The Hidden Costs of Sales Management Dogma
There is an old sales adage in that states “it’s cheaper to
keep customers, than to find new ones.”
This is wisdom is born of experience.
It connotes that the cost of recruiting new customers in terms of time and
resource is less profitable than keeping customers. Your current customers have already found
your product or service, examined it, found that it fits their needs, decided
that is was affordable to them, and the risk of trying your product was acceptable. No need to waste a lot of time
re-demonstrating the product or features in return sales scenarios, all the
ground work is already laid. This is
nothing more than restating the principle of the learning curve, which the
airplane industry’s profits are based upon into a sales scenario.
Enough said – we’re all agreed, right?
So tell me: if it is more profitable to keep customer than
to find new ones, why then has the sales industry adopted the attitude that
they’ll just churn through sales people?
If it’s good for the goose, why is it not good for the gander? Studies have shown that world class sale
forces have much greater company
longevity in their sales staff as compared to average sales forces. So clearly, what follows for customers also
applies to sales forces. Sales people
experienced in your products and services and known to your customers are more
productive than sales people new to your firm.
The logic is self evident.
So how did this notion of churning sales people become the
sales industry norm? To find the answer,
one has to go back to the halcyon days of sales. In the first half of the twentieth century,
and even in the decade following, the world of commerce was about mass
production. New production technology
increased efficiency which drove down costs.
Lower production costs lead to lower consumer prices that unleashed
consumer demand in an unparalleled example of supply side economics. During that time, the function of the sales
person was to place the product in retail outlets or find manufacturers and
businesses whose problems their product or service would abate. Making the connection was all that was
necessary because demand was already there, latent, waiting to be plucked. With
the exception of the Great Depression, it was a time of high growth. It was also the formative years of the modern
sales industry.
The Great Depression was to have a disastrous impact on the
sales industry’s formation. With so many
unemployed and demand down, it was easy to pay sales people low commissions -
there were plenty of out-of-work people around who would do anything for a job
and a possible paycheck. The notion that
all sales people were the same and thus interchangeable was inculcated into
industry ethos due to the exceptional situation in the infancy of the modern
sales industry.
This notion was later refined by the IBM model of sales
management in the ‘50s and ‘60s. That
model held that you churned the bottom third, the bottom 30% of your sales
force. As you churned, the cream of the
sales force would rise to the top. This
reinforced the notion that good and great sales people were born, which
furthered the opinion that because good and great sales people are
self-selecting via performance in the work place, all that was required of a sales manager was
to filter as much raw sales material as possible to separate the chaff from the
keepers. Much, if not most, of IBM’s
success was attributable to its technical innovations. But because IBM was such a sales juggernaut,
it was presumed that their sales model had to be a contributing factor as
well. Thus a generation of sales
managers were taught that it was an acceptable business practice in sales force
management to burn and churn its labor force.
This became a crutch to sales management professionals. Sales down? Simple fire the current
non-performers in the sales force. In
this way, action-firing salespeople, could be mistaken for change. Change is the foundation upon which the
emotion hope is built. So, firing
current non-performing sales people often generated false hope for improvement
in sales. What was really happening in
this scenario was perpetuation of the same faulty logic of self-selection and
cream rising to the top. Repeating the
same mistakes lead to further flat sales or even declines as sales people were
constantly being turned over
Logically, if your bottom third of your sales force is
constantly being churned and the sales cream rises to the top, your sales force
over time should become stocked with nothing but sales all-stars as the cream
at the top displaces the whey-ward performers of the bottom. This never happens. This should be the first clue to every sales
manager that the time honored sales assumptions are nothing more than time-worn
sales fairy tales. If this type of
reasoning were applied to other industries, like baseball for example, how much
easier it would be to win the World Series.
All a franchise would have to do is create a massive farm team system to
filter as many Single A ball players as possible to end up with a complete
roster full of Babe Ruths, Lou Gehrigs, and Hank Aarons. The notion of self-selection and sales cream
rising to the top starts to look preposterous when applied to anything other than
sales where this hokum is not only believed but treated as accepted fact.
The reality is that every sales force has a handful of
all-stars. Why? - Because they are
exceedingly rare. There is some
research, which our consulting firm – SPAN Consulting Group is leading the way,
which points to the fact that there may be innate abilities that come into play
in the formation of a sales all-star.
There is much stronger evidence that good and great sales people are
made by experiences. So there are
actually two components to great sales people:
an innate ability and a learned behavior. The science shows that much of the innate
aspect has to do with a person’s mental acuity and whether their Mirror Neuron
System was fully developed. Even by this
criterion, there is a split between innate and learned in the Mirror Neuron
System. This is a mental mechanism that
is responsible for recognizing the emotions being emoted by facial expressions
in others. The observer must first mimic
or mirror the viewed person’s facial
expression on their own face. This is
known as a micro expression and it need only take a fraction of a second in
order for the physical activity of enacting a facial expression to be compared
to the library of facial expressions in the Mirror Neuron System library and
their corresponding emotions to determine what the viewed person is
feeling. Building the library shelves of
the Mirror Neuron System is innate; stocking the shelves with exemplar facial
expression with emotions is a learned activity.
By in large, the evidence keeps coming back to the notion that great and
good sales people are made.
But before we look at how good and great salesmen are made,
we need to examine the bottom third. The bottom third, the favorite pile of
sales managers to turn over, is where the assumption of the self –selecting,
cream-rises-to-the-top assumptions really get exposed for what they are. But, what comprises the bottom thirty
percent? The obvious answer is low
performers. Scratch a little deeper
though and it becomes very informative about the health of your sales
organization. Prior to being low
performers, what were they? If the low
performers are new hires, then that’s a pretty good diagnostic that you have
problems in your screening and selection process for new hires or problems in
your training (and a topic best served in another article). If you’re like most sales companies, a good
portion of those low performer were once solid performers and the occasional
top performer who have lost their way.
So many sales managers just take it for granted that’s just the way it
is without asking why -what happened to these once solid or stellar
performers. The belief has been held the
attrition is “just natural.” It’s
actually quite unnatural for someone to be good at their job and then suddenly,
or even incrementally, to lose their performance rating. You’d certainly not want to see that in your
health care professionals or any other profession for that matter. The standard is the longer you work at
something the better you get at it. But
in sales, it’s often referred to as burnout.
This is an amorphous term that is internally recognizable to most people
in the sales industry, but they lack the technical understanding to describe what
it is and more importantly what caused it.
In order to understand burnout, you first have to understand
your adaptation mechanisms called the Paradaptive Intelligence Network
(PIN). The PIN is a collection of mental
mechanisms that interact for the purpose of achieving goals which in a larger
sense is the process of adaptation. All
human brains follow the same and very specific sequence of emotions that
control the entire adaptation process.
This sequence, or algorithm, of emotions has a negative side called the
corrective signal side and a positive side called the growth signal side. Each side has a continuum of emotions of
strongest emotions of each variety at the ends of the continuum and the weakest
emotions of the two halves abutting in the middle. One of the corrective signals, and it
comprises the vast majority of emotional and adaptational states encountered in
sales people, is fear. Quotas are a
threat. It is a message of perform or
else! Fail to met the quota and you’re
gone …the churn and burn mentality accepted in the sales industry. Fear is caused by threats. The Paradaptive Intelligence Network is
designed to identify known threats in your environment and move you away from
it. Once identified, the PIN will never
relent from agitating you to move away from a threat. The stronger the threat, the more it agitates
to move away. It will interrupt all
higher order brain functions of adaptation such as logic, reasoning and
imagination in order to move you away from the threat. These impulses that agitate to move you away
from threats are akin to psychic pain.
While this pain and agitation impulse to move away can be overridden by
the conscious mind up to a certain point, it does so at a further cost in
degradation to high order conscious mind processes in addition to those being
levied by the corrective signal.
With that understanding in place, now we can see that
constantly threatening employs only degrades their ability to achieve the
goals, i.e. quotas. A quota accompanied
by a threat of dismissal made good by example to another employee becomes a
known threat. Sales people work under a
threat condition for the vast majority of time it takes to accumulate sales. So even your best sales people are working
under a threat, and thus even their higher order brain functions are degraded
to some extent. Imagine what they would
do if you weren’t hamstringing them with a threatening environment. While they maybe on pace to achieve quota,
that does not alleviate the threat and stop the mental agitation to remove
themselves from the threat.
Salespeople work independently, usually externally, to the
firms they represent. In the parlance of
the founding of America, they spend a lot of time in “Indian Country.” You would expect them to want to come home to
the farm, ranch, mother ship - pick your euphemism, after spending time in the
naked and brutal business world. But if
the safe harbor is tainted by a threat, such as a quota, and their internal
mental mechanisms are agitating them to move away from the threat – the very
firm they represent and are trying to bring clients into the fold of-- then
where do you go as a salesperson? The
answer is: nowhere – you’re stuck between a rock and a hard spot. It is this dynamic that is the basis of sales
person “burnout.”
Fear has two dimensions: intensity and duration. Combat veterans face high intensity threats
for relatively short durations of time.
In WWII, The average combat veteran saw three months of combat before
their units were pulled off the line. In
the past several decades the U.S. military has stretched that enemy contact
time to between six and eight months because the nature of the battle zone has
been deemed less intensive. The result
of this exposure often led to what was called shell shock or battle fatigue and
is now called Post Traumatic Stress Disorder (PTSD). Sales people face a lower intensity threat –
let’s be honest the threat of being fired leading to loss of lifestyle and
security for your family while traumatic is not the same as someone trying to
kill you – but they face this lower intensity threat for a much longer duration
of time, sometime years. Long term,
lower intensity threats have a cumulative effect that is equal to PTSD. That effect is called burnout. Both PTSD and burnout are the same thing with
identical symptoms. Both are marked by
having been conditioned by threat environments to see threats where none
exist. Both are marked by their
inability to sleep. Both are marked by a
profound sense of unease. Both are
marked by overreaction to what might be considered normal events. And the list goes on. In sales, it’s called “when a sale person
goes negative.” They gripe about
everything that the company does because they’ve been conditioned by continuous
threats to see everything the company does as a threat. Just like the veteran that jumps at a door
banging shut thinking someone’s shooting at him.
Another interesting and significant corollary between the
military and business is a concept called combat in effectiveness. In the military, a division is considered
rendered combat ineffective when the losses go below 70%. One would think that there would be plenty of
utility and fight in a unit operating at 70% strength. But the loss of 30% fractures a unit beyond
the mere numbers. In an organization
that succeeds by cooperation, the loss of 30% severs lines of communication and
propagates turbulence in coherence of group dynamics and performance, which
isolates even larger segments of the organization.
Hopefully, a light bulb just went off in your head as
realized that the IBM model of churning and burning your bottom 30% of your
sales force and combat ineffectiveness at 70% are two sides of the same
coin. They are talking about the same
thing. So, sales managers who are
churning and burning 30% of their sales force are all but guaranteeing sales
forces ineffectiveness. Not convinced
yet? Okay – think about it this way: your
success as a sales manager rides upon the cooperation of your sales force and your clients. When you churn and burn a sales person, you
isolate those customers that he was servicing.
So the perturbation goes beyond just the sales person or the sale force
and goes to the core of your business – your clients. Is your company so strong and durable in the
market place that you can afford to isolate 30% of your customers? Be assured that your competition has a better
feel for that than you do.
Need more proof?
There are all sorts of unsophisticated and oversimplified pap being written
in the business world today about “energy vampires,” negative energy, negative
nannies, and so on. One would consider
this is to be equivalent to zombie invasion where one bite can spread the dread
disease in such a rapid fashion as to overwhelm the organization’s
culture. But let’s examine this concept
a little closer. Those negative nannies
and energy vampires have “negative attitudes.” We now can understand that threats in the
work place have created a perpetual assumption of threat in the employee’s mind
whether one existed or not. The mind,
and specifically the subconscious is highly attuned to seeking threats in the
environment. When one employee is seeing
a threat, i.e. has a negative attitude, the minds of other worker and clients
surrounding them will pick up on the threat signaling of the impacted
employee. The standard antidote
proscribed by management for the employee that has succumbed to the natural and
inevitable threat laden environment is to forbid that employee from signaling a
threat to others - to keep their negativity to themselves. The concept of trying to stifle this type of
signaling once the employer has induced it into an employee borders on the
ridiculous. It is impossible for the
conscious mind to eliminate a threat perceived by the subconscious mind. Additionally, it is impossible for humans not
to signal these threats because other types of signaling occur beyond the
verbal. Lastly, what business defect has
ever improved when treated with neglect?
Finally, to prove you’ve been shooting yourself in the foot
if you adopted a churn and burn strategy in sales force management, here is
another corollary from military science.
The primary strategy in combat is not to kill the enemy. The primary strategy is to wound your
opponent. A killed soldier’s position is
marked on the battle field and left to be collected after the battle. A dead soldier only decreases the efficacy
of a fighting force by one. But a
wounded soldier requires on average three people to attend to him and remove
him to the wounded treatment system of a modern military army. So for the price of one bullet, you can
remove four of your opponent’s strength from the battle field with a wound. A salesperson experiencing burnout will
decrease the effectiveness of those around them by inducing a state of fear or
a higher level of fear if it was already underlying in others. This degrades the ability of those around
them by reducing their capacity for reason, logic, and imagination necessary to
complete a sale. So the corollary has
relevancy. Inducing burnout not only
creates the loss of the affected employee, it will impact and ripple through
those in proximity to them and will happen regardless of whatever measures you
take to stifle the threat signaling. You
can’t stop what human’s are built and genetically programmed to due. You’re just wasting your time and energy in
fighting Mother Nature.
This all points to the fact that threatening your employees
costs you money in the form of lack luster sales performance. The ingrained dogma of churning and burning
a sales force’s bottom 30% as the solution to sale performance problems is so
ingrained in the culture of sales that it remains to be seen whether the industry
will ever see the light as to how this pap, dispensed with certainty, and
worshiped without question, is the root of its performance problems. Really? – How many of you would stay in
relationship where your partner threatened you with a meat cleaver ever time
you came home and meant it.
Now, let’s look at the other seventy 70% of sales force
starting with your sales all-stars. By
definition, those all-stars are the top twenty-five percent of your sales
staff. They are working on the positive
side, the growth signal side of the adaptation emotional algorithm. They take little notice of quotas, they just
don’t care. They are focused on
succeeding, and reaching a goal they’ve created for themselves of completing the
process with a sale. The internal
emotional algorithm of emotions rewards them with bath of hormones and
neuro-chemical that create pleasure for having achieved and internal goal. In other words, they are internally rewarded
with pleasure for successfully adapting. The fact that they made quota and
sales bonus is secondary, or not even prominent in their conscious
landscape. The threat of quota has
little or no impact on them because they are not focused on your silly little
measurement of their performance, they’re seeking the rush, the stimulation of
success. In this way, just like
Pavlov’s dog, the all-star sales person conditions themselves to seek the
internal reward of joy and pleasure of successful adaptation, rather than the
external goal of quota fulfillment or sales bonus. The all-star sales person salivates for “the
kill,” making the sale, and not the supposed reward. Your all-star sales person does it because
they are good at it, and they like being good at it. The external reward of
sales bonus is really more beneficial for the middle of the pack performer.
It is the middle of the pack that defines great world class
sales forces. And it is the middle of
the pack that is most problematic. The
middle of the pack performers are middle of the pack performers because they
are not internally driven for success.
They respond to external stimulus, like quotas and sales bonuses. In fact, studies have shown they are
motivated to relieve pain, psychic pain, induced by threat. And they will only work hard enough to make
the pain go away. Once the quota is
fulfilled, they stop selling. In this
way, the quota doesn’t become a stimulus for achievement, it becomes a signal
to stop working and becomes a limiter.
So the average or sub-average sales manager will be saying right now –
“that’s and easy problem to solve, I’ll just raise their quota”…but you already
know what happens when you raise the treat level within a sales organization
and the long term costs to you.
The reason why middle-of-the-packers are focused on external
stimulus is because they lack understanding of how the customer’s mind work, of
the customer’s adaptation process, whereas the all-star has an intuitive sense
of that process that is guiding them and makes them so good. Your all-star is feeling their way through the
client’s process, whereas the middle-of-the-packer is trying to find some
metric that will work. And there are
only two metrics: relationships and process.
The process middle-of-the pack sales person has a formula they work: X
amount of cold calls = X amount of appointments which will lead to X amount of
proposals which will result in X amount of sales. They are problem solvers, they succeed on
focusing on the problem and not the people. The other type of sales person
relies upon their ability to form relationships. The relation based sales person isn’t focused
on the problem of the client, but their relationship with the client. The all-star, because they have an intuitive
sense of the prospect’s internal decision making – innovation adaptation- process
knows when and where to use both problem solving and relationship building to
achieve a sale. Because both
problem-solvers and relationship focused middle-of-the-packers are using a
limited model of understanding to find success in their profession, they
understand, they feel a potential threat because they know/feel that they are
not as fully equipped and capable as the all-stars. This disparity in ability creates a threat
for them because they’ve seen others removed for non-performance which makes
them much more susceptible to threats in the work place and thus burnout.
So by now, hopefully you’ve drawn a better picture about the
hidden costs of sales dogma of quotas and process driven sales efforts. Threats made to produce short term results
will end up limiting your sales organization’s performance. Fortunately, there are solutions to the
problems discussed in this article, and the consultants at the SPAN Consulting
Group, Ltd. are ready to help you figure out what matrix of solutions is right
for your organization.
If you’d like help, please see us at our web page:
www.spanconsulting group.com
For further reading on the topics discussed here, look for Sales Psychology 101: Paradaptive
Intelligence ~The Grand Unifying Theory of Adaptation, Consumer Behavior and
Sales by Scott Syverson available at fine book sellers and online at
Barnses and Noble and Amazon.