How to help your average seller be more successful in 2012

We often ask clients if they can name their best sales representatives or account managers. Frankly, that is generally pretty easy to do. But, can you segment your sales force into their 3 natural groups: Top-tier (best), Mid-tier (average) and Lowest-tier (challenged) categories?

We suggest that companies look at their sellers in three such performance (and developmental) groups for purposes of future planning and investment. These sales-force groups or segments can generally be described in the following terms:

• Top-tier performers—Sales representatives and professionals who consistently can be expected to deliver high-levels of both absolute and relative performance. These sellers are both highly self-motivated and directed. [The top 1/3]
• Mid-tier performers—Sales representatives who provide adequate performance considering market circumstances. From time-to-time they seem highly motivated but you can never be sure whether they are on “their game” when it is needed. These are your average performers. You know they are capable of more. [The middle 1/3]
• Lowest-tier performers—Sales representatives who are consistently operating below expectations based upon any standard applied. Motivation is consistently low and it is often hard to get their attention. They often owe their continuing employment to the perceived difficulty and high cost of replacement. [The lowest 1/3]

Experience tells us that the greatest sales performance improvements can almost always be had by focusing upon the developmental and the motivational needs of the Mid-Tier, or the average seller. Can you complete the above segmentation with your own sales force? If so, stop and do it. It will make the following discussion more meaningful and useful in improving future individual and company sales performance.

2012 is a mere two months away. We believe there are a series of actions a CEO or top-sales executive can take in the coming months to make an average seller more successful in 2012. While we are focusing on the mid-tier performer, the following comments can generally (and selectively) be applied to the entirety of the sales force. We suggest four actions be taken in the next 60 days. 

1. Shake Up your accounts—A sales force can become complacent and call upon the same (comfortable and unproductive) accounts, month in and month out, unless the company steps in to disrupt the “spiral.” Change this “spiral” by reassigning 5-10% of your top-level accounts for 2012. Target making account changes where sales volume is flat and accounts are seemingly unhappy or ignored—you know who they are. It may likely cause a bit more travel, but who cares? (Of course, set some limits regarding seller productivity and client relationships, but remember, without some dislocation nothing will happen.) The reassigned accounts will see a new company face with some fresh ideas and approaches, and the sales force will need to prepare for sales calls (on “new” accounts) all over again. This is a little like increasing cold calling. It is an approach that can be effective with both top- and mid-tier sellers.   

2. Re-focus your sales management team to productive tasks and sellers—It is not unusual to find that sales management is spending the majority of its time attending to performance, account or employment issues that relate to its lowest-tier performers—maybe up to 3/4 of their time. Now, take a minute and go back up the page and look at our sales-force segmentation rules, definitions and ratios. Is it not reasonable for you to expect your sales management to spend the majority of its time (2/3) with the issues of the Top and Mid-tier performers in the sales force—i.e.: in sales-force planning, coaching and developing? But, the reverse is often true for pragmatic reasons. Stop this misallocation of resources immediately and refocus your sales managers to spend their time with the sellers who can deliver the highest return on the investment of manager’s time (ROI). This will clearly not happen by putting much of their energy into the Lowest-tier. [More on the Lowest-tier at the end of this discussion.]

3. Change the sales-measuring stick to “growth”—Typical sales-force performance is often measured (and incentives paid) based upon sales or a volume-related goal of some type. Turn that direction by 90º in 2012 and measure performance based upon salesgrowth—year over year. You can still use your legacy goals and goal-setting processes, but the real currency and acknowledgment for the sales force performance should become growing their portfolio of accounts over the prior year. Of course, management will assure that any sales growth achieved meets company standards for profit—or I assume you won’t book the order anyway.  Now you may ask: “But, each sales territory is different and $100,000 in growth may much harder in one territory than $100,000 in another.” This is correct, but is irrelevant for 2012. You want rapid growth in 2012 and if a seller does so they are successful. [Now that begs the issue of market share, but let’s keep it simple in 2012. By the way if you do not already calculate territory market share, stay around in the coming months and Wilkening & Company will discuss the how-to’s of estimating market share.] 

4. Finally, reward sellers who really grow their accounts—If you are going to focus upon growth, pay for it. We suggest a new sales-growth bonus where incremental (new) bonuses are awarded for both relative and absolute 2012 sales growth. It should be funded with “new money” that is the result of the new profit contribution resulting from sales growth (in addition to price increases). While the current sales pay plan should remain in place, we would scale it down size to highlight the importance of growth and the new growth-based bonus. The growth bonus becomes the cherry atop the sundae. For the plan to get its intended results, the math and rules should work something like the following:

• Seller with top growth gets (say) $20,000 or ½ target annual incentive;
• Next two sellers get (say) $10,000 each or ¼ target annual incentive;
• A handful of the next-performance group gets (say) $2,000 each; and
• Lower half of performers get no bonus.

We have not spoken much about the Lowest-tier performers. You know, no one speaks much about this group. They are often ignored as orphans, and that is an expensive strategy to adopt. As noted, these are generally the sellers with the lowest chance and probability of success. Training investment generally will yield a low ROI and this is the group where your sales management team is drawn to spend most of their time. If you have identified current sellers who fit into this segment, we suggest you aggressively:

1. Closely watch their assigned accounts (or territories) for competitive threats;
2. Find ways to off load the personnel and remediation tasks required of such performers to company specialists other than your line sales managers; and
3. Build a plan to begin replacement of your worst performers—and do it starting today.

So, with 2012 approaching, take 4 steps within the next 60 days that will help your average (and other) sellers get on the road to being a better (happier) and more confident producer. And, do not forget to measure success and progress every month (or week)—make sure you are winning.

Notes on Managing: Investing without IRR

Most CEOs and senior executives are familiar with making most or all investment decisions based strictly on the internal rate of return (IRR) of the project or investment. IRR is the annual rate of return on an investment considering its original cash outflow and its ultimate outcomes (in terms of cash inflow) over time. Such an analysis allows an investor to compare any investment to other similar investments or to a market-based standard. This is a common method used to make investment decisions of all types. IRR is a common part of the executive’s lexicon and tool box.

IRR has a tendency in some companies or situations to be used as a rigorous test for any and all investment decisions. Further, if the future return outcomes cannot be easily or reliably quantified, an investment may not even be considered. As a result, many investments are never made nor considered. Uncertainty becomes a disqualifier—and aren’t all financial outcomes uncertain, in reality? I once worked in a company where $100 wasn’t invested without a 2-inch thick (single-spaced) analysis being properly completed and approved by Corporate Finance. You had better “show” an IRR of a zillion %, or forget it.

While rigor is important when making an investment, we believe that as one gets higher in the organization the executive is expected to make some investments—of both small and large scale—without the benefit of a reliable outcomes’ analysis and forecast. Let me give some (recently-heard) examples of such investments and opportunity—

• “Let’s start a new marketing & advertising initiative that we think will give us increasing client mindshare. The cost is $25,000 per year but we may never know if it gives us a single new sale or project. But, it feels like the right thing to do.”
• “Our competitor is having quality (and ultimately financial) difficulty. Consequently, they are very vulnerable in New England. If we hire 2 new sales representatives and go after 20 of their biggest accounts we could (possibly?!) take a few away. The cost may be $250,000 per year and it may take 2 years to get a $1 back. It’s just too good an opportunity to pass up.”

The examples are numerous but you get the idea.

A CEO or senior executive is expected to make such decisions or judgments each year—with or without the information required for an IRR analysis. The ability to make such abstract decisions is part of what qualifies one for the job and title. Are you using your intuition when faced with such a decision, or are you relying too heavily on the Controller’s spreadsheets?

One way to find out is to take a little 1-year test. Budget a pool of annual investment—say $100,000 (clearly an arbitrary amount) at the beginning of the coming year. [I usually tell CEOs to put it in cash in a coffee can and place it in their lower desk drawer.] If by the end of the year, you have not spent most of your fund on non-IRR supported projects something is wrong. Most likely: 1.) not enough good and intuitive projects are making it to your office, or 2.) you or your staff may have too little tolerance for the inherent uncertainty within your business. Either possibility should allow you to take pause.

While no one is advocating reckless decision making, intuition does have its place. So begin 2012 with that coffee can full of cash in your desk drawer. How much to put in it is up to you. I know mine has less than $100,000 in it, but it will be there.