hitting their goal. Now, forget about the rural salespeople for a minute; that doesn’t explain why you keep others that are in the heart of metropolitan areas like Indianapolis or Columbus.

So, here’s what you do:

  1. You get these underperformers in a room (if possible) and you show them the data, show them the results. You then ask them to answer the question - “Why should you stay employed here?” Make them all answer the question. Tell them that their answer isn’t good enough and that, starting today, this is how things are going to work.
  2. How things are going to work – everyone must commit to a sales productivity number by going through the “extra-ordinary discussion”. (Call Jack in our office and he’ll explain that to you or text me at 513-226-3913, Subject Line: “Extra-ordinary” and I’ll give you a call. Please provide your name).
  3. Build a success formula based on that target number.
  4. Build huddles to start collecting relevant sales activity information.
  5. Start providing data back to them.
  6. After 60 days, review your data and, to each individual with whom you are working, report back the business intelligence you’ve gained because of the data.
  7. Put the people that are failing to perform – either sales activity or sales results – on a disciplined coaching schedule so that you can correct the one or two problems contributing to the lack of results –effort and/or execution.
  8. After an additional 60 days, if you do not see improvement, ask them to go sit out by the street.

 

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