I always worry when a conversation with a sales executive starts with, “We need to fix our compensation problem.”
The ensuing discussion usually focuses on, “We aren’t meeting our numbers, we need to fix the compensation/commission system in order to make our numbers.”
At this point in the conversation, there is an uncomfortable back and forth:
Me: “Why do you think your compensation structure is the problem in achieving your numbers?”
With relatively naive managers, the response is, “Well sales people are coin operated, if we want them to change what they are doing, we just need to adjust the compensation system.” My response is, “Do you know what they should be doing—other than making their numbers? Do you know what’s keeping them from achieving their goals, will fixing their compensation fix those problems?”
Others are, I think, less certain, but think compensation is the starting point to driving performance, “Well, if we don’t fix the compensation system, how will we make our numbers.” My response is usually, “How do you know that compensation is the issue that’s impacting your people’s performance?”
Both of these groups of managers are right in some sense. In general, our compensation systems are perfectly designed to achieve the results we are getting. So the thinking is that changing compensation systems will change the results. But here’s where the challenge starts—is redesigning the compensation system the right starting point? Alternatively, “are we getting the results we are getting because of compensation, or are there underlying issues that impact our ability to achieve results?”
First, compensation is only one of many levers sales management can use to impact performance. Since it is usually the most expensive, and since we want to minimize changes to compensation systems, it’s probably the last thing you want to do in improving performance. There are so many other tools that have greater impact in shorter periods of time. Setting clear performance expectations, having clear leading metrics, coaching/developing your sales people–understanding the specific issues impacting each person’s performance. Even the training, tools, systems, processes, programs we provide are important levers to fixing sales performance.
But compensation is seldom the root cause of sales performance challenges, particularly if you have low voluntary attrition, (i.e. very few people leaving because of compensation.). Where do we start if we are really going to improve sales performance?
Well, usually, at the beginning…..
It really requires us to understand, “what are the things that contribute positively or negatively to sales performance?” Understanding these, focusing on the root causes and real issues are the only way we can hope to drive sustained improvements in sales performance.
The issues are very broad….
What’s our corporate strategy and priorities? Since the sales person is responsible for executing the corporate strategy with customers, we have to be very clear about what that means. Who should we be selling to? What is the size/opportunity in those markets, is it aligned with our performance expectations? What customer experience do we want to create? How do we create value and differentiate ourselves to the customers? How do we want to balance performance across the sales function–for example new customer acquisition versus customer retention/growth/account penetration, new market expansion, product line mix, and so forth.
How do we effectively reach and engage our customers? Actually, this isn’t just a sales question, it’s a corporate question—certainly, we know marketing plays a key role in creating visibility, awareness, interest, and developing demand. Customer service plays a key role if we want to keep and grow those customers or get positive referrals. Strategy and product management come into play because we need to develop solutions that solve our target customers current and future (even unanticipated) problems. And I can go on to each function in the organization, but you get the point.
The “reach and engage” question also has important implications to our overall organization and deployment model—but the way we begin to answer these questions is by looking at how our customers buy. If we are selling to individuals or small groups, or if we are selling transactional products/services, there are a variety of models—Web sites with shopping carts, the classic inbound approach with SDRs/AEs. High volume/velocity outbound models with SDRs/AEs. Complex product/solutions may require overlays and product line specialists to work with account/territory managers. Complex buying processes may involve a team approach, both with complementary skills and maybe geographic dispersion. And often, leveraging partners or other channels is the best way to reach customers or to effectively cover the opportunity potential.
These overall design/deployment questions then spawn a number of other issues: What are the right people, skills, competencies needed to execute the strategy? How do we recruit, onboard, train and develop them? How do we maximize the performance of each person on the team and of the organization as a whole?
Then there’s what we do every day, how we engage our customers, perhaps igniting the need to change and initiating a buying process. We can start with prospecting—are we finding the right customers in the right volumes to support our business requirements? How do our people prospect most effectively? What levels of performance do we need, how do we assure they are effectively executing? Then there’s qualifying those prospects, are we finding high quality deals where customers have a high sense of urgency? Do we have a sales process aligned with the customer buying process–are we executing the process as well as effectively as possible. Are we creating value in each interaction with the customer and creating superior business justified solutions to their problems? Are the customers realizing the value we sold, can we grow that value? How do we stack up against all the alternatives the customer considers.
But do do these things, our sales people need the right systems, processes, tools, programs, support to execute these as effectively and efficiently as possible. As the complement to this, we need to understand the road blocks, internal and external that impact performance, doing everything we can do to remove these and maximize performance.
Embedded in all of these is the concept of, what are the expected activities and behaviors, stated differently, what are the performance expectations, we have of our people in doing all these things? What are the expectations in prospecting, in deal management, pipeline management, value creation, account management, time/territory management? How have we communicated these to our people and assured they “own” them. How to we monitor, coach, and develop the capabilities of our people in performing at the highest levels possible?
Oh, and yes, there’s the compensation system. But designing the compensation plan only makes sense, once you have addressed these other issues. Then you design your compensation system to reinforce the things that are critical to driving performance.
Our compensation system is an important element in driving sales performance. Basically, it’s one of the means we leverage to focus people on what we want them to be doing. But until we know these things, it’s impossible to design the compensation system that reinforces the attitudes, behaviors, activities critical to sales performance.
If we want to improve sales performance, we have to understand all the things that impact performance. If usually starts with fundamentals, if those aren’t in place, then nothing else will impact them.
It’s become trite to say “sales has changed more in the past 5 years than in all preceding history.” Indulge me with leveraging this trite phrase. Usually, I look at these issues from the customer point of view, knowing that much of what has changed about sales has been a result of the changing buyers. Permit me to look internally only, let’s look within our own organizations and within our profession.
Let’s look at some of the things that have happened:
Content is king: Billions are invested in content development–much focused directly on customers, creating awareness, driving interest, creating demand, hopefully driving leads.
Beyond just content, marketing invests billions in other areas, all focused on helping create more customers and supporting sales through the entire buying cycle.
In the past 5 years, thousands of sales and marketing automation tools have hit the market, with thousands more every year. All these tools are intended to “help” sales people become more efficient, more productive, more knowledgeable, better prepared, more impactful.
Training has skyrocketed. Training in all forms, workshops, seminars, eLearning, webcasts, podcasts. It’s available where ever we turn. Where affordability might have been a barrier in the past, much is free or near free.
Information and data available to sales people keeps growing. We can research each company, each individual understanding them in ways we have never been able to do in the past. We can “stalk” them through the digital world, develop relationships with them. We have analytic tools giving us insights on buying behaviors, propensity to buy, and all sorts of things–all focused on helping us talk to the right customer, at the right time, about the things most relevant to them.
We have new business models in sales, rather than having to be masters of everything, specialization reigns. There are prospectors, qualifiers, demoers, account managers, closers, product line specialist, value engineering specialists, support teams and resources—and of course all the tools and technologies enabling us to collaborate and communicate with everyone.
And then there are the thousands of blogs, articles, books, videos, podcasts all helping us be better, more productive and more efficient. You can attend conferences focused on every aspect of marketing and selling every week.
Yet, virtually every study shows sales performance flat to declining. The number of people making goal is horrible. While I haven’t seen research data, in our own consulting practice, we see skyrocketing CPOD (or the equivalent), declining overall productivity.
Time available for selling, voluntary attrition, employee satisfaction, absenteeism, and other indicators — all going in the wrong direction.
We see more data and articles focused on things like seller distraction (from all this help we are giving), cognitive overload (it’s a brain thing—Google it).
Somehow in a world of abundance of tools, information, training, content, data we are accomplishing less.
Perhaps it’s time to rethink things. Perhaps rather than more, we should be simplifying, focusing on the few things that are most critical, excelling in executing those.
Perhaps we should think of how we might to more with less, rather than the inverse.
I get deluged with emails and calls asking me for a short phone conversation. Here’s how one stated today:
Hi there –
Just read your post. [Body of pitch selling me something.] More details below.
Hope to hear back from you soon.
[Name deleted to spare this person the shame of being called out for cluelessness]
I was actually mildly interested in what this guy was offering, but then decided to ignore the email. As I reflected on the note, he hadn’t taken the time to address the note to me personally. Clearly, he’s targeting bloggers, mentioning interests in my posts, but not referring to anything specific in the posts. Later, he followed the email up with a slightly snide note asking why I wouldn’t invest my time in a call with him.
This individual was seeking my time, as it turns out, in the body of the text, he was asking for at least an hour of my time. Yet he hadn’t taken the time to research and personalize an email to me. I suppose he thought his time is much more valuable than mine.
Perhaps it is, but, I’m still the person he wants time from and he hasn’t created enough value for me to commit my time.
As I reflected on the note, this was just another of hundreds of bad prospecting messages I get. Sales people focused on high volume and velocity, deluge prospects with meaningless emails.
These clueless outreaches are bad enough, but they are seeking to rob me of my valuable time.
Isn’t it ironic, too often, we seek prospects and customers to invest their time in us, yet we haven’t invested the time to earn their time.
We send out untargeted, meaningless, unpersonalized emails.
We haven’t done our research on a person’s company or on them prior to picking up the phone.
We haven’t prepared for the call or meeting, failing to think of, “What value will we create for the customer in this interaction?”
Everyone is time poor. Each one of us chooses to invest our time to maximize the return we get out of each minute. How can we expect prospects and customers to choose to invest their time in us, if we haven’t invested the time and work on our side.
I won’t invest time in you and your blind outreach. If you want my time, you have to determine what might be relevant and of value to me and communicate that. If you don’t, then stop wasting your time on me.