B2B Sales and Marketing Turnaround

 

https://dripify.io/b2b-sales-strategies/

Sales Department Analysis (B2B)

One of the first things for turnaround a sales department is to know what the people profile is. So I would suggest the following classification: Farmers, Hunters, and Soldiers.

Sales department staff classification: Farmers, Hunters, and Soldiers.

A few common mistakes in sales departments regarding staff profile

• Not having Farmers: So not having customer loyalty strategy or not properly implemented.

• Having Farmers but manage everybody as Hunters or Soldiers: In this case probably we are not taking advantage of the specific Body of Knowledge (BOK) for Account Management.

• Not having Soldiers: This is deciding to “not pilot our sales”. I mean leave leads generation just on marketing actions could be a risky decision. Because we do not decide specifically the customers in which we are interested, we just wait passively to receive customers’ requests that could come from an interesting customer for the firm, or not. Likely, many customers searching for bargains will approach us. Moreover, some customers could not be approach our company because there is a misunderstanding about our market positioning. For instance, customers that could think that our company is too big to be interested in their business while those customers have enough size for us. Be aware that without Soldiers the company cannot create a Territory Plan, and companies without a Territory Plan manage the present rather than the present and future of sales.

• Having more than one sales type, but managing all of them just according to one type: People profile and even salary must be different for each sales type mentioned, so we are managing wrongly all of them in the same way (“coffee for everybody strategy”).

Analyzing B2B Sales Profiles: Who Are You?

Nowadays closing large and complex deals in B2B is getting harder and harder for sales staff. Large firms in order to guarantee the best deal in important purchases are creating robust procurement teams, hiring well prepared professionals from specialized industries (e.g. from logistics service providers), and using consulting firms support. Today large companies are well-prepared and define their own solutions. Thus the time in which the relationship building approach used to fit much better than other tactics to close sales deals looks to be ending.

CEB Consultancy (Matthew Dixon and Brent Adamson’s) study has performed a massive study in order to understand much better the key success factors of high performance sales staff. They have found that we have five main sales profiles, although some salespeople could have characteristics of more than one style:

• Relationship Builders are focused on building rapport and nurturing long term relationships.

• Problem Solvers used to be well prepared to manage post sales issues. They are detailed and reliable people who solve problems. We are likely in front of the right profile for Key Account Managers.

• Hard Workers enjoy with their job. So they are self-motivated and are able to work hard for closing sales. They are constantly interested in comments regarding the sale.

• Lone Wolf is self-confident salespeople who follow their own instincts rather than the rules.

• Challengers have a deep knowledge of the customer business, their industry and products/services. They love to debate and approach customers challenging their assumptions and trying to move from their comfort zone bringing up new ideas that generate massive value for customers. Being at ease to discuss money.

This study concludes that after analyzing the five styles (core performers) sample the higher performers are: Challenger (39% of high performers relative to core performers) and Lone Wolf (25%). Under performers used to be the styles: Relationship Builder (7%), Problem Solver (12%) and Hard Worker (17%).

From the turnaround point of view is essential to mention that many companies spent massive amounts of money on training and other initiatives in Relationship Builders. However, many of those companies do not underperform maintaining accounts, or having loyal customers. The big issue use to be getting new deals and especially new customers. So sales turnaround in those firms should likely move resources from Relationship Builders to Challengers.

Sales Rep Pofiles from CEB Consultancy

CEB consultancy studies brings us a new sales paradigm. While Relationship Builders say to customers what they already know in order to build advocates within the customer firm, Challengers make customers think and bring new creative and worthy ideas increasing the deal closing probability. Important companies purchasing decisions are being based on bottom line impact rather than in rapport.

The Best B2B Sales Transformation Methodologies and Books

Unfortunately, market competition is intensifying day by day. Sales organizations need to be updated and even continuously transformed to maintain the firm competitiveness and accomplish with the high demanding expectations of shareholders. Leading sales organizations use sales transformation methodologies to reinvent themselves and revamp sales.

What is a B2B sales transformation methodology?

It is a proven sales methodology that comes with a new insight to increase the number and the size of the winning deals at the same time that reduce the long selling cycle time of large complex sales.

What are the key B2B sales transformation methodologies?

We have summarized in a timeline infographic the sales methodologies that have transformed sales organizations. Although some of them like Dale Carnigie Relationship Selling Principles were created many decades ago, all those selling techniques are still to be valid nowadays. Most of the newest sales methodologies are adding new contributions to the sales knowledge rather than offering a new complete sales methodology. For this reason, it is advisable to know all these selling approaches.

Is your sales organization using the full potential of the available sales approaches?

In our experience many companies are using the potential of 20th century approaches as Solution Selling. Nevertheless, there are still many organizations that they have no updated their sales methodologies in order to incorporate new selling concepts as The Challenger Sale (see our post Analyzing B2B Sales Profiles: Who Are You?) or Inbound Sales.

What is the best B2B sales transformation methodology?

In our experience success sales reps at least must master one of this methodology. As many of them that are mastered in an integrated way will likely increase the selling success rate. However, it is important to simplify the selling approach in order to be able to training and implementing an easy and replicable selling process around the whole sales organization. Thus, our suggestion is taking one of those methodologies as a core sales process and complement that one with a few addons from the other methodologies.

We suggest using Inbound Sales methodology as a core sales process.

Why should we use inbound sales methodology as a core sales process?

1. This is probably the newest sales transformation methodology. So, it is integrating most of the previous sales approaches (product benefits, spin selling, solution selling, quantify value, building rapport and so on).
2. This methodology realizes that Internet as increase the amount of information flow and power of buyers. Therefore, the sales strategy is based on the buyer rather than the seller. Failing to understand how the buying behaviors have changed is one of the most important barriers to growth for many firms.
3. Inbound sales personalizes the sales experience to the buyer’s context rather than using standardized emails or presentations. That will support the differentiation process and the chance to win deals.
4. This approach is taking advantage of the pure interaction selling processes AND the sales support technology processes (CRM tools, etc.) in order to increase the sales team productivity and success rate.
5. It is based on smarketing (sales and marketing processes integration) to achieve around 20% higher revenue.

Although identifying Inbound Sales as a new powerful sales transformation methodology is a great step, that methodology must be adapted. That methodology mentions the integration with other sales approaches as building report but it does not develop how to do. So, we suggest to request support from specialized companies on Inbound Sales to overcome some of the handicaps of successfully implementing the new Inbound Sales methodology to materialize the full growth revenue potential of the organization. Moreover, we are showing the Key books but there are other books that we do not tag as transformational but they are important to be considered.

Quick and Inexpensive B2B Guerrilla Marketing Transformation to Revamp Revenue

As Jay Conrad Levinson said in his book Guerrilla Marketing “failure to upgrade your marketing effort is a symptom of corporate demise.” Many firms need to revitalize or even turnaround their growth strategy. Nevertheless, without a marketing transformation or deep review, we have the risk of having a false start in our growth initiative. I think that Guerrilla Marketing with 200 marketing “weapons” is a very good starting point to revitalize the marketing strategy.

Why is marketing so important for growth transformation?

Two of the most common causes of growth failure are related with marketing:

1. The wrong company positioning and target market definition: Strategic marketing is the starting point for a success growth strategy, and there are some SMB (Small and Medium Business) that have not thought deeply about the positioning of their firms. Organization need to think about:

• What is your firm competitive advantage?
• What are the real benefits that your company is offering?
• What are the key differentiators?

That positioning exercise will take the company to the next strategic issue, I mean the definition of the target market. For most SMB,  a success target definition will require a niche focus because that would be probably the only way to differentiate from huge global organizations that used to be focus on all the large market segments. Moreover, that niche specialization will “likely protect” the company from the commoditization threat and price competition.

Once that we have successfully performed the key strategic marketing activities, our sales organization would have a much higher success when it will continue the strategic growth process defining the strategic account targeting.

2. The unsuccessful attempts to attract customers: Different surveys to sales reps show that one of the most difficult selling tasks is to get leads. Strong marketing organizations are not just focused on brand building rather than on lead generation. So, how many leads is your marketing team generating? If the answer is just a few, it means that we need a marketing transformation.

Why is not our operational marketing generating enough leads?

First, many of us we have learnt many of the best marketing practices from the most successful players which means from large well-known companies. Those large well-known marketing oriented organizations used to have two main characteristics that determine the operational marketing: they used to be B2C firms, and they used to have huge marketing budgets. So, for those firm a success operational marketing used to be based on building brand awareness using traditional media ads. However, if we replicate large B2C operational marketing in a SMB B2B organization will likely realize that our budget is not enough to be effective.

Second, misunderstand the concept of marketing. We must not confuse advertising with marketing. Guerrilla marketing transformation offers us 200 marketing weapons. Ads are just a small portion of the marketing weapons, and used to be one of the most expensive weapons. In the same way, we must not confuse social media with facebook. Facebook is the largest and most famous social network but if we are in the B2B business, should we think about LinkedIn as our main focus social network? Finally, it is well-known that a picture worth a thousand words. But in complex B2B, sales messaging is the key for a success selling process. Photos is not marketing. Photos just will demonstrate what we say with our message.

Third, overlook that one of the competitive advantages of SMB is that they can focus on tiny details to approach and build close and personal relationships with customers and prospects. Nonetheless, old marketing practitioners overlook this advantage and continue using unethical marketing tactics as massive email spam that damage the company brand and even achieve less leads than could be with laser focus emails.

Fourth, one of the sales reps activities is generating leads. So, some companies decide to leave 100% lead generation responsibility on the sales organization. This is happening because there is probably a misunderstanding of the potential amount of leads that could be generated with the right marketing, and it is also misunderstood the complementarity of marketing and sales leads generation approaches.

Fifth, your marketing ROI is determined by your marketing investment. Small and medium enterprises used to have important budget limitations. Although guerrilla marketing transformation does not need a lot of money, it is forgotten that an adequate formal budget is need it. Thus, it is quite common to find organizations that just have one person to take care of marketing, and with very low experience. You will likely know what the consequences will be. Yes! a false start of the marketing initiative. In those situations, I would suggest to compare the total marketing investment with the total sales investment. Then, I would recommend to analyze if we transferred some budget from sales to marketing, would it be worthy? For instance, moving the investment from one underperforming sales reps (if there is any) to marketing would likely bring more leads to be closed for less sales reps. That should reach the sales organization productivity, and hopefully the revenue and profitability of the company.

Implementing B2B Guerrilla Marketing transformation

In 1983 Jay Conrad Levinson published the first version of Guerrilla Marketing. At the moment of writing this post the last version was the fourth one from 2007. Guerrilla Marketing shows 200 marketing weapons which many of them are easy and inexpensive to implement (download our template: 200 Guerrilla Marketing Weapons: Plan & Budget). Thus, I strongly recommend for turnaround and transformational projects using this marketing approach that must bring quick and dramatic results in the marketing and revenue areas of the organization.

Those 200 marketing weapons are classified on 8 main categories: mini-media, maxi-media, e-media, info-media, human-media, non-media, company attributes, and company attitudes. I generally suggest avoiding maxi-media that used to be more suitable for large B2C organizations and analyze properly the mini-media options because it show many of the traditional media tactics that are reducing their effectiveness nowadays. On the other hand, I highly recommend to explore and focus on the potential of e-media and info-media weapons because with a small budget, a stream of important leads could be generated focusing on Internet marketing.

In order to maintain marketing budget under control, you need a professional marketing team (the team could be just one person, this depend on the size of the company) with experience, imagination, flexibility, energy and technology prepared.  So, in the same way that you cannot expect to improve the sales organization without at least one sales A-player in your team, do not expect relevant improvements from your marketing without at least one marketing A-player in the team.

I must highlight that guerrilla marketing transformation is about speed, flexibility and inexpensive initiatives. In order to achieve those goals, I suggest thinking about the trade off between the expensive highly personalized marketing material provide for traditional marketing and publicity agencies versus using very low cost customizable templates sold by Internet. If you are lucky to manage a large budget for marketing, there is no doubt that you must use the specialized services of marketing and publicity agencies. However, I have seen medium enterprises with very limited budget trying to replicate large firms hiring those professional services, and the result was a high quality marketing material that could not be quickly updated, being inflexible and expensive. Therefore, rather than having control over the key marketing material by performing monthly and even weekly updates, Those firms just could update the essential marketing material once every 3 years or even more. That un-flexibility killed the marketing freshness that in the Internet age is even more essential than ever.

As I mentioned before, Internet is likely the great opportunity to transform your marketing. In order to materialize that opportunity, the marketing guerrilla staff must be comfortable working with customizable electronic marketing material templates, WordPress content management, CRMs, and so on.

Is Your B2B Firm Struggling to Grow Sales? Sales Transformation

If your firm is struggle to grow sales, you already know that you are facing an important issue which needs to be fixed quickly. We cannot “pilot” our organization, if we are not able to manage the top line of the company (sales). We could try to protect the profitability of the firm with cost-cutting programs, but those initiatives have a short-term limit effect. Healthy companies need a reliable revenue growth “engine” (sales organization) or perhaps they need a sales transformation…

Sales Diagnostic

The first thing we need is to make a diagnostic of the severity of the sales issue. So we would suggest checking quickly, if your firm was facing any or most of the following symptoms:

• Commoditization of your products/services

• Lack of sales leads

• Low sales success rate

• Revenue does not take off

• Margins are getting eroded

• Weak company pipeline

• Low sales forecast accuracy

Unfortunately, all those symptoms used to be interrelated and companies underperforming in sales used to face most of them. In those situations, the firm need a sales transformation to fix the root cause of those symptoms. Although before analyzing the sales transformation, let me tell you the story of one of the company in which I have worked that showed clearly in two different times of that company life cycle how used to be a high-performance sales firm, and how used to be a low-performance one.

How it is a sales high-performance and low-performance organization

At the beginning of 1990s this firm developed a very good strategic vision in which the transportation industry will grow and transform into the logistics industry. In order to materialize that vision the company understood that every business start by sales. So a strong sales function had to be built to sell the future logistics projects that large firms would demand according to the new coming logistics outsourcing strategies. So the best salesperson that I have never ever met (my best sales coach) was in charge part-time like company sales director and part-time acting as a large accounts sales executive.

After a few years the company was importantly growing in number of large accounts, revenue and margin. It is true that at that time the company was in a new and fast growing industry. So competition was lower, and buyers used to be less experienced. However, enter a new industry and sell “new” services are not anything trivial that just a real A-player could do it.

At that time, the sales department was the most relevant one in that organization. A strong customer-driven and sales culture were building up. Everybody in the firm respected and supported the sales function. The CEO used to participate in the sales meeting, and he used to have his complicated agenda “almost” opened for new customers’ meetings. All the staff got a customer-driven and sales training which set a clear message for the whole organization. Salespeople had quarterly meetings with some time allocated for sales skills training (AIDA selling technique, purchase motivations, company presentation role play, sales objections management, etc.) Additionally, salespeople used to have regular review meetings with the sales manager, and the sales manager used to visit customers with salespeople in order to be able to offer a better feedback and support to them. Etc.

Suddenly, the company decided to try to find new ways of fast growing and it started to focus on “new sales toys searching for the magic bullet” (NLP, selling quantified value, hiring a high-performance industry veteran, etc.) Unfortunately,  the company made a chain of big mistakes that are quite common in many sales organizations underperforming:

• Believe that there is just a “magic sales bullet”

• Forget to motivate its “golden goose” (A-player)

• Ignore the fundamentals of sales management

The new direction and consequences were terrible. The part-time sales manager function was assumed by a 100% operational general manager with a lack of customer orientation and no sales managing experience. All the sales management fundamentals  were substitute for a few meetings to review the sales quota progress (no training, no sales team support, etc.) So the sales team got unmotivated, without direction and immersed in the chaos (“as goes the leader, so goes the organization”). Then, after a while the unmotivated “A-player” and real “hunter” was fired, and the company tried unsuccessfully with a few “farmers” to fulfill the real “A-player” performance. The sales situation was deteriorating. The company was really struggling to get new sales, and contract renovations became an issue too…

Sales Force Transformation Approach

The most important key success factor in sales used to be following the sales management fundamentals. However, for whatever reason nowadays you can find an important amount of companies that are not following those fundamentals and get struggle to create a healthy sales organization.

For those firms with important issues on sales, we would like to suggest the following sales transformation roadmap to improve results:

• REFRAME Sales
• Leadership: Coaching the sales manager about how to lead the sales team. Tools: monthly sales meetings, monthly one to one review meetings, working in the field, etc.
• 
  
• Strategic focus: Reframing the sales strategy. Tools: market segmentation, strategic account targeting, messaging, etc.
• 
  
• Organizational change: Reviewing the team, roles, and responsibilities. Tools: people performance review, talent management, hunters vs. farmers, etc.

• 
  
• RENEW Sales
  • Diagnostic: Reviewing main causes of failure, best practices, processes, and the team. Tools: one to one interviews, questionnaires, visits to customers with salespeople, etc.
  • Culture management: Renewing the sales culture fostering a high-performance and result-driven sales culture. Tools: communication plan, compensation plan, etc.
  • Change management: Making things happen. Tools: conditions for success framework, etc.
• REVITALIZE Sales
  • Critical processes improvement: Improving the high value sales process. Tools: sales territory plan, sales pipeline, value proposition, etc.

I would like to highlight that other sales “toys” like NLP or CRM are good sales support tools that should be incorporated inside the last part of the framework as process improvements. Nevertheless, in order to be success in sales we suggest that the main focus must remain in the sales management fundamentals rather than in the sales “toys.”

Right now, someone could think “well, most of this is anything new, it is just to train and enforce the traditional sales management fundamentals.” Indeed, it is not as simple because it is getting quite uncommon to get people in house with strong experience on performing the “sales management fundamentals.” The training option is needed it but it is not enough because unfortunately just a couple of days of training will not materialize a sales transformation. How many people does it get trained and after a few weeks you realize that they are not using almost any of the training?

The sales management fundamentals are mainly based on sales leadership and cultural management factors and those “soft factors” used to require some coaching to materialize the nontrivial sales transformation. Moreover, the rest of the transformation framework proposed is not part of the sales management fundamentals rather than a necessary complement for success transformation of the sales organization. For instance, strategic focus reviews the sales and market strategy and connects it with the firm strategy. Change management makes sure that we correctly implement the transformation at the salespeople level. The critical improvement processes get advantage of a few chosen sales tools to maintain the sales process as simple as possible in order to improve the effectiveness of the sales process execution .

Benefits of the Sales Force Transformation

The correct sales transformation approach will create a high-performance, well-motivated and properly trained sales team. This team will be able to match customer expectations, differentiate the firm, and being perceived for customers as high value advisors. So the sales success rate, revenue and margins will start taking off again. Then, the pipeline will show the healthy of the company sales. This is a virtuous circle because salespeople will become energized by the success, and they will work better and with a higher success probability.

It looks simple and logical, but all of us we know that making a success sales transformation is one of the most difficult tasks. A experience person on sales and a clear sales transformational roadmap are the foundations for the transformation.

Additionally, we must say that this sales management transformation approach should be leveraged with other transformational approaches like: growth transformation that takes advantage of a better synchronization between sales and marketing, or customer experience transformation to leverage the sales mainly from current accounts. Many times areas as sales are view as silo, and honestly speaking high-performance sales required of the properly coordination with other areas as marketing, or customer service to improve the number of leads, referrals, cross-selling and so on.

Right now, it is your decision if you transform and accelerate sales…

How to Grow Your Business. Why Do B2B Firms Fail to Grow? Sales and Marketing Turnaround

Nowadays, one of the main business issues is how to grow business and “obviously” profitably grow. Therefore, the first task is to identify what is limiting our growth, I mean why we are failing to grow. Thus, we are analyzing the most common mistakes that B2B firms used to make defining and/or executing their growth strategies. Once that we will be able to identify why our firm is not growing healthy, we will be able to know how to turnaround the situation to recover the route to growth.

Being sales minded rather than balancing sales and marketing minded

As Philip Kotler pointed out long time ago there are some industries in which is difficult to find marketers with specific knowledge about those industries and customers’ buying patterns (e.g. service logistics providers). In those cases many CEOs are still taking the decision to put the marketing responsibility under the Sales Director. Those people without enough marketing knowledge and experience continue acting like Sales Managers. Therefore, we will not able to get the benefits of a stable long-term growth that offers us marketing, compare with the less predictable short-term growth that used to produce a sales strategy without a robust marketing strategy. Sales mainly focus on closing deals and marketing on demand generation, so both functions are necessary and complementary to achieve a sustainable growth. Furthermore, the lack of a powerful strategic marketing function used to reduce the firm profitability importantly, because sales used to focus on volume and marketing on profits. Thus, firms facing profitability issues should review urgently their marketing strategy rather than just look for a solution in the sales area.

Sales minded vs Marketing minded

• Is your company sales-minded?

• Do you have the right person managing of marketing function?

Being unable to uncover the full marketing potential

Marketing is a powerful tool and as we have mention before is a necessary discipline to growth profitable and sustainable. Unfortunately, there are still many firms that limit marketing to communication or promotion of their selling products and services. It is easy to identify the organizations that have not realized the marketing potential because they used to have very few people on marketing (even just one person) that used to be the most inexperienced person in the Sales & Marketing department. Global firms used to invest in marketing, but some of them mainly invest in a global marketing team. Unluckily, those people used to be too far away from the local and customer reality. Thus, they should invest in local marketing teams in the same way that they are investing in local direct sales force. That investment in local marketing not necessary means increasing the expenditure in Sales and Marketing, it means to reallocate the budget of Sales and Marketing in a more efficient way.

Marketing Phases

• In which marketing stage is your company?

“Just” a good Sales Rep in the position of Sales Director

Sometimes firms assume that functional competence of a sales rep is enough to lead a sales department. The leading competence is assumed too because some people think that if they are able to lead customers, they should be able to lead a team. Indeed, being a good sales rep is a necessary condition for leading a sales department but not sufficient. “Weak” Sales Directors used to underperform in the important task of coaching and motivating the sales team. It is impossible to growth with a not well trained and motivated sales force. I would suggest asking the sales reps:

• When was the last time that the Sales Director visit a customer with them?

• When was the last time that they learnt something from the Sales Director?

• Does the Sales Director show how to achieve the results or just set objectives?

Do we have a really compelling value proposition? How to grow business?

It is very difficult to find good compelling value propositions. For instance, the global market players trying to escalated positions to the top market positions used to adopt a similar value proposition than market leaders (we are global, customized solutions, etc.) It is very difficult to reach the market leaders using the same weapons that they used. Moreover, many of the value propositions are not based on what the company can offer today rather than on what they would like to offer in the future. That approach used to rest credibility to the value proposition. If we analyze the value propositions of market leaders used to be very similar, it looks that all of them copy to each other.

• Why should customers buy our products/services compared to the market leaders?

• Have you asked any customers about how compelling they believe is our value proposition?

Used a market-segmentation rather than a customer-segmentation

Segmentation is a strategic pillar for growing. Segmentation is going to define where and how to grow. Nevertheless, many organizations are still segmenting based on market segmentation like size of the companies or industries what offers a poor direction to the sales force compared with customer segmentation (attitudes and the willingness to do business with them, how important is the supplier in the buying decision, service needs, different degrees of value added and so on.)

• What is your segmentation strategy?

Sales obsession for large accounts

A few global large accounts with a good margin can make growing a company a lot. However, this is just the “nice” part of the story. Indeed, large companies used to delay buying decisions (bureaucracy of large firms), take advantages of their buying power, and “ignores” our solutions because they have consultants and their own well-trained staff. Moreover, the cost to attract those accounts are usually prohibitive unless a competitor makes an important mistake. Competitors are going to fight very hard to retain those huge accounts.

• Have you thought about focusing in mid-market companies?

Failing to decide when to approach customers

There are “sweet times” to approach customers successfully. For instance: a few months before the current contract is expiring, or when there are changes in the buyer management team, or when the buyer firm is underperforming, etc. In order to take advantage of those “sweet times,” we need a process in place to manage sales notifications.

• Do you have a customer database with contract expired date?

• Do you search in daily basis on business newspapers or/and Internet for relevant news?

Ignore the channel management competitive advantage

Leading companies has built the channel advantage using the full potential of the direct sales force and other channels like business partners, tele-channels and even Internet. I mean they have been able to cut the selling cost, increase market coverage, customized customer approaches, and growth faster using their channel advantage. On the other hand, we have companies which growth strategy is based just only in one channel, the direct sales force which is the most expensive channel. Those organizations argue that they are selling complex customized solutions mainly for large accounts, so the correct selling channel is direct sales force. Nevertheless, I would like to point out that using a channel management strategy does not necessary mean that closing deals are performed for example for a tele-channel. A well-trained tele-channel could perform prospecting tasks perhaps more efficient that direct sales force. Moreover, many customers are demanding easy and inexpensive solutions that could be sold from several channels rather than complex customized solutions delivered by direct sales force. For instance, Dell selling customize solutions using call centers or Internet, or Verti.com selling insurance using call centers or Internet. In the past, selling computers or insurance was defined as complex and critical sales that had to be performed by sales reps, but nowadays that assumption has changed.

• Could any of your products be sold for other selling channels?

• Have you explored the possibility of accelerating revenue generation creating a network of business partners?

• Do you have any activity like leads generation that could be performed more efficiently for other channel like tele-channel?

Managing distributors as competitors rather than partners

There are organizations that just move complex and low margin activities to distributors. That situation could create financial viability problems in the distributor side, and indirectly create service problems in the end customers (the distributor could not have resources to invest in stock and/or services). We should be aware that customer service is one of the building blocks to achieve customer loyalty and profits from referrals. There are firms that rather than support distributors compete for the same business. We should be aware that most times killing our distributors is killing “the goose that lays the golden eggs.”

• What is your margin and your distributors’ margin?

• Do you perform distributor satisfaction surveys?

• Who is managing distributors’ complaints and suggestions?

• Do you have clear and fair rules to differentiate opportunities to be managed for your company or for your distributors?

Chaotic and desperate growth strategy

There are Sales Directors even at global level they are still thinking that sales initiatives have an additive effect. I mean as many initiatives and in many fields, faster growth is generated. Indeed, trying to be all things to all customers all of the time used to produce chaos, confusion and very poor results. For example, a company growth strategy based on new customers, AND new products, AND new markets, AND more Sales Reps, AND increasing prices all of the time. I am not suggesting that those growth initiatives are not good, although I suggest that those initiatives need time and excellent execution in order to deliver the expected results. The point is that the faster and most profitable way to growth used to be based on growing with the current customer base and the current product portfolio. Thus, the suggestion is not losing the main focus on the very fast growing opportunities, and “limit” the resources for other much slower and riskier initiatives. Be aware that most times trying to implement at the same time many complex initiatives could create some important chaos into the direct sales force (approaching new and existing customers, small and large accounts, selling new and well-stablished products, selling in several industries, and so on). Let’s go to review the issues with the main growth initiatives that look for “new landscape” rather than growth mainly with the well-known customers and products base.

New customers

The cost to acquire new customers is between three and six times the cost to retain. We must be aware that new customers are increasing revenue, but in the short-term will probably be unprofitable due to acquisition and implementation costs. Without any doubt companies have to invest in acquire new customers, but we have to decide wisely what portion of time and budget is for developing new customers and what for existing ones.

New products

Those are harder to sell than actual products and sales cycle will be longer which means that we are not increasing our sales in the short-term. Furthermore, those products would be likely unprofitable in the introduction stage due to sales force training, customer education and other introduction costs. Again investing in new products is something desirable, but we have to decide wisely what portion of the budget is for developing new products and what is for existing ones.

New markets

Imagine a logistics service provider which main experience is in the automotive and high-tech industries trying to entry in the pharma market. That company is probably building its pharma capabilities and the direct sales force does not have the selling expertise for that market. Thus, in the short term we should not expect fast growth and even profit generation. Be aware that entry in new markets has the risk to fail. How much should we invest in new markets?

More sales reps

We could think that hiring more sales reps, we are increasing our revenue and profits proportionally. In that case, we would be underestimating some key factors affecting sales reps performance. First at all, new sales reps likely need some training at least in our specific company and products what is going to delay the delivery of results. Second, it is well known that usually sales force spent just around 37% of their time selling because the rest of the time is spent on meetings, admin tasks, aftersales service, etc. Third, direct sales force is the most expensive selling channel. Fourth, I would say that the ROI of the direct sales force is heavily conditioned as we have reviewed for: the marketing strategy and implementation, segmentation, compelling value proposition, having the right Sales Director, and so on.

Increasing sales prices above normal prices’ adjustments

This initiative is one shoot initiative because we cannot perform special sales price increments in regular basis. Furthermore, customers are well informed and it is difficult that they accept price increases above the market. But even if we get the approval of some customers, it is likely that those customers are going to be the small accounts with low buying power because large accounts would face an important impact what they are unlikely going to accept. Thus, this financial initiative used to fail to improve company profits because the success relies on applying for price increases in the key largest accounts. At the same time, that unexpected and unusual price increases used to annoy customers and deteriorated relationships. It is essential to mention that some companies’ face problems of profitability because sales department manages prices rather than discounts. Modern management to avoid compliance issues in the sales area and increase profit focus suggests removing the sales price activity from sales.

While some managers blame to market and commoditization forces for the low growth rate and sales margins. In this post, we have tried to show the principal pitfalls to growth and some suggestions to overcome those issues proactively.

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Turnaround in business. Part 6

 

Why Do Firms Fail in Emerging Markets?

It is well accepted that emerging markets like BRIC countries represent a huge present and future opportunity for growing the business. Thus, many companies are entering into those markets. Unfortunately, not all organizations are able to show off that they are growing as it was planned. So let us review why do firms fail in emerging markets like Brazil:

Focus on what we need (increase sales) rather than in which customers need

Our financial goal can be to increase sales, but we must maintain customer focus. We should not assume that because our products fulfill global needs and are selling properly in some developed countries, those are going to work properly in emerging countries. We should ask ourselves: What are customers’ needs? And what is customers’ behavior (in emerging markets)? So, we will likely realize that customers in those countries buy with a different mindset. E.g. In Europe, it is much more likely to find customers that buy products according to “Product Life Time Value” than in Brazil that prefer list price to make purchasing decisions.

Market research focuses on the size of the opportunity and “neglect” product and price market constraints

There are still companies in B2B markets that pay much attention to sales and much less on marketing. So, some firms wrongly leave product introduction project on the hand of not very experienced marketing people. Having a deep study of how our products and prices fit the market is so important.

Decision-makers and influencers with lack of understanding of emerging markets

We can find that decision-makers have been historically located in Europe or North America headquarters. Some of them have never lived or even been in any of those markets, and they use their own country mindset.

“Global product strategy” rather than “fit to market strategy”

We have listened many times: “be global, act local.” However, there are still many companies that executing their global strategy (for instance reduce complexity,) they kill the necessary “fit to market strategy.” E.g. In the automotive industry in Brazil, customers prefer mechanical engines, so offering just electronic engines in order to have a global product strategy means give up a huge potential customer base.

Not understanding the “good enough segment”

Important growth in emerging markets comes from that segment. Good enough segment expects reliable enough products at low enough prices. I mean enough quality at affordable prices that still generate profits. Moreover, this segment is important to achieve economies of scale that will allow us to access to competitive price levels. E.g. In the automotive industry environmental regulation for emerging countries have a few years of delays. Trying to reduce product complexity having the same product for Europe and Brazil means increase features and prices that push us out of the “good enough segment.”

Not understanding “growth strategy” implications

In order to grow, firms need to invest. Some companies get in dead-circuit because they want to grow and get short-term profitability, and both strategies used to be incompatible in the short-term. Indeed, growing means investing (facilities, stock, days of sales outstanding, sales force, and so on,) and just a few industries allow firms to materialize profits in the short-term. Many of the successful firms that entry in emerging countries have invested strongly during years before getting the expected return. Other companies think that the important is just to fulfill their global footprint, and they invest shyly (probably one salesman by-product or vertical industry). In this last case because the investment is not enough, it will take very long time to get the return on investment, and firms could lose the patient and enthusiasm for those markets.

“Problems are OUT (of the firm) approach” rather than “problems are INSIDE (of the firm) approach”

The arrogance of some people/companies does not allow them to realize that they have many improvement opportunities inside. Those companies blame to market, customers, and so on. Many times, those people are bad listeners, and therefore people with low customer orientation. Moreover those people with a limited view of the problem cannot take advantage of the “power of AND” when trying to solve problems. So, they think in terms of OR. For instance, rather than improve the firm processes to be more competitive AND solve the market price issues, they think that the solution is lost money OR to increase even more the list price.

Measure success perceptually (%) rather than in euros/dollars ($)

Controllers can kill growth initiatives because those initiatives do no reach a percentage of net margin. Indeed, those initiatives can have a positive net margin, an important contribution margin, and support market share growth during the market penetration stage.

Not pursue costs saving aggressively

There are huge global corporations that are losing market share because they created in the past huge facilities (with several thousands of employees) difficult to manage properly. Those plants have very limited flexibility, diseconomies of scale, and massive overheads. Again, we have the risk of controllers assuming wrongly that current cost structure is correct, and suggesting “rationalizing” products, customers or markets.

Assuming that managing more value activities means creating more customer value and profitability

Some organizations decide to enter emerging markets and be focused on sales development. So, they use resources to grow quickly, and they take advantage of local partners and outsourcing activities. Other firms decide to invest at the same time in sales and building other capabilities. For instance, there are companies that have a distributor business model, but those firms try to add assembling/manufacturing capabilities to the distributor business model to generate more customer value and be more profitable. Nevertheless, they deviate resources from sales development to assembling/manufacturing, and because at the beginning there are not enough sales, the assembling facilities do not get economies of scale to compete. So, they face two problems at the same time: low sales and lack of economies of scale in production.

It is important to highlight that many of those causes are interrelated. So, companies failing in emerging markets are quite often affected by several of those causes, which increases even more the probability of failure in the emerging markets.

Is Profitable and Justified Strategically Maintaining Our Current Network Of Facilities?

Products, customers and offices unprofitable must be identified and make profitably or we should take the decision to remove them. Many times it is assumed that facilities network are a strategic long-term decision, so it is not reviewed the strategic convenience of those investments approved for top management any time ago. Thus, we are going to review some of the commonest strategic and financial reasons argued to open/maintain subsidiaries opened.

We must be aware that in the last few years many things relating communications have changed a lot. For instance, traveling costs are cheaper because we have low-cost airlines, communication costs are cheaper because there are communications base on Internet, companies have adopted widely conference-calls as a cheap and reliable communication way, virtual offices with sharing meeting rooms and other services are in place, teleworking can avoid investing in an office, and so on. Moreover, dot com firms have showed us that is possible to compete in many industries with a much less footprint those traditional companies.

So let’s go to analyze those often strategic reasons for opening/maintaining facilities:

“Being close to customers was going to facilitate customer acquisition and/or retention.”

• If we analyze our value proposition, we used to ask ourselves: What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer needs are we satisfying? Why do customers turn to one company over another? (Alexander Osterwalder & Yves Pigneur 2010) But having a new office is not a likely question.
• If we analyze our customer relationship approaches: Personal assistance; Dedicated Personal Assistance; self-Service; Automated Services; Communities; Co-creation (Alexander Osterwalder & Yves Pigneur 2010). Even the personal assistance relationships not necessary must be built from the same location. In personal assistant is more important the person than the location.

“Being close to customer means offering better services.”

Nowadays, we have access to motorways, higher fly frequency, service logistics operators that deliver in 24 hours or fewer from central distribution centers, etc. This means that today we could offer a similar service level from a central location than from a local one.

Many times is hard to recognize that managing subsidiaries is a very tough task for our organization. So outsourcing that distribution center or for instance using a dealer could be more profitable at the same time that we could be able to improve service levels. Although that means having the humility to recognize that someone can do a better job than us.

“Cost of doing business is reduced because traveling costs are reduced.”

We must analyze the traveling cost avoided versus cost to have a facility:

• Obvious office related costs: Costs for rent, electricity, water, communications, insurance, cleaning, security, taxes, and so on.
• Office staff related costs: Salaries, office furniture, telephones, computers, software licenses, company cars, petrol, traveling costs to headquarter meetings, etc.
• Office/Warehouse improving costs: Human being used to try to improve things. So because we have a new facility, we can take advantage of that and we could think that we could build some stock. So because we have some stock, we need racks. So because we have some stock, we need a forklift. So because we have a forklift, we need a warehouse man, etc. I mean once that we have a new facility we open the door to many initial unexpected costs.
• Control costs: ERP customization to control that office, traveling to audit and support the office staff, etc.
• Productivity costs: Many small offices have less access to resources, training, control, etc.
• Complexity costs: Sometimes subsidiaries argue that local suppliers are better than corporate ones. That practice reduces cost saving of using corporate suppliers.

I am not suggesting that having more than one facility is wrong. What I am trying to suggest is that in turnaround is very important to review the real need of current offices or even the appropriate decision to open a new one. Subsidiaries can affect massively in company profitability.

When Should We Outsource Activities?

“Whenever a company produces a service internally that others buy or produce more efficiently or effectively externally, it sacrifices competitive advantage” (Quinn, James Brian, Thomas I. Doorley, Penny C. Paquette “Technology in services: rethinking strategic focus” Sloan Management Review, Winter 1990). Thus, any activity not considered a core competency has the potential to be outsourced, but what are the advantages of outsourcing?

Outsourcing Advantages

The big disadvantage of outsourcing that used to be mentioned is the “loss of control”. Although with the information systems that today are in place, and managing properly the relationship with the outsourced firm by having regular meeting and conference calls, we should be able to overcome that “disadvantage.” In reality one of the biggest handicaps for outsourcing could be “the loss of power” for some managers. For instance, we could have a Supply Chain Director managing more than 1,000 workers and after outsourcing the distribution centers network he could be managing just 20 people. So that strategic focus could be seen for some managers as “loss of power and control.”

Activities like transportation, warehousing, co-packing, publicity, payrolls, or legal support have been outsourced during many years in order to materialize the outsourcing advantages. However, the outsourcing process continues its evolution and its getting further. In the last years some companies have implemented outsourcing AND offshoring strategies in order to enhance the outsourcing benefits. For example, DHL is outsourcing globally some IT activities in India, or Telefonica is outsourcing call centers in Colombia.

The long tail concept introduced for Chris Anderson in 2004 is supporting the access to outsource for very small firms or low volume activities. For instance, Legalitas in Spain offers outsourcing legal advice for just 15 €/month, or outsourcing the marketing creation of a PC wallpaper can be sold in Internet for just $ 50.

Once that we have identified a potential outsourced activity, the next step would be answering the following question: How can we “guarantee” that we should outsource that particular activity? We should outsource it, if we are able to answer affirmative to the following three questions:

1. Are we reducing complexity or increasing flexibility? If managing the outsourced firm is being easier than managing that activity internally. From the change management perspective, this is an important issue because outsourcing important activities are probably creating some internal conflicts with trade unions. Moreover, those processes could affect staff morale (thinking that their jobs are in danger in the current or in the future coming from outsourcing processes.)
2. Is the service being improved? If the outsourced firm has more expertise or specialized resources to perform those activities, the outsourced firm is likely improving the current service.
3. Are we improving our cost structure or reducing our assets? Companies with higher expertise and more specialized resources should have better processes (reducing the cost of “poor” quality) and higher productivity. Moreover, better processes and resources allow companies to use less experienced and cheaper workers to perform activities. For example, warehouse men using well design processes supported by radio frequency just would need a very short training about products, their location, picking strategy, etc. The location and type of business that the outsourced firm performed can create a competitive advantage from the labor cost point of view what it is so important in intensive manpower industries like services. Cost reductions is going to support turnaround projects, but assess reductions offer one of the best opportunity in turnaround projects to improve cash (selling warehouses/buildings, machines, etc.)

How Does Top Management Make Decisions?

Many CEOs assume that making and publishing an organizational chart is enough in order to answer the structure and some relates matters like company style. However, there are some key questions like the style question “How does top management makes decisions?” that are not answers with an organizational chart.

According to Bain & Company there are mainly four decision styles (directive, participative, democratic, and consensus). Nowadays that we live in the democratic and team work age, we could think that the most collaborative styles (consensus or democratic) bring out the best results for firms. Nevertheless, research and experience of Bain & Company have found that participative style uses to perform better than the other styles. Be aware that even having primarily a participative style, it does not mean that all decision fall into this specific style.

Decision Styles: Adapted from Marcia W. Blenko, Paul Rogers and Patrick Litre

Bain & Company explains that participative styles improves decision quality because takes advantage from collaborative styles that at the same time get employees engagement via participation. Additionally the decision-making process is accelerated because just one person takes responsibility for each decision avoiding bureaucracy. It having one person in charge of every decision brings single-point accountability as well.

We would like to stress that there is another important advantage not mentioned for Bain & Company from having one single-person taking the responsibility for each decision; we get a consistent and coherent decisions direction because the same person is in charge of decisions. We mean we get decisions alignment.

From the turnaround perspective we cannot sacrifice the speed of decision, neither the quality. So we could say that we are almost forced to use the participative decision style.

Finally, we have to mention that it is essential that the CEO decides and communicates the primary decision style for the company. This can avoid internal conflicts. For instance, if the firm decides to use a participative style and there are people who feel most comfortable with other more collaborative decision styles (democratic or consensus) communicating formally the participative style decision will help that staff to embrace the decision style and avoid unnecessary internal conflicts. We must be aware that people from primary activities of the company can feel most comfortable with the participative style, while people from support activities can prefer consensus style. So again we have to highlight the importance of defining and communicate the decision style to avoid conflicts and get people much better aligned.

Business Alignment: When Board Is

Misaligned with Management

It is pretty obvious that business alignment is a prerequisite for firms to success. This alignment is even more important in the two top layers of the firm, the board of directors and the management team. Thus, we can find companies underperforming which main cause is poor management, and the effect is the misalignment between the board and management.

What is board and management alignment?

Peter Drucker defined this alignment very clear and showed us that a clear responsibility definition is one of the main business Key Success Factors: “The board must not act at the level of tactical planning, or it interferes with management’s vital ability to be flexible in how goals are achieved… the board is accountable for mission, goals, and the allocation of resources to results, and appraising progress and achievement. Management is accountable for objectives, for action steps, for the supporting budget, as well as for demonstrating effective performance.”

Adapted from Peter Drucker: "Defining the board and management responsabiities"

How board and management misalignment used to happen?

Most of the time a board member does not understand his role. In this situation that member used to implement what we could call “micro-management.” That is entering in the tactical planning and interfering with management.

What are the consequences of this misalignment?

The consequences could be disastrous for the following reasons:

• The board member wastes his time with tasks that he should not perform.
• The management team waste their time and energy internally rather than externally making loyal customers and fighting with competitors for market share.
• The board used to overrule the management members. This is a common human being practice to demonstrate “they are adding value”. This attitude used to unmotivated the management team, and in the mid-term could provoke desertion of good managers who will prefer moving to others firm with less interference in their job.
• For seniority, respect and status quo the suggestions of the board used to be followed. However, those suggestions could be “wrong” because the board members used not to have the daily contact with customers and other regular issues to “properly understand” the importance,  urgency, and consequences of those tactical decisions. The other reason why board members used to fail in tactics’ decisions is that most of them use what I call the “fishbowl approach.” I mean they prefer isolating themselves in their offices to improve their own productivity but that approach used to work uncorrelated with the capacity to solve tactic issues that required to be very much in touch with the staff, customers, suppliers, and so on.

There is one case in which could be understandable the practice of micro-management for a board member. It is the case in which the management team is not good enough. Nevertheless, the top management team have been hired for the board. So it is again the responsibility of the board to select a good management team and to replace underperforming managers, but no interfere with managers’ tactics. We should not forget that another Key Success Factor for board members should be their ability to hire the right people for the right position.

Before continuing, we must answer the question is micro-management always a bad practice? The answer is no. I mean micro-management could be needed it for managing young and inexperienced staff, or to manage inexperienced middle management in underdeveloped countries and/or organizations. However, board should not use micro-management under any circumstance with management.

Other way to identify poor management practices in the board is analyzing their tasks. Poor board members do what they do not have to do, and they do not do what is expected from their positions. It is easier to perform micro-management because those tasks used to be easier than board activities but this is not the expected work for board members.

How is business alignment and misalignment affecting turnaround initiatives?

In turnaround projects, we should wonder us:

• Do we have a poor management issue?
• Is there a misalignment between the board and management?
• Who is the responsible of this misalignment?
• Can we perform a success turnaround, if the people underperforming are still in the firm?

This misalignment issue probably is quite uncommon on large corporations. But it is quite common in small businesses that have grown fast, and the same people who used to be managers are now low experienced board members.

The Sales Area Is Underperforming: Have

 You Promoted Your Best Salesperson to

 Sales Manager?

It sounds strange hearing that it could be something wrong promoting the best performer. For instance, do you know any good mechanics or engineers who were promoted to a managerial position, and the company lost a good technician and got a not too good manager? Please, don’t misunderstand me. There are many mechanics or engineers with the right managerial skills but having technical skills, does not guarantee good managerial skills.

From the Kindergarten, we have been taught that people with better score are the best. Therefore, we can find many Small and Medium Business (SMB) that follow the assumption that the best salesperson should be promoted to the position of sales manager. Even in the  subsidiaries of global corporations are in place the same assumption because the hiring responsibility of the sales manager position depend on the country manager in order to have full accountability.

We have been taught that all of us we should be leaders and the proof of our success will be achieving a managerial positions. However, this is not exactly true. No everybody is or will be prepared to be an effective leader or manager. However, that does not mean that the person failed. It just means that those people are more suitable for other positions that can be of high value for the firm and very well-paid too. Anyway, I prevent you that this article could be very challenging for the current mindset of many salespeople and sales manager.

Why the best salesperson wouldn’t probably be  the best suitable person for the sales management responsibility?

First, as Mike Weinberg point out “the successful individual sales producer wins by being as selfish as possible with her time… The seller who best blocks out the rest of the world, who maintains obsessive control of her calendar, who masters focusing solely on her own highest-value revenue-producing activities, who isn’t known for being a team player, and who is not interested in playing good corporate citizen or helping everyone around her, is typically a highly effective seller… The successful sales manager doesn´t win on her own; she wins thorough her people by helping them succeed.” It is relevant to stress the difference between selling on her own and selling thorough her people. An evidence of the misunderstanding of selling through other is that with almost the exception of IT industry, no other industry is using Partner Channel Management as a powerful sales channel that could provide around 60% of total company sales. Anyway, you could find a top salesperson who is suitable to be a sales manager but is quite improbable. I am explaining why in the next paragraph.

What is the profile of Top Salespeople and Sales Managers

Second, the skills and responsibilities of a salesperson and a sales manager are different. Let list some of the skills of a sales manager: building a sales culture; leading a team; team motivation; hiring; retaining top performers; conflict management; coaching; feedback delivery; challenging data, false assumptions, wrong attitude, and self-complacency; create the area budget and forecasts; etc. Are those the skills of sellers? The answer is NO!

Third, as Mark Roberge highlight sales top performers used to base their success in a specific selling skill (relationship building, or consultative selling, etc.) Nevertheless, the sales managers need “a well-rounded grasp of the entire sales methodology. Sales leaders with balanced abilities would be able to diagnose a specific issue and be qualified to customize a coaching plan to address the issue.” So, sales top performers with unbalanced skills are not likely able to coach a team on any skills that they have poorly developed. Now, we must clarify that a sales manager must have a good performance selling in order to know the process of selling well but he is not usually a top sales performer.

Fourth, we should remember that “what distinguishes great leaders from merely good ones? It isn’t IQ or technical skills, says Daniel Goleman. It’s emotional intelligence.” Many people with high technical skills are promoted without some training on management and leadership. Other times, firms think that managers could be built with just a few days of leadership training (for instance the “famous company talent programs.”) The good performance of top sales producers does not guarantee that they will be great leaders for sales teams, and a few days of training on leadership neither. In fact, as Mark Roberge says: “Sometimes really good salespeople are selfish, egotistical, and competitive by nature. Those traits do not translate well into management.”

I would like to say that the rule should be “don’t promote your best salespeople to sales management.” Nevertheless, as any rule there are exceptions but remember that exceptions are very few cases.

Be careful if you are using a multitasking approach: Part-time salesperson and part-time sales manager

This used to be a very seductive approach for small business and even large corporation subsidiaries. Getting two roles for the price of one. I have to say “good try but this shortcut is not working at all.”

As we have mentioned before it is quite improbable that you find the right person for both different positions. However, if you are lucky to find someone who fits with booth positions, you will have some important challenges mixing those responsibilities:

• This salesperson will probably pick the best leads for himself with the excuse that the top performer must manage those important leads in order to increase the probability of win the customer. This could create mistrust on the sales team.
• How much time will he commit to each person if part-time means 2.5 working days per week? He could spend just very few hours on each salesperson what could be not enough to develop the sales team.

How can you motivate and retain your top sales performer without promoting her to sales manager?

The answer is building a Career Growth Plan with a few sales titles that link performance with the sales compensation model. Thus, higher sales performance means higher position and total salary.

So, what should be your first recruit priority? A top salesperson or a sales manager?

For a new sales organization with no more than a couple of people on sales, hiring a top salesperson could be a good first step. Indeed, I know some success examples of this approach. Although there are three considerations regarding hiring a top salesperson:

1. Industry experience used to be overrated: I remember the best salesperson that I have ever met that told me once: “Today, I am selling logistics but the important thing is that I master the selling technique. So, I could sell to any B2B almost any product or service.” This is true but there are still some fear for hiring people from other industries.

2. Industry connections used to be overrated: We must highlight that “customers belong to companies not to salespeople.” Salespeople could bring small accounts that have very low risk trying a new supplier. However, for large B2B sales account the reality is different:

• for large purchasing amounts used to have medium or long-term contracts in place that prevent to move the account;
• the relationship between buyer and seller used to be built around many people in different levels of the organization, not just the salesperson;
• the buyer justified internally the decision to work with the current supplier, trying to move to another supplier would mean that the decision was wrong which could be put in danger the job of the decision maker;
• move from one supplier to another just because the salesperson moved to other firm does not have any sense from the risk associated with large contracts
• Etc.

So, do you really think that a salesperson would be bring her last sales accounts to your firm? I don’t think so. If this is happen, it will take at least 2-3 years to move large complex accounts.

3. Is this person able to success in an unstructured environment? My experience is that top sales performers used to be hired from larger and better organized corporations with more sophisticated sales and ops process, customer based, marketing support and lead generation capabilities. Small firms used to have the temptation to solve their sales problems hiring a top sales performer from one of the largest competitor. This used to be “a big mistake.” First, as we have explained before is quite unlikely that the salespeople are moving their last sales to your firm. Second, small unstructured firms require of “evangelistic sales” in order to communicate their “not well-structured value proposition” and building the company brand. That necessary education skill is quite unusual on top sales performers from large firms because large firms are well-known and customers do not question their capabilities. Salespeople working for large firms no need to educate the customer regarding their company rather than developing a different skill, quickly building customer solutions. So, what is the probability that she replicates her past success selling with your small unstructured firm? Honestly speaking, very low!

If we are thinking not just in one or two salespeople rather than building a sales organization, it should be more suitable to hire a sales manager before thinking about recruiting a top sales producer. Be aware that a sales manager should increase the chance to hire the right top salesperson. Additionally, the sales manager would implement a sales leadership and culture that could be exponentially deployed around salespeople and branches.

For new sales organizations, Mark Roberge suggests hiring a quite uncommon profile rather than a sales manager or a top salesperson, the entrepreneur. He pointed out “the entrepreneur is most likely to accelerate the company toward the right product/market fit…She will dig in with prospective customers to learn about their challenges, opportunities, perspectives, and priorities.” I am personally think that he is right. Recruiting a sales manager for a consolidated and organized firm has sense, but for a new company or sales organization the first thing is to learn about customers in orders to build the “customized sales weapons” (communication plan, firm positioning, etc.) that will guarantee the success foundation for a fast growing sales organization.

Self-questions

If you are a…

• Sales manager: Are you in the right position or should you go back to be a top sales performer?
• Salesperson: What do you think that is more suitable for you career path to remain as a salesperson or to move on sales manager?
• CEO and your sales area is underperforming: Do you have the right person to growth your company revenue?

Creative Destruction in Human Resources: Creating High Performance Teams with the 20–70–10 Rule

Jack Welch is a leader with followers and detractors. So we are going to analyze the 20-70-10 Rule that some people could say that is a worthy management tool that creates high performance teams, and others say that is a cruel tool because it fosters to fire 10% approximately of the less performer.

The 20-70-10 Rule can be categorized inside the concept of creative destruction (Joseph Schumpeter work). We mean the idea is not firing 10% of the staff to reduce cost rather than change poor performers for other people with the expectation that the new staff could be better. Thus, increasing the number of high performance people and raising the company results.

20-70-10 Rule: Defining good and poor performers

We should ask ourselves a few key questions in order to know if the tool is adding value or not to our organization:

• Can our companies allow itself to maintain poor performers? Nowadays markets globalization, weaker economic drivers, intense competition, product commoditization, etc., make difficult to justified maintaining poor performers.
• What is the internal message maintaining poor performers? The culture of the company would get “paternalistic” or permissive. Then people working close of poor performers would realize that they could reduce their productivity and the firm is not taking any action. So what is it going to happen to the company productivity?
• What is the consequences to maintain a poor performance in the long term? The company would lose competitiveness day a day while other firms are rising their competitive advantage. Thus probably one day the firm would take the decision to close down the facility and move it to other location even outside the country. Thus, the consequence could be fired 100% of the staff rather than 10%. Some people could argue that the battle competing with emerging economies is already lost. Indeed, we have countries like Germany that they are demonstrating that the battle is not lost at all, if firms focus on raising productivity.
• Is it fair to maintain 10% of poor performers having people looking for an employment? Probably it is not. Moreover, it is not fair for the staff that are performing well, because maintaining underperforming people can put in danger the company and their jobs in the future.
• What about good performers? Poor performers are easy to retain, but good performers are a different issue. Good performers are demanded by the market, and they are more confidents in their abilities in order to move to other company. Moreover, good performers expect to work in high performance environment, and be paid according to the value that they create. Although with poor performers into the company is difficult to fulfill those expectations. So there is a real risk that good staff would get out of the firm, and mediocre staff would grow even higher than 10%.
• Why do we maintain under performers? In order to answer properly this question we should ask ourselves another question before: do we maintain under performers because it is an unpleasant task to fire people?

In turnaround projects where poor management is an issue, one of the most important causes of the company decline is because we do not have the right people. It is not unusual to find in those firms 10% of poor performance staff. So in those cases “getting out the bus” that staff allow us to increase firm results, and accelerate the change management process bringing new people with new mindset and abilities to the organization.

We have to highlight that organizations have the responsibility preventing poor performers, and we can suggest to prevent poor performers: First, having good performers in key positions, because good performers do not use to tolerate the poor performance. Second, selection process should be excellent. Third, making a periodic follow up of the team and specially the new staff, because two or three months is enough to realize if new employees should continue or not. It is better to “get out the bus” people in the second or third month that allow continuing in the company.

Finally, while poor performers by definition are people who damage the organization, and “getting out the bus” those people would not be an issue for the company. What it is not clear for me is the following: as Jack Welch suggests continually changing 10% of the staff that worst performs (being categorized like poor performers although they are not necessary underperforming, just they are on the bottom of the list) is getting any return. I mean there is low risk changing the staff that underperforms, despite changing people that are not “really” underperforming is increasing the risk to get the worse staff. Additionally we are losing the investment done in our current staff, and we have to invest in finding and training new workers. Moreover, we are creating an unhealthy stress in the organization. So I would not personally recommend continually changing 10% of the staff just because they are the worst performers.

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