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7: The Science of Sales Management

The present chapter is intended to focus on a variety of challenges for sales management, aside of hiring, training, and coaching.

Reducing Sales Personnel Turnover

The hard cost of replacing an employee includes the hiring and training of a replacement. For most positions, there are also soft costs that include lost productivity, morale, and opportunity costs. It's generally agreed that the cost of turnover exceeds a year's salary of the person who leaves. The authors claim "experts believe" the total cost to be around 150% of annual compensation.

To some degree, it's a function of changing culture: The "Baby Boomer" generation expected upward mobility by staying within a company and moving through the ranks, whereas Gen X workers advance in their careers by changing jobs frequently.

On the other side, employers are also recognizing the value of candidates that have experience in multiple firms - but paradoxically, employers expect that a candidate who has changed jobs every three years will "settle in" when they come to work for them.

And for sales specifically, a profession with notoriously high turnover, there's also the potential loss of revenue from customers who were served by that specific employee.

In a growing economy, there is competition for skilled workers that create more lucrative opportunities elsewhere. Conversely, salesmen make a better income in good economic times, and have less incentive to seek to change jobs because they are making good commissions where they are.

In a depressed economy, it's generally believed that employees stay in their jobs, but this is a misconception: there is always competition for highly productive employees, and this intensifies in an economic downturn. For sales, a poor economy that causes decreased revenues means decreased employee compensation, and salesmen are likely to be attracted to the opportunity to make more income at a different firm.

Ironically, it's often the coping mechanisms firms put in place during a downturn that causes employees to leave: budgets are tightened, salary increases dwindle, commissions are paid more slowly, etc. The net effect is that the firm feeds on its own people and foster resentment among employees who have been short-changed and neglected during a downturn are all the more open to opportunities elsewhere.

According to the Deloitte survey, about a third of employees expect to change employers when the economy improves - and of that group, almost half cite a loss of trust in their employer as the primary reason they intend to look outside their firms.

The Right Job for the Right Person

Job satisfaction will often retain an employee even when they are not delighted with their monetary compensation, and the authors suggest that being in a position that is a good fit to the strengths and values of an employee is a critical factor.

In small firms, or understaffed large firms, there is less specialization of labor and less support staff, such that each salesman is required to be a jack-of-all-trades, performing every task related to their job function: those at which they do well and those at which they do poorly.

A common division in labor within sales departments is splitting the responsibilities for marketing (identifying prospects), sales (closing the first deal to create a new customer), and support (getting repeat business from existing customers). From there, specialization can be taken further - in sales alone, staff may be split between inbound and outbound, divide by customer type or geographic territory, etc.

Each specialized function requires different skill sets and is suitable to different personality types. A salesman who has strong people skills and social inclinations may be happy and successful calling on customers in person, but miserable and mediocre if tasked with handling inbound calls from a web site.

Returning to the jack-of-all-trades salesman, he can attend to functions that are a poor match to his skills and personality, but he will attend to them poorly and will be unhappy doing so.

Meanwhile, management maintains a vague notion of what qualities make a person "good" at their job - and when the job is broadly defined, the assumption is that a "good salesman" is good at anything generally related to sales. This is not so.

Without an analysis of the job to define the profile of a candidate that would do it well, and without an analysis of the person to determine the degree to which they match that profile, it's all gut-feel. Neither the manager nor the employee has any reliable way of knowing if a given job will be a good fit.

The Importance of an Upward Career Path

There is also the notion that job satisfaction derives not only from a person's happiness in their present position, but that there is a future at their company that leads to personal growth.

Companies are reluctant to discuss career paths with employees - the fear being that a discussion will be construed as a legal obligation to promote the employee. Even when they do consider succession, companies pigeonhole their people an d hold them to narrowly defined career tracks: the assumption is that a salesman will become a sales manager.

It's noted that not all salesmen want to become sales managers, or would thrive at that role. The skills and traits that make a person good in the role of a salesman are different to those that would make them good in the role of a manager. A quote: ''It's not a manager's job to make herself successful. It's to make her staff successful.'' As such, it's fairly common for a newly promoted sales manager to fail in their new role, and be miserable.

(EN: There's also the underlying assumption that people want to advance in their careers. Some people are happy in their work and don't prioritize rank advancement, and recognize that advancement means that they lose the ability to do what they love. For example, a skilled surgeon promoted to chief of staff seldom performs surgery, but instead becomes involved in administrative tasks and political turmoils.)

The author looks to an example of one employer who enables salesmen to remain in their roles for longer periods of time. High-performing salesmen receive titular promotions and greater compensation, but their core function remains the same. Another example is firms that provide perks to salesmen, such as granting a salesman with a certain level of production a part-time clerical assistant to handle some of the drudgery while enabling the salesman to focus more on what he does best.

The Problem of Sales Technology

Salesmen generally accept technology that automates the drudgery and makes the more effective in their roles - and reject technology that requires additional drudgery that does not improve their performance. Sales managers, meanwhile, are supportive of technologies that enable them to track the activities of the sales force. This is an ongoing conflict.

Because management has authority over the purchasing decision, software providers cater to their interests - and have produced a string of solutions that focus on measurement and tracking to the detriment of sales performance.

Their solution to that problem has merely been to rebrand their solutions: Sales Force Automation (SFA) systems a dismal failure - so they stopped calling it that, and replaced those systems with Customer Relationship Management (CRM) systems, which did the same things, and were based on the same principles. Recently, there's indications that CRM systems are failing, and there's buzz about "Sales 2.0" systems - which of course do the same things and are based on the same principles.

The author concedes that administrative tools are useful: unless a firm can monitor activities and measure their success, they cannot identify best practices and implement programs that will result in widespread improvement. But when the ability to monitor is implemented at the cost of performance, it is counterproductive.

And worse, when a system and procedures are put in place and salesmen are commanded to follow the established practices, their practices become standardized and innovation is effectively prevented. Not all customers are alike, and not all respond well to a standardized sales procedure. Every technology solution is based on certain assumptions - and where those assumptions are wrong, the technology forces salesmen to follow a procedure that is damaging to success.

By way of an example, the traditional sales process assumes that the customer needs information about a product, and the early stages of the sales process consist of presenting this information. This assumption hearkens to the pre-Internet era, where customers were completely uninformed. In today's world, the customer has likely researched your product as well as your competitor's products, has this information, and will be annoyed if put through a process that repeats to them what they already know. Moreover, if the information a salesman provides is different to what they have learned on their own, they will be wart.

The SFA and CRM systems are based on the principles of factory automation. Aside of being offensive to customers, such systems are less scientific than they might seem: they track WHAT occurred, but have no measurements of the HOW or WHY a given event came to pass. This is an example of the way in which a little bit of science, poorly applied, can do more harm than good.

Another problem with technology is that it oversimplifies the sales process - assuming that if certain things are done in a certain order, a certain outcome will be achieved. This works well in factory automation, where all the factors are controlled and predictable. But sales is much more complex and defies simplification.

Not surprisingly, the failure rate of technology is very high. One research firm (Gartner) indicates that CRM implementations have a success rate as low as 50% - which is a dismal track record and should be a clear indication that the system is flawed. Unfortunately, the reaction of firms to these poor results isn't to question the system, but to insist its people aren't using the system in the right way.

Building a Culture of Innovation and Entrepreneurship

Some sales managers wish to create an organizational customer that encourages creativity in the sales process: they recognize that each customer is an individual, with unique needs and motivations, and that their salesmen must be flexible and adaptive to find an effective way to appeal to each customer. Naturally, this is in direct opposition to the factory-like set of processes and procedures that are imposed by automated systems.

While much has been written on the topic of creativity and innovation, the vast majority tends to be anecdote-driven and pseudoscientific: an author spins a self-aggrandizing tale about something unusual he had done that resulted in success in a very specific situation. While this is great entertainment, it is completely worthless from an educational perspective.

A few notes are provided from a University of Miami study into leadership of innovative firms:

The study also suggested three basic rules for leaders who wish their organizations to be innovative:

  1. Coach others rather than direct them. Recognize employees for acting outside of their comfort zones. Be eager to reward success and reluctant to punish failure.
  2. Lead by persuasion and influence rather than by command and control. Be open to new ideas rather than imposing your own ideology on the firm.
  3. Strive for open communication. Rather than depending on traditional top-down organizational communication through formal channels, seek to use channels (such as blogs and social networking) that enable direct interaction - and "interactive" means participating as a listener, not merely a speaker.

It's generally accepted that everyone has some ability to be creative - however, the environment and culture of an organization can either stimulate or suppress creativity. Managers are responsible for creating such an environment.

Another general principle is that people enjoy being creative - but there is no single approach that suits everyone's idea of creativity. For example, extraverted people delight in raucous brainstorming sessions whereas introverted people are more creative by means of quiet reflection. Neither would be very creative in the opposite environment.

The Predictive Index

The Predictive Index

The authors suggest that their own Predictive Index measures four factors that are germane to creativity:

It's also noted that the assessment of these qualities doesn't lead to the conclusion that a given personality type is or is not creative - everyone is creative, but the way in which their creativity manifests itself will be determined by these qualities.

For example, introverted people tend to be more creative, but quietly so - they spend much time in thought and reflection, rolling ideas around in their own heads - which produces a smaller number of more developed and considered ideas. Meanwhile, extraverted people work through ideas by bouncing them off other people - which produces a large number of undeveloped and unconsidered (and often quite bad) ideas. Either personality type is capable of coming up with a good and creative idea, it's just that they go about it in a different way.

Fostering Entrepreneurship

Traditional education in business focuses almost exclusively on the management of ongoing operations, rather than the establishment of new ones. However, remaining competitive in an established market requires a more entrepreneurial spirit, and there is greater academic interest in fostering entrepreneurship in various disciplines: business, economics, sociology, and psychology.

Unlike operations managers, entrepreneurs are comfortable with ambiguity, uncertainty, and risk. They are motivated more toward pursuing new and unknown opportunities than in solving known and measurable problems.

The author refers to a 2009 survey of the 100 finalists in an entrepreneurial program (Ernst & Young) in Ireland, which found the following characteristics to be pronounced among entrepreneurs:

It's suggested that these findings from Ireland largely reflected the results of a 2006 study of successful entrepreneurs in France. (EN: Both are European countries - hence the possibility of cultural bias cannot be dismissed unless a broader range of cultures is considered.)

The author concedes that personality is only one factor in performance: skills are also necessary. However, skills can be taught whereas character is fixed and stable in the vast majority of people. The maxim "hire for drive, teach skills" reflects this balance.

(EN: I disagree agree with the notion that character is fixed - it is much harder to improve, and a lot easier to damage, but not immutable. I'll continue to take notes, with the caveat that the authors' premises are flawed.)

As such, the authors suggest that a person who is an excellent skills-fit and a poor personality-fit for a given role is unlikely to become a top performer, whereas a person with a strong personality-fit and a poor skills-fit can more easily be coached and developed into a top performer as the skills deficiency is overcome.

Psychology also indicates that intelligence is critical to entrepreneurial success - however, traditional measurements of intelligence are unsatisfactory in assessing the kind of intelligence needed. Traditional assessments of intelligence are based on known factors and established patterns, whereas the entrepreneur must apply his intelligence to a situation characterized by uncertainty, ambiguity, insufficient information, and rapid change.

It's also noted that intelligence is an amalgam of various mental skills and acuities: abstract thought, perception, understanding, reasoning, learning, problem-solving, etc. Different areas of endeavor rely on some of these skills more than others - which explains why an entrepreneur who is particularly adroit with financial services may be woefully inept with biotechnology.

The Importance of Non-entrepreneurial Creativity

In the present environment, innovation is likely overemphasized. It is the "new thing" that has caused the "old ways" to be neglected and disregarded, even when they continue to hold merit.

Entrepreneurship and innovation are critical to the formulation of a new idea, but exit the stage when the time comes to execute upon the idea. This does not put an end to the value of creativity: solving problems and improving processes also require creative thinking.

Generally, non-entrepreneurial creativity is conducted within the bounds of the original concept - it does not change the core of the idea, but finds creative ways to implement it. There are instances in which a discovery made during implementation and operation merits changing the plan - and many game-changing shifts originate after the initial creative act.

As such, companies that "truly master" innovation not only seek to be innovative in new development, but leverage incremental opportunities to be innovative that are discovered during implementation and operations.

Using Science to Manage Change

In the current time, it has become clear that most companies were unprepared for an economic crisis, and their behavior during the downturn has been shortsighted and reckless. The author cites a survey (Watson Wyatt) in which a third of US companies admitted that they did not have a contingency plan for an economic downturn, and half of those that did have a plan focused exclusively on layoffs.

When layoffs occur, managers often make these decisions based purely upon gut feeling, internal politics, and plain blind hope. There is also the assumption, in spite of evidence to the contrary, that those they choose to retain will remain with the firm.

However, employees are neither blind nor passive. In a layoff situation, there will be a number of employees will sense that trouble is coming and jump ship before it hits the rocks. There will also be a number of employees who will leave after a layoff, even though they were not among those that were dismissed. They may fear a second round of layoffs, their morale may be damaged by the dismissal of their colleagues, or their morale may be damaged by the aftershock, when the work of the employees who were fired is heaped upon them.

It's also worth noting that employees who leave of their own accord are often highly qualified people (attractive to other firms) who possess desirable character traits: the simple fact that they recognized the problem and chose to take action testifies that they are observant, proactive, confident, and motivated. As a result, the company that seeks to streamline its workforce by getting rid of the very worst employees often finds that their very best leave of their own accord.

In terms of human resources, the recent economic crisis should teach companies a lesson (EN: which they are likely to fail to learn again, as previous economic crises elicited no change in their behavior): that a company must plan and prepare for the worst, even in the best of times, in order to retain a strong core of employees that will enable the firm to weather the crisis and emerge poised for success. The author suggests some critical questions for approaching this task:

It's critical to avoid relying on gut feeling regarding the capabilities and mindsets of employees based on intermittent observation of their daily performance - a more scientific assessment can produce more reliable and consistent evaluations. In addition to identifying weak employees, managers should be attentive to the strong ones: they are the more likely to leave of their own accord or be poached by competitors who are seeking top talent.

Other Suggested Applications

A few examples of the application of science to personnel management are provided:

Behavioral assessment can be used to strengthen the interpersonal relationship between manager and employees. Through a behavioral assessment, a manager can develop familiarity with employees' values and traits, and leverage this information in communicating and interacting with individuals and groups.

A skills assessment helps a manager to understand everything employees "bring to the table" and, in that way, better delegate tasks to those employees who are best capable of handling them, identify weaknesses or gaps where individuals may struggle with duties, and appreciate any gaps in the skills of his entire staff.

Successfully influencing and rewarding employees requires a manager to know what motivates each person and what kind of rewards they value. Motivation is highly individual, and something that motivates one employee (e.g., financial bonus, public recognition, a personal note, additional time off, etc.) may not be valued by another.

Personality assessments also provide a more reliable indication of the emotional reaction an employee has to environmental factors. Without this insight, mangers must engage in guesswork about how a given person "feels" on a daily basis - and such guesswork is notoriously wrong.

An employee's interest in following a given career path is determined by their values. Some wish to take on new challenges, others prefer greater stability, and behavioral assessment can identify opportunities for career development and growth.

Case Study: Bell Mobility Canada

Mobile telephony was a major disruption to the telecommunications industry, which represented a need to change that was not merely an opportunity, but a necessity.

Bell Canada recognized this, and used behavioral assessment to define a profile of the kind of employee that would make the transition to the new line of business, which was highly useful in assembling a team to handle a new line of business.

Beyond that, BA was seen as a way to better understand employees, with an eye toward building out development plans that accounted for personal strengths and weaknesses. There are some general statements that this practiced provided "dramatically more insight than we had before" and facilitated "conversations that may have never happened otherwise."

It's also mentioned that the data gathered was not kept secret, but shared out along with the organizational chart as a way to help people get to know each other better, and that PI scores have become "part of the vernacular."

(EN: This seems questionable for a three reasons. First, psychological profiles seem highly personal - and an employee might feel exposed if their assessment results were shared publicly. It's next of kin to having an IQ test score posted for others to casually peruse. Second, it would be perceived, if not used, as a method for unfairly disqualifying employees from opportunities - i.e., if it were assumed that only a person with a an extraverted personality would be successful in a position, anyone whose scores indicated introversion would not even be considered. Third, psychological profiles are food for manipulative individuals - the ethics of using psychology in dealing with people are very gray.)

Another "best practice" is in using skills assessment to inform and assess training programs. Bell Mobility invests heavily in training programs, and spending the budget wisely means identifying the need for training, eliminating needless training, assessing its effectiveness, and using the outcome to make better decisions regarding the topics and methods of future training. In this regard, the claim is that the information was found to be "quite accurate" and the firm learned that a "one size fits all" approach was inadvisable, leading the firm to more effectively segment its training.

Case Study: Meadowbrook Golf

Meadowbrook Golf is a firm that sells equipment and supplies for turn maintenance (mowers, trimmers, fertilizers, seed, etc.)

The company president acknowledged that "bonding with the customer is as important, or more important than knowing the product" and that finding the right staff is critical. A great quote: ''It takes five years to win a customer and five minutes to lose one.'

The firm used the traditional approach to recruiting (posting a classified add, sifting through whatever resumes came in) and found it to be "a guessing game" in which many candidates who presented themselves well on paper and in interviews turned out to be unsuccessful one hired.

The firm followed the author's recommended approach: developing a psychological profile for positions in the firm and using telephone interviews for screening. Its goal was to narrow down the hundreds of resumes that came in to eight to fifteen candidates who seemed to fit the profile, then used interviews to see how closely the matched what was needed. It's vaguely asserted that this saved "hundreds of thousands of dollars" - but no specifics are given (whether it is recruiting costs, training costs, benefits to revenue, or a combination of these various factors).

An interesting interpretation: the firm administered the SSAT assessment first to managers, then to salesmen, and discovered that the managers scored much better. The firm quickly realized that this meant it was promoting good people to management, but that their experience wasn't being transferred effectively to their staff. (EN: A more obvious conclusion might be that the skills register was out of focus - the test was configured to measure management skills rather than selling skills. I'd be less critical of the results if it noted differences between successful salesmen and unsuccessful ones.)

It's also suggested that this enabled the firm to better focus its training budget, to focus on developing skills that were lacking rather than wasted on "teaching" people things they already knew well. It's suggested the training paid for itself within two weeks because one of the attendees closed a major deal with a customer after taking the training.

Another example is a poor performer whom the firm expected had the potential to be a strong salesman - after taking the training and being moved to a new territory (EN: which obviously taints the results), he sold more in four months than in the previous year.

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