No, I’ve not decided to convert this blog into a lesson on Anatomy, I actually want to talk about systems. But I don’t mean systems–technology, I mean systems–the way thing work, how things interrelate, specifically in acquiring and retaining customers.
The way we acquire and retain customers is a complex inter-relationship of different activities and processes. These processes occur within our organizations, for example through sales and marketing, with our customers–their buying processes, and in the surrounding community–our competition, opinion leaders, and others. All these “subsystems” are connected together, they depend on each other, respond to each other. Likewise, these systems don’t work well in isolation or without the other systems. For example, a selling process is meaningless unless aligned with a customer engaged in a buying process.
The complexity of these systems and their relationships cause us to break them down, focusing on subsystems and components. We start to specialize in these subsystems, for example, marketing may focus on demand and lead generation. We in sales focus on our selling processes. It’s a natural and probably the only way to manage the complexity and begin to design, develop, execute and manage our customer acquisition and retention processes.
Designers and engineers try to manage the complexity of the interrelationships between subsystems by trying to define clean interfaces–defined inputs and outputs. The theory being as long as we keep the inputs and outputs the same, we can change anything within the subsystem and not have an impact on the overall system performance. We try to do that as we define our marketing and selling processes — it’s perfectly reasonable and puts some manageability to what we do.
Designers and engineers design subsystems, trying to keep clean interfaces, optimizing the overall system. Here’s where some of the challenge comes in. First, as much as we try, it’s very difficult to keep clean interfaces — even in designing “products.” For example, when we develop mechanical assemblies, we design within certain tolerances. As we try to fit those parts together, each subsystem that worked on its own–used the expected inputs and delivered the expected outputs, now the system as a whole doesn’t achieve it’s objective. In the case of mechanical assemblies, this problem is called “tolerance stack-up.” Each part meets its tolerance requirements, but when I try to fit them all together, they don’t fit.
We see the same thing in out processes for acquiring and retaining customers. Marketing may define a perfect lead nurturing and qualification process, it may fit the “specs” perfectly; but when it is “assembled” with the sales lead/qualifiation process, it blows up and doesn’t work. Something is lost in the interfaces, something is lost in the interrelationship of these processes.
The problem gets more complex — at least with sales and marketing. Designers and engineers know that all the subsystems must come together and work as a whole. They understand that missing major subsystems means the thing doesn’t work. A car without a braking system doesn’t works very effectively as a car.
We seem to forget the need for “clean interfaces” and the view of the “whole,” looking at our customer acquisition and retention processes–sales and marketing. CSO Insight’s 2010 Sales Performance Optimization Study provides some interesting clues about these issues. We design our sales prospecting strategies around achieving certain goals and objectives, yet we cut marketing budgets for lead generation. We base our quotas around certain sales performance levels, but we cut training budgets so we don’t develop the skills of sales people to perform at the expected levels.
Now let me add another level of complexity. In sales and marketing, the interfaces are never clean. Moreover, they are constantly changing. Using my car analogy, it’s kind of like installing a new braking system while driving at top speed on a curvy mountain road–covered with ice. It’s not a trivial problem to solve. One of the ways we start managing this is simple, we start talking to each other. The days of marketing and selling “silo’s” are over. We have to have to coordinate our programs, processes, goals, investments. We need to start collaborating. We need “interlock” what we do with the other functions in our organization. (As a side note, Andrew Rudin is looking at this same issue from a slightly different perspective, “Fools Gold: Searching For The Most Important Step Will Ruin Your Sales Process.” Take the time to read it, it reall compliments some of the points I am making.)
I’ll stop here — but there’s more, so far I’ve been focused on our marketing and selling subsystems. Now imagine adding the customer buying and community subsystems into the mix. I’ll talk about these in the next blog post. I’ll leave you sitting at the edges of your seats for now.
There are a couple of things that I’d like to conclude with:
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We do have to break down these processes, developing high performance subsystems. There is so much that can be gained by optimizing these subsystems and processes. All the work that is being done to improve marketing effectiveness and processes is critical to our organizations. Likewise, all the work that we do in improving sales processes, performance and effectiveness is critical.
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While we are “solving” those problems, we must be cognizant that what we do with these subsystems may not work when you look at the system as a whole. Ultimately, we have to look at how all the pieces – parts fit together. Does the “whole” work together to achieve the results we want? Are we making changes to one subsystem that adversely impact another subsystem?
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As sales and marketing professionals, we need to be thinking in “systems” terms. We need to think how subsystems fit into the overall system and how we interlock on programs, processes, goals and objectives.
What do you think?
Stay tuned, the real challenge is still ahead!
Pay For Performance?
I hear the phrase, “Pay For Performance,” all the time. I think it’s a reasonable concept, that is, the better you perform, the better you get paid. Naturally, we want to pay our top performers the best, who can argue with that?
Somehow, it seems as though Pay For Performance is getting distorted. If we want the sales person to do something, other than get orders, we put a bonus on it or add it to the commission plan. We want the CRM system updated, put a bonus on it. We want forecast accuracy, let’s pay the sales people for accurate forecasts. We want the sales person to participate in a task force, let’s put an incentive on it. Somehow, things seem to be getting confused. Too often, our solution to motivating sales people to do we need them to do is to put some form of compensation on it–a bonus, a commission element, an incentive.
I get into a conversation about this issue at least once a week. A sales manager or business executive calls me to ask, “How do I get my sales people to do what I want? What if I added something to their compensation plan?” Throw money at the problem, it will motivate the right behavior!
Somehow that seems to be a temporary and, possibly, an expensive fix.
In a comment on this blog, my friend Jim Keenan, reminded me that much of this is all about leadership. Jim’s right, somehow, the issues, seem to be rooted in leadership. Leadership–getting people aligned to achieve the organizations goals and objectives, providing them the skills and tools to achieve them, motivating and inspiring them, coaching them–helping them improve their performance. Leadership is all tough stuff. It’s demanding, it takes time and patience. It’s dirty work, a leader actually has to get engaged with their people, they have to set expectations, they have to manage performance–both good and bad.
Getting a sales person to keep the CRM system updated is not just something managers can dictate, we’ve seen the failure of these strategies. Leaders have to show sales people how the tool helps them–the sales people–become more productive and effective. They have to help the sales person understand the impact of this information on the rest of the company. Producing accurate forecasts is important for the company–other functions set their plans and schedules around the forecast, they allocate resources based on the forecast. Accurate sales forecasts are a cornerstone to overall company performance–leaders need to make certain their people understand this importance of this to the organization.
Leadership requires the leader to clearly identify roles, responsibilities, expectations. It requires the leader to define expected behaviors, and to model them in their own performance. It requires the leader to clearly communicate these to the sales person, making sure they understand and own these responsibilities and expectations. Leadership requires leaders to manage performance. Thise means they need to invest time in their people, coaching, developing, and helping them achieve the highest levels of performance.
To borrow a term from Jill Konrath, in the “crazy busy world” of sales managers, it’s often tempting to take the easy way out, to substitute pay, an incentive, a bonus to get what we want. Rather than doing the tough and time consuming work of leaders, we throw money at the problem.
Don’t get me wrong, I think bonuses and incentives are very powerful in motivating certain actions and behaviors. I think they are best applied over a short period of time for very specific and short term goals. For example, in a new product introductions, an accelerator or incentive around the sale of that product can give a quick start. Accelerating penetration of new markets by leveraging a bonus for sales into those markets can be very powerful.
However, in my experience, bonuses, commissions and incentives are not effective in driving sustained behavioral or performance changes. Bonuses or commissions to get the sales people to do things that would be considered “conditions of employment,” set the wrong tone for the organization – both the sales organization and the overall organization.
None of these are substitutes for solid leadership!
Compensation Drives Sales Behavior? Is Compensation The Only Tool For Managing Sales Performance?
I’m participating in a discussion with a group of people I deeply respect. It is about managing sales performance, particularly about getting sales people to do things they don’t like to do. You know what those are: Spending time doing reports for management, updating the CRM system, attending one more training class they think they don’t need, getting those expense reports in on time, participating on an internal task force…….. The list goes on. The argument of sales people is always the same, “You’re keeping me away from the customer, don’t you want me selling?” “This will keep me making my number.”
In the discussion, a suggestion has been made, “we should base some of their compensation on having them do this [activity]. What if we based X% of their bonus on doing these activities?”
I think this is a fundamental problem. Sales people are motivated by compensation–aren’t all of us. However, tying everything to the compensation plan is wrong. It dilutes the plan–pretty soon the plan gets so confusing with the number of bonus elements, that it no longer becomes a motivator. What are we saying our people should do? Where should they focus? Do we want them to sell? Do we want them to do other things? Which is more important?
This is a common problem, I think too often, managers try to leverage the compensation plan to drive the behaviors we want. It’s kind of like a parent, giving a child a reward for doing what they have been asked. Over the long term, it drives dysfunctional behaviors –”You want me to do this, you have to pay me for it.”
We need to remember, there are several dimensions to performance management. One is the compensation plan. It should focus on the 2-3 major behavioral and performance expectations you want the sales person to focus on—in the case of sales people, that’s probably something directly related to sales. We want to keep this clear, simple, unambiguous.
There is another side to performance management, that’s the performance plan or review process. Too many managers don’t use this–frankly they do a bad job of managing this process and reviewing performance. Just a point of clarification, many think a performance plan is something you put in place for people who are on notice and must improve their performance or be terminated.
The performance plan is (or should be) something different. It should set the basic standards of performance we have for each person in the organization. It should establish each person’s goals and objectives for the year–not only their quota, but other expectations we have of the person and their expected contribution to the organization. It provides a framework for the behavioral standards of each person. The performance plan is where managers need to address expectations of the job that may not, or should not, be covered in the compensation plan. If we expect CRM systems to be kept up to date, we don’t want to compensate them on doing this, we want to set it as a performance objective in their performance plan. If we want them to do certain developmental activities, these should be covered in the performance plan.
I think a performance plan is critical for everyone. It sets overall goals and objectives for each person in the organization, it outlines areas of personal development, it establishes “MBO’s.” In many organizations, the performance plan and subsequent review is the basis for establishing raises, promotions and other things. Every organization should have a performance planning process, every person should have a performance plan. Managers should periodically review performance against the plan as part of their normal coaching process. The goal is to make sure people achieve their performance objectives, that they are continuing to develop and perform.
It’s important for the sales person and the manager to develop the performance plan jointly–it provides the framework for them to work together, making sure expectations are being met, for aligning priorities and objectives, for growth and development. It provides a road map for both the sales person and manager to inspect throughout the year. It provides the basis for a coaching plan for managers.
In managing performance, we need to leverage both the compensation plan and the performance plan. Without both, managers aren’t leveraging the tools necessary to develop their people and drive the highest levels of performance.
Reacting!
Sales people are great at “reacting.” The customer puts a hurdle in front of us, we know how to respond. The competitor does something, we know what to do. Our management asks us to do something, we immediately (well OK–almost immediately) jump on it.
Most sales people are proud of their nimbleness and speed in reacting, handling any challenge put to them.
I guess I have the problem with the “re” part of reacting. If we are reacting, it means someone else is acting–demanding our response. It means someone else is setting the rules, defining the playing field, possibly defining the outcome. Reacting always diverts us, it sets us down a different path than the one we were originally on. Reacting slows us down.
Somehow, that makes me uncomfortable, I want to be driving the strategy, I want to be setting the rules. I’d much rather have competition be forced to react to what I’ve done than to be forced to respond to them.
How do we get out of reacting? This is where that ugly four letter word–starting with P—comes in. It’s the word no sales person likes, it just wastes time.
To stop reacting, we have to develop a Plan, yes that’s it, a Plan. In fact before we even act, we need to have a plan in place.
When I start talking to sales people about planning–whether it is an opportunity plan, an account plan, a territory plan, or a sales call plan, there eyes roll back. I know what they are thinking, “Here’s a guy that doesn’t understand the time pressure I’m under, he doesn’t understand how hard it is to get things done. He doesn’t know how nimble I am, how I can handle anything that comes up. He’s just going to slow me down!”
It gets worse, I ask them to write the plan down — they can barely suppress the groans.
Well, I’m sorry, I’m not very sympathetic. I get it, I get the pressures everyone is under–I see it every day, I have similar pressures. But if we want to control our destiny–if we want to manage sales opportunities to have the shortest sales cycles and highest probabilities of winning, if we want to make sure we are maximizing our impact in the territory or account, if we want to make best use of our time and the customer’s, we have to have a plan.
Planning is nothing more than a disciplined way of thinking about how you are going to achieve your goal. It is simply the process of laying out exactly what you need to do to reach the endpoint as efficiently and effectively as possible.
Planning makes our actions purposeful, not random. It gets us out of react mode — it causes others to have to react to us. Good planning accommodates shifts in course. The plan is living, not just something we do at the beginning of a sales opportunity, or once a year when we are asked for a territory or account plan. We update our plans, based on changes that occur as we have executed them. I guess if you are nit picking, you might call this a reaction, but in reality, it isn’t. When we react, we simply respond to the action of a customer, competitor, or someone else. In adjusting our plans, we take stock of where we are, what has changed, and what we must do to most effectively achieve our goals. It is always forward looking and goal oriented. It keeps us focused on being effective and efficient.
Are you acting purporsefully, with a plan; or are you reacting? You will more likely get to your goals if you have a plan of how to do it and thoughtfully execute that plan.
