How does management tend to react to poor performance from a sales rep? A lot of the time, the reaction is to fire the rep and start again from scratch.
This is especially true of startups and smaller businesses, where the CEO has often been either involved in selling in their own right or been able to build up a closer relationship with the sales team than is the norm in larger corporations. Sales consultant Russ Lombardo explained the thought process behind such decisions to Eric Markowitz of Inc.com:
'Lombardo says he’s seen many smaller companies where the CEO believes that because they used to sell a certain amount,' writes Markowitz, 'and they’ve never been trained, they know it can be sold in a short amount of time.'
Structured Selling Takes Training
As we noted in a recent blogpost, this type of approach incurs stratospheric costs, with companies spending on average $11,000 just to fill a vacancy. The new hire will then take between three and five months to reach full productivity. But, as Lombardo points out, it’s not just the financial cost that should make us think twice about this hire ’n’ fire approach.
'[The CEO will] say, “I hired some salespeople, and they couldn’t sell it, so I fire them and I bring in another,”' Lombardo told Markowitz. 'It’s like every six months they bring in a new salesperson, which means they’re going nowhere. You’re not giving them time to understand the customer or the market, and to train themselves… You can’t just say, “OK, six months and you’re out the door.” You have to look at the Why [sic].'
The 'why'—the top reason that sales teams fail—is lack of training. There are many reasons for this: lack of time, lack of ability, maybe even lack of training in managers. It doesn’t help that sales is traditionally a ‘self-starter’ industry: you’re supposed to show up and just make it happen.
For Lombardo, this is patent nonsense. All salespeople—all people—have weaknesses and Lombardo says that, through teaching, those weaknesses can be worked upon. 'Maybe they’re not so good on the phone, or maybe they have trouble closing, or maybe they can’t handle rejection,' he says.
'I’m a believer that good selling is more of a science than an art. You can teach people. If you are born with some of those skills, that puts you in a better position from the get-go, but that doesn’t mean they can’t learn.'
But it’s difficult to pinpoint a person’s weaknesses with stats as basic as their monthly sales figures. 'It is easy to obsess over the obvious numbers like monthly or quarterly revenue or close rates,' writes Walter Rogers on the Salesforce blog. 'Unfortunately, those numbers simply give you the “final score,” without telling you anything about how your team played the game.'
That’s where KPIs come in. They give us a quantifiable way of assessing performance and pinpointing where people are falling short—or, as Rogers puts it, 'the KPI…give you insights into how well each member of your team is actually playing.'
What are the benefits of KPIs?
'There is an old saying,' writes Rogers. '”People don’t do what is expected, they only do what is inspected.” When sales makers understand what you are going to inspect every week, they are much more likely to do them every week.'
In other words, KPIs hold employees accountable. Reps assume management will check their figures and act to make sure they are up to scratch, regardless of whether the figures will actually be checked or not.
'One of the biggest threats to any business is its staff[‘s] performance,' writes business performance coach Dave Sewell. 'The only way you can keep them focused on what they should be doing is to keep them accountable.'
Accountability to management can feel like more stress, more supervision - but accountability to the team, each other and their own goals can be powerful motivators that also improve morale. Whether you use a sophisticated gamification app or you write the magic number on the whiteboard, switch out raw sales figures for KPIs as public markers of achievement.
Make Success Understandable
Often, it’s difficult to make an employee understand how their relatively small contribution really can contribute to an overarching company target. The bigger the company, the more difficult it is for the employee to understand. Identifying specific KPIs that work towards that goal, allow the rep to see how their actions specifically affect the company as a whole.
'Let’s say your goal is to increase EBITDA by 2%,' writes Lisa Knight of The Strategic CFO. 'Working with your team to determine what factors are really driving EBITDA will lead to specific, actionable steps to achieve the goal. There are many ways to improve EBITDA but focusing on your company’s KPIs can help you develop your unique roadmap to success.'
Progress And Transparency
Long-term goals can seem not only huge but also very distant. It can be demoralizing to be constantly working towards something without seeing any real signs of the goal being attained. KPIs help employees see the small amounts of progress every day, giving them the satisfaction of having accomplished something as well as a feeling of momentum.
Knight calls these moments 'small victories' and says they can do wonders for the overall company atmosphere. 'Employees feel empowered to make a difference when they see the needle move, so breaking down the goal into its key drivers can give them the opportunity to achieve the goal in stages,' she writes. 'Focusing on these “baby steps” along the way improves morale and keeps everyone focused on the prize.'
As Grow CEO Rob Nelson points out in Inc., KPI analysis creates greater transparency and a healthy competition within a team. 'Reviewing metrics in our weekly meetings removed any kind of employee or manager bias,' he writes. 'It fostered healthy competition and forced employees to buckle down and improve their metrics before the next team meeting, and feedback became more collaborative and discussion-based.'
Throw Away The Cookie-Cutter
So, the benefits of KPIs are clear. Why, then, do some companies not implement them? Or implement them and then withdraw them in dissatisfaction?
Perhaps legendary entrepreneur Nolan Bushnell, the man behind both Atari (yay!) and Chuck E. Cheese (boo!), can tell us.
'A lot of what is wrong with corporate America has to do with a culture filled with antibodies trained to expel anything different,' says Bushnell. 'HR departments often want cookie-cutter employees, which inevitably results in cookie-cutter solutions.'
The cookie-cutter solution in this case is the one-size-fits-all KPI program that your company has implemented—and it’s the reason it’s not working. The problem is that reps are too diverse to have similar goals, as Josh Allen found out.
One Size Doesn’t Fit Anyone
Allen is vice president of sales at remote-access software/SaaS firm LogMeIn. He and his company introduced a traditional, one-size-fits-all sales KPIs only to abandon them. Here, he explains why:
'We’ve tried cookie-cutter KPIs—for example, everybody has to make 60 dials a day, create five new opportunities a week, etc,' he told Trish Bertuzzi of The Bridge Group, Inc. 'But when you apply KPIs broadly across different sales teams, and try to graph it, you’re going to have people who are on the high end and the low end. And very few people who are actually meeting the target.'
This type of approach creates huge problems, with staff becoming resentful at being assigned KPIs that they feel shouldn’t apply to them—and then having to sacrifice time they could be spending on sales trying to measure up to these poorly assigned barometers of their progress.
While working as a consultant, Liz Ryan, CEO and founder of Human Workplace and Forbes columnist, met a veteran software engineer called Marilyn. Marilyn had been assigned KPIs by her superiors—and, boy, was she not happy about it. 'I have my real job, and then my extra job meeting the completely arbitrary numbers in my KPI profile,' she told Ryan in an interview with Forbes.
'I have to keep track of about 15 things that I do and I have numbers to hit every week. The correlation between hitting my KPI targets and actually getting my work done is a very weak correlation. I could do a fantastic job during the week and move our company forward a lot and at the same time miss all my KPI targets.'
This was exactly the kind of employee satisfaction that Josh Allen wanted to avoid at LogMeIn. He and the company decided to go for an ingenious solution.
Personalized Sales Formulas
Instead of arbitrarily assigning reps KPIs, Allen and his team set about building a formula that would be customized for every sales rep. They factored in historic sales performance to come up with something completely unique for each employee.
'We know their historical conversion rate and we know their quota,' he told Bertuzzi. 'So we have two known entities and [we] work backwards from there. We use those to determine how much pipeline each rep has to build to hit their number.
'Then, we can layer in how many conversations it takes to get to that pipeline goal. From there, we determine how much effort and activity they’ll need—on a daily basis—to generate those sales conversations.'
The one drawback is that it will normally take at least a quarter before a new rep can have a reliable formula based on consistent behavior over a significant period of time. But it’s a price worth paying for the information it provides sales managers about their employees. Following the ‘hire and fire’ method, at the end of that quarter an underperforming rep is halfway to the door, another $11,000 gone. But if the same rep can be halfway to a personalized productivity plan in the same amount of time, there’s a solid base for growth there.
Suddenly, they can pinpoint the rep’s problem areas, something that would have been impossible from just looking at end-of-quarter figures. Allen gives the example of a rep who is not hitting his conversation goals and suggests possible areas of improvement:
'[T]he manager has to locate the specific place in the process where things are falling down. They need to find the coaching point. Is the rep asking good questions to qualify or disqualify early? Are they doing enough up-front research to know what type of business they’re calling into? Are they using relevant anecdotes that are going to stimulate or spark interest with the target contact? Are they talking to or targeting the wrong people? Are they not expanding the opportunity to include enough people?'
More Than Numbers
Provided you have good sales managers in place who are able to pass on their knowledge and intelligent, conscientious reps who are willing to absorb that knowledge, these customized KPIs will be a boon for your business, allowing managers to cut straight to a specific rep’s issues and offer a remedy.
If your company is currently not using KPIs, or is using generic KPIs, it’s definitely time to rethink your strategy. The benefits are obvious, but it’s important also to strike a balance. KPIs provide accountability and structure. But employees need room to develop and deploy skill without spending all day ticking boxes.
Overreliance on KPIs—regardless of whether they’re custom or not—can be infuriating for professionals who are highly motivated and consider the constant need to 'check in' with their KPIs an insult to that professionalism.
As Marilyn told Liz Ryan in Forbes: 'It’s insulting to have to stop my real work every few hours to focus on the numbers that someone assigned to me without even talking to me.'
Ryan herself then takes the baton from Marilyn: 'You’ll never cultivate Team Mojo [Ryan’s term for momentum] by measuring more of your team’s activities, but you can kill your culture by measuring too much and evaluating people based on their numbers more than other factors.'
Build out KPIs for your team based on data and personalized for each rep’s needs. Track them, preferably publicly, and make it clear how those KPIs were arrived at and how they’ll be used to make decisions. That way, instead of constantly panicking about results, reps will focus on immediately rewarding activities that they control. At the same time, you can cut recruiting costs and start seeing a return on that $11,000 for each new rep. Want lower turnover, higher and more predictable sales and a better company culture? Turn to the data, get reps on board and offer personalized KPIs.
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About the Author
A serial entrepreneur and digital nomad, Geoffrey has been running his own marketing consultancy for the past year.More Content by Geoffrey Walters