“Aligning Strategy & Sales” was named to the 800-CEO-READ Business Book Awards Longlist as one of the best sales books of 2014.
Putting the right team on the field is crucial, especially in sales, where differences in individual performance are greater than in other functions. Studies in B2B contexts find that rep performance in similar territories often varies by 300 percent, while in retail stores selling productivity typically varies by a factor of three to four. In other words, there are salesstars in many firms.
But focusing on hiring only “the best,” as many firms say they do, is not the best approach, for multiple reasons. Given the time and management resources required, most firms just can’t afford to hire stars in all sales positions. When firms are polled about their recruiting criteria, over half say they look for “selling experience within the industry.” This means that you and your competitors shop first among each other’s stars. And research indicates that stardom is not easily portable, especially in sales. Sales tasks are determined by your strategy and target customers, and selling behaviors are heavily influenced by your control systems and culture. Those are firm-specific factors. When you hire a star, or when a competitor hires one from you, that salesperson leaves all of that behind.
The truth is, you’ll never have enough stars for all positions. In fact, you don’t want stars in all sales jobs. In any sales context, some activities exhibit high performance variability but little strategic impact. Others may be strategically important but exhibit little performance variability – because the tasks are standard, because your firm or industry has reduced variability, or because your business model simply limits the bandwidth of performance variance. Think about the difference between sales personnel at Nordstrom, where personalized service is key to strategy execution, versus Costco where low price and product availability make selling activities less complex and variable.
Perhaps it’s time for a re-think of “Death of a Salesman.” After two decades of talk about the “new economy” and the “disruption” of certain professions by the Internet, you might think that sales as we know it is as stale and outdated as Willy Loman — a function that has been “disintermediated” by the digital revolution.
In fact, reports of the death of sales are not just exaggerated; they are wrong. To paraphrase a line from Arthur Miller’s play, “Attention must still be paid.” The sales force remains a force. True, the digital impact on business has been significant and, in some industries, revolutionary. But companies that view sales as just part of the plumbing do so at their peril.
Strategy has shrunk. For many firms and even for some prominent strategy consultants, the concept is now nothing more than “just-in-time decision making” or “a few critical initiatives” or other variations on “adaptability.” Driving this view is a set of assumptions: that making and integrating strategic choices “assumes a relatively stable and predictable world,” and that the speed of information flows and change in our high velocity world makes a search for sustainable advantage an ephemeral exercise that’s not worth it.
Forget, for a moment, the paucity of data supporting these assertions and the evidence that contradicts it. (U.S. Census Bureau data indicate that the average age of businesses is increasing and that new-business formation and other metrics of what economists call “business dynamism” have, sadly, been declining for decades.)
Instead, consider: how different are we, really, from what has come before? The idea of information overload was the basis for Alvin Toffler’s pop-sociology book Future Shock in 1970. That’s a few business generations ago: think mainframes with spindle cards, Nixon, and gas guzzlers; your parents were probably younger then than you are now. You can look at history too: creative destruction has been the fruitful norm, as Schumpeter emphasized, at least since the steam engine.
Let’s consider some common assertions with respect to sales compensation that in my experience, are often false.
The fear is that “complex” plans can cause salespeople to spend too much time calculating payoffs instead of selling and taking care of customers. Conventional wisdom is that “a good compensation plan is simple and predictable … A well-designed plan fits on a card small enough to be carried around in the salesperson’s wallet.” Maybe not. Many sales situations involve complex bundles of activities: group sales efforts, product plus service offerings, multibusiness participation on solutions sales, and so on. You can pretend the complexity isn’t there, but it is.
Behind the simplicity assertion is an implicit view of salespeople: they may not be bright enough to understand a comp plan that’s bigger than a business card. But this claim is contradicted (often by the same person making the assertion) by fears that a complex plan will drive gaming behavior by salespeople who maximize income with minimal effort. Will reps game the system, any system: complex or simple? Yes. But then the issue is crafting a win-win plan, not fear of taxing their brains. In a strategically effective plan, the company wins when the salesperson wins a bonus. Consider sales comp plans at firms like IBM, Oracle, and others that have strategies with complex sales tasks. The plans are many pages long, with multiple permutations and complex payout schemes. That complexity reflects selling realities. I have yet to meet the sales force that, in the aggregate, does not understand within a week the implications for (in the phrase used at IBM) “hitting big casino” and maximizing income. Available data across firms indicates no difference in the percentage of reps who meet and beat quota under more or less complex comp plans. As one CEO says, “Salespeople become experts in their sales plan, regardless of its simplicity or complexity, and you can count on unintended consequences.” Why? If a policy determines how you will eat, you will study it in detail. As for predictability: it’s the market that ultimately determines predictability or volatility, not your comp plan.
I’m calling it early: Aligning Strategy and Sales is the best sales book of the year. I know we’ve got a few months left in 2014, but I’m not too worried that I’ll be proven wrong—I’ve been waiting for a sales book like this one for a long time and the odds that another will appear before December 31 are long indeed.
With rare exceptions, sales books are about one of two things: the sales process or sales skills. The process books are aimed at providing the sales force with a path it can follow to close deals; the skills books are aimed at bolstering an individual salesperson’s results. Good ones of both ilks can be worth their weight in gold. “But,” warns Cespedes, a consultant and senior lecturer at Harvard Business School, “they also treat selling in isolation from strategy, and the focus of much sales training can have a perverse effect: It often leads a company’s sales force to work harder but not necessarily smarter .” Worse, he adds, the sales force can get “better and better at things that customers care less and less about…and the cycle can be self-reinforcing.”
Sales compensation is a perennial topic at most companies. There are many different ways to pay salespeople, and money is important. Business history is full of firms that got what they paid for (e.g., reps who, responding to their volume-driven incentives, failed to execute premium-priced sales strategies) and didn’t get what they didn’t pay for (individually-focused incentives in a team selling approach).
But the compensation conversation has also generated some assumptions that, in my experience, are often false. Here are five common “truths” you should reconsider.
For most companies, the most expensive part of implementation is aligning sales efforts and investments with strategy goals. Yet, research indicates a big gap. On average, companies deliver only about 50% of the financial performance that their strategies and sales forecasts promise. That’s a lot of wasted money and managerial effort.
Join us for a 1 hour ISBM webinar with author and Harvard Business School professor Frank Cespedes as he discusses tools to help close that gap and improve selling and strategy in your organization. Informed by his experience as a business manager, Board member, and academic, Cespedes will highlight what his recent research can tell us about improving performance in this area and increasing enterprise value. He will also leave you with diagnostics that you can use with colleagues in your organization after the webinar.
Start Time: November 20, 2014 1:00 PM Eastern
Sales leaders face a conundrum when selecting sales managers from the rep ranks. Most firms have examples of successful salespeople who are disasters as managers because they persist in the same behaviors as a manager that helped them excel as an individual contributor. With this in mind, some industry thought leaders believe sales management candidates should be pulled from another talent pool entirely.
On the other hand, a sales manager can benefit from experience as a rep in that particular sales organization to boost credibility among their direct reports. And credibility is required to conduct candid performance reviews, make compensation decisions, implement necessary account reallocations, and other vital sales management responsibilities. Considering these two conflicting facts, what’s a sales leader to do?
To identify salespeople who can become effective sales managers, leaders need to clearly define the specific behaviors required of managers, and then test for them effectively. And this actually isn’t so hard if you use the right framework and assessment techniques, and then use that knowledge and tools to communicate shared expectations with those aspiring to be sales managers.