The Sales Manager’s Success Manual

Author: Wayne M. Thomas
Pub Date: 2007
Your Price: $24.95
ISBN: 0814480500
Format: Hardcover

 

• Overview
• Sample Chapter
• Praise for this book
• Table of Contents
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Chapter 2

The Sales Force

When you get right down to it, one of the most important tasks of a manager is to eliminate his people’s excuse for failure.

Robert Townsend

Most companies find the cost of going to market is their second-largest expense—just behind COGS, the cost of goods sold. De­pending on the mix of goods and services, companies may spend up to 40% of revenue marketing their products. As CSO, you are a steward of this investment. In your role, just a few strategic decisions will add to or subtract from the company’s return on its investment.

One of your first decisions is whether the current sales force is adequate or inadequate for its mission. Do you or don’t you have the right people?

According to Caliper, an organization specializing in recruitment and selection, 80% of salespeople are in the wrong jobs. After a study of 78,000 sales representatives, Caliper concluded that 55% should not be in sales at all, and that 25% were in the wrong kind of sales.

If Caliper’s findings describe your salespeople, you have a Hindenburg Omen on your hands. You have also discovered an area where your leadership as an agent of change will make you a valuable corporate asset.

 

How to Assess Your New Team

How do you determine if your reps and staff are a match for the mission you are leading? You need clarity on two things. The first is your company’s objectives, which flow from its mission. The company’s mission might be: “To make money for the Hunter family and to cure cancer.” More specific objectives flow from that: “Achieve $5 billion in sales this year.” Second, you must create a sales strategy to achieve the objective(s). You can only begin your sales force assessment with these ends in mind.

For example, to achieve $5 billion in sales, you decide upon a fundamental change in field tactics. Your new strategy requires a solution selling approach to corporate-level (C-level) executives. In the past, the sales force called primarily at the department level using product-oriented tactics. It was effective, but meeting your new assigned objectives requires high growth in existing accounts. The sales force must expand its skills to include effectiveness at the corporate level. Now, assessing your sales force becomes more straightforward. Do they have the polish and technical expertise to be credible at the C-level? Have they demonstrated it before?

Collecting Data

• Examine the results of existing sales teams and individuals sales reps.
• Socialize your sales vision with colleagues in other departments, and gather their feedback.
• Talk to some of your customers.
• Review team performance with your sales managers, meet one-on-one with top-performing sales reps.
• Review performance reports on sales and team activity.

At the earliest possible time, begin making field calls with your salespeople. There is no better way to make a confident assessment of your terrain than by experiencing it yourself. Do not accept someone else’s assessment, because his or her evaluation criteria may be different from yours.

Riding in a car with sales reps always provides deep insights available no other way. After a few days in the field, you will appreciate the sales culture, marketplace, customers, and competition more insightfully than any other way. Then, with the confidence of your own observations, you can make faster, more sound decisions.

Remember that you are taking a small sample of the whole organization as you make your calls. Do not take everything you hear or see as a universal truth. Be aware of what I call “the rep who” influence. Psychologists tell us that we have easy recall of, say, “the rep who” you rode with last week who claimed that the company’s tech support was lousy. You must keep an open mind later when the issue of tech support arises, remembering that each of us has a different perspective on the truth. We see through the eyes of one in our personal context. Try to simply flag issues for further investigation rather than assuming you have special insight from that single exposure.

Your early need is to see the big context and make decisions about how the structure you inherit facilitates or inhibits the behavior it does. That said, making sales calls can unearth solutions to great mysteries and provide valuable insights.

I debriefed a new CEO who had returned from a week’s worth of sales calls. Primarily, he had called on large accounts and top executives within those accounts. He learned that while the company believed it had a major account program, all it really had was a product sales program. Most of the executives he called upon had no idea of the diversity of his company’s products and the potential benefits available by more integrated partnering. This insight led him to develop, despite protests from his VP of sales, a separate major account group under different management.

 

Do It Now

Many months will pass before the benefits materialize from major sales organization changes. Because of this ramp-up time, a new CSO must determine early if she will make major changes in her channels. This is essential because she also must set expectations early.

In clear terms and wary of overconfidence, the CSO must inform her CEO how much time will be required to ramp to achieve expected results from the change. She must also warn the CEO of estimated productivity declines in the interim. Then she must get a firm commitment of support.

If you don’t get buy-in, at least you have put yourself on record assessing the inadequacy of the current sales team to achieve objectives. In denying your request, the CEO also goes on record with you.

What happens next? You begin to limp along with a sales force that you have identified as inadequate to do the job. A smart CEO will be open to reconsider your earlier assessment as it now comes to pass. Inaction will not solve the problem.

Loyalty to one’s staff is important; however, loyalty can hurt people who are asked to perform tasks incompatible with their attitudes and skills. You cannot send ducks to eagle school.

A former VP for an international communications firm shared her experience: “The market need these days is for consultative selling. We could have great product-oriented salespeople, but they just wouldn’t have the horsepower to do the job required today.” Her experience was that 80% of the existing sales force failed to adapt to consultative selling. “There is no time to waste these days. My advice is to make cuts and changes all at once. Loyalty to you isn’t worth much if you don’t make your numbers.” If you don’t, it will be your neck on the block.

 

“You Got to Know the Territory!”

Another sales VP advises new CSOs not to stop with changes to the sales channels. “Also assess political alliances of your staff and field managers.” In addition to fourteen years as a sales leader, he has a black belt in karate and is a student of Sun Tzu’s The Art of War. “I wish I had taken Sun Tzu’s advice myself when I became a sales VP—‘know your terrain.’” Sun Tzu says that any commander “ignorant of the conditions of mountains, forests, dangerous defiles, swamps and marshes... cannot conduct the march of an army.”¹ “Only after you understand your terrain can you develop an effective strategy.” In other words, you must adapt your tactics to the reality of the environment as you find it. To illustrate, he discussed several managers in technical and administrative positions whom he inherited and knew to have political loyalty to others.

 

Spies

“They were essentially spies.” By the time he learned that several of these holdovers were actively undermining him, it was too late to move them out of his organization. To his chagrin, he discovered that his boss clandestinely maintained an open door to them.

“I should have gotten rid of them immediately and put in people loyal to me. I was reluctant to do that because of their political connections. Now I realize there would have been some of initial discomfort, but it would have been well worth it. In the end, they killed me.”

With your own loyalists, you can move earlier and more decisively. Most sales executives believe the optimum strategy is to make your personnel changes quickly. Stringing them out will kill morale and cause your best people to look for companies where shoes are not always dropping.

I know this from personal experience. I was a sales executive brought in to AT&T to help its sales force succeed in a deregulated environment. In this environment, AT&T announced that 40,000 employees would be separated from the company. You can well imagine the internal environment after this announcement.

The downsizing occurred over several years. During that time, morale was low and stayed there. Instead of a focus on market success, the employee focus turned to and remained on personal survival. I observed a sales organization with a short-term, personally pragmatic outlook. Because the downsizing occurred in stops and starts, predictability vanished. Throughout its 100-year history, perhaps more than anything else, predictability of the company’s systems, markets, and policies drove the loyalty and commitment of its employees. Thereafter, virtually nothing became predictable, and the culture collapsed. Who could have predicted that the most recognized company in all the world be sucked into decades of decline, finally culminating in the sale of the company?

 

Assessing the Future

No one would have predicted the demise of AT&T. Because of the market’s unflinching confidence in AT&T, it was able to bor­row more money than any corporation in the United States and at favorable rates. Did all of its brilliant employees suddenly become inept? No, they simply became victims of a market environment, which changed because of technology, regulation, and competition.

Just because prediction is so difficult does not mean that we should not try. By careful observation, many things are highly predictable. Again, the best time to make your prediction is before accepting the job. There are some good ways to do this:

• Through your networking contacts.
• By interviewing customers.
• Through your interviews with the CEO, peers, and if possible, sales managers.
• By reviewing results.
• By assessing the level of supervision and control in place in the sales organization.

Some CEOs have little feel for the sales department. It is best to know this now to understand whether you will be a good match for each other. With good information and good questions, you should be able to assess your CEO’s sales temperature. What is the CEO’s policy about compensation? Is he willing to let salespeople and sales managers make big incomes?

Where you identify a highly cost-conscious CEO, you can bet that the sales organization will tend to be undersized. If you determine the need for additional salespeople, would you have his support? As a sales professional, you know that more salespeople make more sales than fewer salespeople. Experience also says that in growing a sales force, it may be better to bring on new reps all at once rather than over time. Most CEOs are unfamiliar with the concept of carryover.

Depending on the sales cycle and nature of the business, up to 40% of next year’s business can be directly attributed to selling that began this year. This is the concept of carryover. There is a reason that many CEOs and CFOs do not understand this principle: It is due to the optical illusion that whenever there is a major sales organization downsizing or management change, sales results may appear unaffected—in the short term. Those who do not understand sales do not understand that the continuing sales are the result of work begun months in the past. Fewer reps do not produce as much as more reps. Unfortunately, this myth becomes the problem of the new CSO who inherits a pipeline with insufficient carryover to buoy future results.

 

Contracting the Selling Activities

One major decision awaiting CSOs is a review of existing partner relationships, or whether some (additional) segment of the sales program ought to be effectively outsourced to indirect channels. These independent companies perform the selling function primarily by extending your company’s reach into segments familiar to them and not you. This subject is a book in itself and beyond the scope of this book, which focuses on the direct sales force. Many management parallels do apply, however.

Additionally, there are decisions to be made about the wisdom of deploying other selling technologies such as inside sales and the Internet, to reach additional markets cost effectively.

In the next section you’ll find a powerful tool to weigh the question of whether to add more personnel to your sales force.

 

Sales Channel Sizing and Company Profitability

Make every decision as if you owned the company.

Robert Townsend

 

Cost Containment

Companies are always at work on lowering their cost of goods sold to gain competitive advantage through price reductions or to fatten margins. As you read earlier, sales-related expenses are usually the second largest cost item. In a downturn, some companies also focus on reducing sales expenses and/or improving sales productivity. There is a variety of ways they do this.

Some companies reduce direct and channel costs by a percentage (“15% across the board cut”); some reduce costs through straight funding cuts (“take $2.5 million from the budget”); still others contain costs through controls such as mandating a target ratio of revenue to sales expense (“sales will be 15% of revenue”).

However, the three approaches above are financial strategies, not necessarily good sales strategies. Even in difficult times, if the company is in a growth market, none of these strategies may recognize the opportunity to maximize profits.

The analysis in Table 2.1 illustrates—counterintuitively—that sales cost containment limits a company’s profitability in a growth market.

 

Productivity Improvements

Productivity improvement is always in season. Some firms channel expense by purchasing automation software to improve sales productivity. If CRM (customer relationship management) delivers a 10% improvement in sales productivity, there are second-level choices. Is this an opportunity to grow sales without adding headcount? Or is this an opportunity to reduce sales headcount by 10%? In a growth market, the appropriate choice may be to reinvest into sales force growth in order to grow revenue and profits.

 

Invest in Sales or Reduce Costs?

The analysis in Table 2.1 makes the case to add sales headcount. It also demonstrates for the factors given that containing sales costs in a growth market will not maximize profits. Sales investment helps maximize profits.

Status Quo.  In Table 2.1, the company makes no changes: The directive to sales is: Maintain 19% sales expense to revenue with no additional sales hires.

Investment for Profit Improvement.  In this next example, the directive to sales is: Increase the sales force by eight reps for greater reach and coverage (see Table 2.2).

Observations.  The decision to add eight reps increases the sales expense to revenue ratio by 1%, but adds $1,950,000 to the bottom line. This occurs despite sales performance at only 50% productivity (ramp up) their first year at full loaded cost. There is still a safety margin to cover the breakeven cost of the new reps even if sales fell to 30% of the established reps’ production.

 

Consider Carryover

A CFO or CEO could argue that many companies appear to have cut their direct and indirect channel costs with relatively little effect on the current year’s production. This can sound like a compelling argument. It is a good argument only in the short term. In the longer term, the company handicaps itself by ignoring sales carryover and market growth.

Recall that sales carryover recognizes that sales made today are the culmination of sales groundwork done in the past, months or even years earlier. It follows that a drop in sales effort today will not show up until months later, perhaps even the next year. Depending on the industry and length of a sales cycle, up to 40% of next year’s sales result from the previous year’s activity.² This phenomenon makes carryover an important planning consideration.

Furthermore, if you are blessed with a growth market, the company loses the advantage it may have gained by securing a larger share. The foregone growth and profits cannot contribute to the company’s financial health and competitive position.

Now, you must take all the information you have gathered and weigh it against the task ahead of you. The sales force is either adequate or inadequate to meet the assigned objectives. If the sales force is adequate, it passes the minimum threshold required. There­fore, it will not be an initial priority for you. Of course, everything can be improved, but that is not your task right now. You are looking for Hindenburg Omens. A rating of inadequate signifies a Hindenburg Omen.

 

In Pursuit of Rewards: Chocolate, Sex, and Money

When I am getting ready to reason with a man I spend one-third of my time thinking about myself and what I am going to say, and two-thirds thinking about him and what he is going to say.

Abraham Lincoln

 

Freud saw our minds in constant battle between the forces of ra­tionality (superego) and the forces of “I want it now” (id). When rationality prevails, we are said to display emotional intelligence. We are able to delay gratification. Of course, this is an important power to have, or at the least, to have others perceive that you have it.

We are all familiar with those animal experiments where the lab animals drop from exhaustion after nonstop pushing of control bars to release pleasurable substances. Today an MRI enables us to watch ourselves manage our temptations in living color. Researchers observe that we are often on the edge of performing in irrational ways as the power of our own id skirmishes with rationality.

When emotional intelligence loses, according to Freud, pursuit of rewards can inspire our own worst behavior. Like it or not, we are still evolution in process with many of our animal-brain proclivities in good working order. Freud’s observation, confirmed in color by MRI, explains some of the unusual things we see in sales management. Now we know why people act the way they do. Here is a simple example.

 

Chocolate and Sex

What do attractive people, sex, and chocolate have in common with money? They all activate the same region of our brain that lights up an MRI when a person ingests morphine or cocaine. Just as they react to sex and drugs, your sales reps can become chemically buzzed up pursuing money or receiving it.

“Whether it’s reacting to a sexual conquest, a risky business deal, or an addictive drug, the brain often distinguishes clearly between the thrill of the hunt and the pleasure of the feast.”³ For many sales people the chase is reward enough. Sometimes pursuit pushes the rep into risky, unethical, or uncollegial behavior.

 

Non-Money Rewards

Sales reps do not do what they are not paid to do. Fortunately, researchers Hans Breiter and Daniel Kahneman have demonstrated the power of psychic rewards are a currency, too.⁴ Their experiments demonstrated that even salespeople derive pleasure from the hunt whether the payoff is self-esteem, money, or both.

A sales success provides a major high from victory, recognition, and being on top. I saw this principle in action the time my top sales rep won our biggest order ever. In a spectacle right out of The Music Man, he marched into our building escorted by a high school marching band. He was smiling and nodding to onlookers like Professor Harold Hill leading 76 trombones!

 

After the Thrill of the Chase

Of course, the commotion flags when the chase ends. Sometimes, too little interest remains in implementation. This behavior is reminiscent of a classic sales bait and switch joke: During the sales process, the salesperson lavishes golf, exquisite dining, and the promise of perpetual sunshine under blue skies upon the prospect. The rep creates an indelible image of the pleasures and benefits that lie ahead, if only the prospect will sign the contract. He signs and soon discovers that all of this was an illusion. When the customer asks what happened to all the ruffles and flourishes before the sale, the sales rep responds, “yesterday you were a prospect, but today you’re just a customer.”

 

Astute Observation

One sales team used this proverbial insight to turn several apparent losses into victories. They encountered a talented competitor named Mike who beat them regularly. They studied him and looked for a weakness, which they found. Mike did not require a signed contract to experience the thrill of victory. All he required was to be told that he was the winning vendor. After that, he appeared to down-shift his activity, even to take a vacation. The result: Weeks passed before Mike negotiated a signed contract.

We realized that this lag time made him vulnerable to stealing his deal. There is always some degree of buyer’s remorse with a major decision. Add to this a time lag and the potential for unpleasant surprises lurking in an unsigned contract, and you can see the reason for our hope of turning around an occasional loss.

Perhaps this example is so unusual that you may never apply it. Perhaps the better lesson is this: We need to take every advantage, even small ones, to win. In baseball, the batting champion ekes out every hit he can, because winning the title or a deal may depend upon it.

Viewed in a different context, if you were Mike’s manager, you would provide him a valuable coaching service by studying why it takes him so long to reel in his dinner. In the next chapter we will see more ways successful sales managers create a positive sales culture for their teams.

 

Ethics in Question

In our research interviews with their non-sales colleagues, we heard allegations that “sales will do anything to get the sale.” This is another of those “your greatest strength can be your greatest weakness” paradoxes. Sales should do (almost) anything to get a sale that is moral, legal, and ethical. Losing a sale by doing anything less is apostasy!

Not just corporate colleagues question sales’ ethics. A Gallup poll of consumers found that of all the business occupations, selling and advertising were ranked at the bottom in terms of honesty and ethical standards.⁵

Sales ethics are not a black-and-white thing. Salespeople are expected to be enthusiastic about their products. However, when does enthusiasm spill over into puffery, white lies, or untruths? Sales management must communicate answers, lest they risk their company’s future.

For Met Life and Putnam, questions about sales ethics have prompted internal reorganizations. For Prudential, an ethical charge cost it over $425 million because its sales force oversold clients. Ethical problems at Arthur Anderson, WorldCom, and Enron caused prosecution and bankruptcy. Obviously, ethical problems are not limited to unreliable firms.

The issue is not going away. I say this because ethics have a large situational component. What is unspeakable in one situation can be excusable in another. Is it ever moral to murder your own baby? U.S. News & World Report raised this question in an article on moral issues.

Many psychologists believe we have several powerful moral precepts that are hard-wired within us through evolution. It is an emotionally settled issue at first pass that we would never murder our own child. Not so fast, claim a team of Princeton researchers who underscore the role situational elements play in accepting or overriding our initial gut reaction. Princeton’s Joshua Greene proposes that “a moral judgment is ultimately a balance of several different considerations—the initial, primal reaction; empathy; cultural or religious norms; and individual reasoning. Sometimes these will all be in line and make the decision an easy one, but often they will conflict.”⁶

The team ran a study posing the following situation: “Enemy soldiers have taken over your village and will kill any civilians they find. You are hiding in the cellar of a house with a group of townspeople, and you hear the soldiers enter the house. Your baby starts to cry, and the only way to quiet him is to hold your hand over his mouth and, eventually, smother him. But if the baby keeps crying, the soldiers will discover your group and kill everyone, the baby included. What should you do?”

In this situation about half the subjects said they would murder their own child. Researchers observed the decision process via MRI and saw the collision of emotion with cognition and conflict control.

Situational pressures will increase on our sales forces as they face more capable global competition and smarter, more demanding prospects. The future of the direct sales job is more uncertain than ever. Reps worry about outsourcing, downsizing, sharing territory with indirect channels, mergers, acquisitions, reduced budgets, and higher quotas.

The most successful sales managers will anticipate these ethical challenges and address them with their teams. They will make their standards clear and define the penalty for unethical behavior. Careers, reputations, and the viability of our companies are at stake.

Keep in mind that personal standards of conduct are usually higher than business standards. Employees often perceive that business behavior at lower standards levels is acceptable. USA Today, referencing an article by Susan Powell Mantel,⁷ found this perception goes across department lines. They reported that nearly half of all workers admitted in a survey that they had committed “unethical or illegal acts.”

It is not just the brains of salespeople that slosh around with potent doses of reward-seeking chemicals. Money and other situational variables seduce corporate workers and create skullduggery in every department.

 

© 2008 Wayne M. Thomas.
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