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Measuring The Real Effectiveness of Salespeople
In the investment world, the return you will get in any given time period is far more dependent on the overall performance of the underlying market than the effectiveness of the manager. The absolute return of a portfolio could be very good, while the manager of the portfolio actually performed poorly and vice versa.
It’s for this reason that the investment world is filled with measurements attempting to isolate the actual value created by various investment decisions. One of my favorite is alpha. Alpha measures the “value added” by the investment manager by isolating the underlying risk the manager took to deliver their returns.
What’s true in investing is also true in sales. On a call with one of my clients today, we got into a discussion about the volatility of their market. I shared with him my concern that we may not have adequate information to assess the true effectiveness of our salespeople. Far too much of their performance is dependent on the underlying characteristics of his market.
Think about it. How do you measure your salespeople? All too often it comes down to total sales (or margins, profit, etc.). If a salesperson is up 20% we say that’s good, and if they’re down 5% we say that’s bad.
However, what if the salesperson’s market was up 30%? In that case 20% doesn’t sound so good. On the flip side, what if the market was down 20%? Then being down only 5% could be a hero’s performance.
In this post, I don’t have an answer. Instead, I’m asking a question.
How can we create a “Salesperson Alpha” measurement? What do you do to measure the true effectiveness of a salesperson?
Growth Means Making Mistakes
One thing I know with certainty is that if you want growth (be it personal, professional, or business growth) you’ll make mistakes. The faster you want growth – the more mistakes you’ll make; and if you want fast growth, be prepared to make lots of ‘em.
Mistakes are part of the game (I shared one of my basic ones yesterday). They shouldn’t just be tolerated, they should be celebrated and learned from. The question should never be “did you make a mistake;” instead it should be “did we make a mistake that we learned from?” And did that learning advance our journey?
I’m seeing a trend that is concerning me. While executives are putting growth initiatives at the top of their lists, they’re also demonstrating a dangerous level of “gun-shyness.”
In both selling situations that I’m involved in and in questions I’m getting from CEO associates seeking my advice, I’m hearing comments along the lines of, “We’ve done something similar to this before it didn’t work quite like we wanted. How do we know that we won’t be making a mistake here?”
The answer, obviously, is that you don’t know it won’t be a mistake. And the goal shouldn’t be to avoid making a mistake – the goal should be moving forward.
Don’t misunderstand me. I’m not a fan of making the same mistake again – nothing makes me angrier. I’m also not saying that your goal should be to make a mistake.
However, when the “similar thing” is something like:
- I hired a consultant before…
- I’ve tried marketing on the web before…
- We’ve tried hiring salespeople before…
And your asking yourself how do you know it will be different this time – the answer is because your doing different things.
The “mistake” questions you should be asking are:
- If this turns out to be a mistake, what’s the likelihood that we’ll learn something valuable from it?
- Does this effort have a better chance of being successful than the current steps we are taking?
- If this is a mistake, can we afford it? (If a mistake’s cost is large enough that it would materially impact your ability to continue, then find a way to scale the effort down and test it.)
The definition of insanity is to do the same thing again and again and expect a different result. If you desire faster growth than you are currently experiencing, that means you will need to try new things. The problem with new things is that the only way to prove that they will work is after you try them.
Don’t let the last three years prevent you from moving ahead. Keep your focus forward. If your tolerance for making mistakes is too low, you’ll choke your ability to grow.
I Screwed Up
Selling (the right way) is hard. As we train and lead salespeople and executives all across North America, I regularly try to remind them that selling is, in fact, difficult, and that it’s remarkably easy to fall back on old, natural habits that get in the way of making the sale.
Just today, I made a basic selling mistake.
I was introduced to the CEO (I’ll call him Mike) of a young, growing company by a fellow consultant who arranged the meeting. She set me up perfectly and my initial call with the Mike went phenomenally well. In hindsight, I think it went too well.
Mike got right into the growth opportunity he was pursuing. I asked some good diagnostic questions and we got deep into conversation. I was able to identify the problem he was having and that was preventing his desired result. I shared my observation with Mike.
Mike was very grateful for the insight, agreed with it and asked me the greatest prospect question of all time – “Doug, how can you help me solve this problem?”
So I floated some trial balloons, laying out some ways that we “might” be able to address the problem. Mike was eating out of my hand. I said give me a week or so to put some specific ideas together and he agreed. He finished the call by saying, “Doug, I really feel good about what you’re saying and I’m excited to be able to have a guy like you help me deal with everything.” If that’s not a buying sign – I don’t know what is.
Fast forward to my webex presentation. Executed flawlessly. Mike is loving everything that I’m telling him. Now it’s time for the closing question:
Mike, on a scale of 1-10 how do you feel about what I’ve shared so far and moving forward.
Mike’s answer – “15…
(Ready for the shoe to drop)
…I just need to talk with my two other partners and run this by them. Doug, would you be willing to share your thoughts with them?”
$%^&!! Partners?! Partners?! Mike never said he had partners. How could Mike let me do all this work and not tell me he had partners?!
Oh yeah – I never asked. I got so caught up in the “clarity” of the situation, I completely messed up some of the most basic tenants of any sales situation. Now to Mike’s partners I’m just a solution – and as I’ve written before, solutions are worthless.
I created a tremendous amount of value with Mike because we collaborated on diagnosis. Mike’s partners didn’t get to participate in diagnosis, so they didn’t get that value. No wonder they’re wondering how I’m different than other consultants.
I think I’ll save the sale. I’ve made mistakes frequently enough that I’ve also learned how to recover from them. The point of my story is selling is hard. We constantly make mistakes and, unfortunately, they’re often the same mistakes.
But remember, making mistakes is part of the game when you’re growing. The real story isn’t in making a mistake – it’s in adjusting and learning from the mistake.
Make It Productive
December is a tough time to get anything done when you are in sales. In my experience, there are two things that happen between now and the end of the year that can make the time productive.
- This time is great for closing business with people that have been hemming and hawing.
- This time is great to set up meetings for January.
Complete these two steps, act on them, and you’ll be a step ahead of 2011.
- Pick 1 – 3 opportunities that you’ve been working on for some time. Everything has been covered and you know they should make their decision. Call them up and remind them that now is the time to clean the slate and get 2011 off to a fresh clean start.
- Identify 5 – 10 people that you want to meet with but have struggled getting in touch or getting them to commit to meet. Call them within the next seven days and ask for a meeting in early to mid-January.
Here’s a bonus step to make finish 2010 strong:
- Write down the five best things that have happened for you this year. Then answer these points:
- Why is it valuable?
- What can you do to take further advantage of it going forward.
Be Consumeable
At one of my speeches recently, I was talking with an attendee on the difficulty he was having getting prospects to respond.
As he shared his experiences with me, I came to understand that:
- He did something really different,
- The results his clients received were nothing short of amazing, and
- His message was so complicated that the more he talked about it, the more I got confused.
I spent some time with him in an attempt to simplify his message so that people who hadn’t worked with him could understand why they would want to talk with him. While he listened intensely, I could see him struggled with making his message simple. “It’s more complicated than that,” he would tell me; or, “And we do much more than that.”
What I wanted him to understand was that it’s his job, and the job of his selling organization, to make his message easily understandable.
“Make it consumable – make it like junk food,” I said.
Marketers have understood for years that positioning yourself as the proverbial “spinach – it’s good for you” is not an effective strategy. Why do more people eat Oreo cookies than spinach? Because Oreos taste better and are more easily consumed.
The same is true when it comes to messaging. People are too busy and too crazed. They don’t have time to think, so stop making them do it. Do the thinking for them – make it easy – you’ll see your sales soar.
Some Valuable Stats on Successful Salespeople
A very interesting article in December’s Harvard Business Review: Do You Really Know Your Best Salespeople (subscription required).
Here are some interesting observations:
- The study observed 800 sale professionals in live sales meetings, measuring each salesperson in 7 skills.
- Skills related to sales success: rising to the challenge, meeting prep, customer interaction, and company presentation.
- Skills not related to sales success: storytelling, the sale pitch, and presentation and rapport.
FINDINGS:
- Only 9.1% of sales meetings result in a sale, and just 1 out of 250 salespeople exceed their targets.
- It takes $1,760 of profit per sale to just cover the cost of failed sales meetings, assuming that the meetings cost, on average, $160.
- The study categorized 8 sales types, but only 3 of those 8 types (about 37%) were consistently effective.
- The behaviors of the remaining 5 types (63%) actually drove down performance.
I’ll share my thoughts on this study in a future post.
Multiply Your Sales
I’m reading a fascinating book right now, Multipliers: How the Best Leaders Make Everyone Smarter (affil link).
One chapter addresses how great leaders (called Multipliers) make decisions. Specifically, Multipliers act as “debate makers,” while less effective leaders (called Diminishers) act as “the decider.”
Of course, one of the most famous “deciders” of all-time is President George W. Bush. The authors referenced an interview Bush conducted with author Bob Woodward where he said:
I’m a gut player. I play by instincts. I don’t play by the book.
Woodward, who wrote four books on Bush’s presidency and conducted more than 11 hours of interviews with him, had this to say about Bush:
I think [Bush] is impatient. My summation: He doesn’t like homework. And homework means reading or getting briefed or having a debate. A part of the presidency, part of governing, particularly in this area is homework, homework, homework.
Now please understand this post has nothing to do with Bush, Woodward or politics. The point is that Woodward’s description of Bush is smack-on to the description of the vast majority of salespeople.
I’ve often wondered why intelligent people don’t do the things that they know will help them get better results. Reading this passage lit a bulb for me. The reason is simple:
LOTS OF PEOPLE DON’T LIKE HOMEWORK
Unfortunately, the truth of our times today is that if you want to be successful selling, homework (often lots of it) is necessary. It’s a lot like the signs I saw when I first brought my son to workout at his baseball facility. They read:
- Mediocrity not accepted here
- Champions do what others don’t, when others don’t want to do it
The same is true of successful salepeople.
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Resources
Doug's Washington Business Journal Columns- Intelligent Growth Articles
Third Wave Selling Blog
Products to Grow
