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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Growing Sales and the Peanut Butter & Jam Sandwich

Tags: pareto principle, sales performance coaching, sales productivity, salesforce evalutation

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Okay… so I know you might be thinking, “What the heck does growing sales have to do with a peanut butter and jam sandwich… AND why jam and not jelly?”

Not “jelly” because… well, I really don’t like jelly. I grew up with my Mom’s homemade strawberry jam.  And, for years, I would just eat jam sandwiches because I didn’t like peanut butter. But then…

THE SALES GROWTH & PB&J CONNECTION

In 1973, I was offered a full scholarship to play football at Boston University. I accepted and signed my letter of intent but, later in the year, that coaching staff left BU and went to UConn and so I followed. 

As a senior offensive lineman at Hammonton High School in New Jersey, I was 6’4” and 170 lbs. on a heavy day.  I was instructed to consume more calories, lift more weights and ingest lots of protein to build muscle.  Peanut butter was now part of my dietary intake.  During the summer leading up to my freshman year at UConn, I would consume 10,000 calories a day.  That included breakfast and then 5 peanut butter and jam sandwiches between breakfast and lunch.  So, there you go.

As any peanut butter and jelly/jam aficionado knows, when making the perfect sandwich, you want to spread both ingredients all the way to the edges of the bread.  No bread uncovered.  You spread peanut butter on one slice, jam/jelly on the other slice and then smash the two slices together so that the combination of ingredients oozes out of the sides of the sandwich.  Then, just cut in half and eat!

The first time I heard the expression, “Let’s not spread our training program dollars around like peanut butter” was from George Emmons, then president of the community bank at Key Bank.  I asked him what he meant by that.  He said, “Tony, we have limited resources to get this done and so we have to be judicious in how we use our dollars.  We have markets like Seattle that are our highest potential growth market and then we have a market like Vermont.  Vermont is a great market for us - very strong - but we already enjoy sizable market share there, so our ROI isn’t going to be as great.   We need to invest our dollars where we get can get our greatest return.”

And there, my friend, is the connection between building a sales growth sales team and making a peanut butter and jam sandwich!

Now, on to growing sales …

“PEANUT BUTTER” AND YOUR SALESPEOPLE

When you think about your sales team, the collective book of business and the market pool, you have to be more intentional in your investment of time money and effort.  Not all of your salespeople are equal, not all of the clients represented in the book of business are equal and not all of the businesses/people/prospects that are available in the market place can bring you the same revenue, value or profit.  Given the variability, you cannot (and should not) spread your resources like peanut butter.

In my previous articles and blog posts, I’ve talked about the 80/20 principle - the simple concept that 80% of your results come from 20% of your efforts.  You can substitute efforts with people - salespeople, client people, people in the market, etc.  Having said that, I highly recommend you follow Perry Marshalls process of the 80/20 of the 80/20.  Simply stated:  Do the 80/20 math again with the remaining salespeople, clients and prospects.  See below as an example of how to segment a revenue book.  (click here to read the detailed article about the 80/20 of the 80/20).

pbj-chart.png

I believe the chart is easy enough to follow.  The key things here to recognize are:

  1. About 96% of your results are coming from just 36% of your team
  2. That 36% isn’t tapped out – the top 3 might be, but if you add admin and support staff, you can probably get them to double productivity – spend “peanut butter” differently for this group than for the rest of the group.
  3. You have great opportunity/potential in the 2nd group of 80/20 – the next 3 salespeople (next quintile). Lots of “peanut butter” (intentional coaching) here in training, development, management, marketing/lead generation resources.
  4. The last quintile - the bottom 3 people - are not going to get you to the mountaintop based on their current productivity. Unless they are brand new, they not only get zero “peanut butter”, but they also get the opportunity for alternative employment.
  5. Some of the people in the bottom quintile might be there because they are new to the organization, so don't’ abandon them; however, make sure you have a very intense on-boarding program to make sure they climb into the next quintile and beyond quickly. Lots of “peanut butter” here.
  6. Your middle quintiles - salespeople in the middle 33% of the company - need to get lots of attention (“peanut butter”) for a short period of time because they have to demonstrate that they can actually produce the way you thought they would when you hired them… or they unfortunately validate that you made a hiring mistake.

WHEN TO USE A LOT OF “PEANUT BUTTER”

Follow this same process when analyzing the individual books of business for each salesperson.  Your salespeople should not be treating them all the same. The top 33% of the book brings over 90% of the revenue – treat them that way – with LOTS of “peanut butter”.

And, finally, when approaching the market place, use the information/data from the analysis above when looking at the individual books of business.  Identify the common characteristics in the top 33% of the book of business and then look for new opportunities that look like your top 33%. Stop spending time, money, effort and peanut butter pursuing anybody in the market place that doesn't (or have any chance to) look like your top 33% of your current clients.  (There us a great book on this concept, Selling to Zebras)

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