As a result, sales managers overassign quotas to the sales reps they have in hopes that a certain number will exceed their goals to offset the bottom 20 percent who aren’t going to make it, open territories that they begin the year with, or turnover they may have.
Many managers try to live with the lesser of two evils: (1) let a bad rep continue to work in a territory because at least there is a “body” there, or (2) live with an open territory that they must cover themselves. The most frequently made mistake is not trimming poor performers early enough. Not only does this demotivate the rest of the team, but it also takes the manager away from being a coach.
Some sales executives aggravate their turnover problem simply by increasing quotas every year based on what the analysts or CFO says the sales increase ought to be, with no thought to where the new sales will come from. Will these quotas come from better coverage, new products, new markets, increased prices, better margins, or an increased win ratio?
Without a bottom-up analysis of true potential, raising sales quotas doesn’t raise sales—it usually only raises turnover and discounts. This is one of the great myths of selling. And if sales quotas are increased as a percentage of an individual’s sales quota last year, then the great reward for a job well done, after the sales banquet, is an even greater quota for your best performers. How motivating is that?
While working for Atlanta-based Optio Software, one of our principals, Blake Batley, was asked to relocate to the West Coast to assume the newly created role of western regional director.
His challenge was to revamp the region, which had previously included only one salesperson and had never generated more than $500k in software license revenue.
Instead of managing the business for what was possible, the company was managing the business for the analysts. They put together a first-year plan to find and generate $10 million in the new territory. His tasks included finding office space, furnishing it with everything from chairs to computers, hiring ten new salespeople plus support staff, and getting them trained and up to speed so that they could produce $10 million in the first year of operation.
At the end of that first 12 months, they had a fully equipped office and a full staff. His team produced over $5 million in revenue on the $10 million quota. To everyone in the western regional office, it was considered a huge success. But, according to the analysts, it was a failure.
When financial strategy drives sales strategy, quite often the result is planning for failure. And if this overassignment of individual quotas results in discouragement or increased turnover in the sales force, a complete downward spiral begins.
When financial strategy drives sales strategy, quite often the result is planning for failure.
The solution is to improve our hiring and planning processes—to get the right people in the right jobs before the year begins. One best practice that we've seen in several companies is the hiring of junior salespeople who work either on existing accounts or on farming and marketing activities to learn the business and prepare themselves for territories when they open up. In my experience, we hired a number of these — about one per district — and many of them have turned out to be not only extremely successful sales reps but also vice presidents of sales and CEOs of their own companies. Without them, we would have begun the year behind the curve and would never have been able to catch up. The impact would have affected sales results and eventually shareholder value.
Get a Bench and a Pool
The worst recruiting practice is to wait until you have an opening. This means that you are reacting to the marketplace and only looking through the available candidates in your area. The best practice is to build a bench within your own firm and a pool of candidates in your industry on which you can draw when you have an opening. It may take years to build this network of candidates, but it means proactively going after people and companies that may not be looking for jobs at the moment.
In our firm, it takes us about two years to recruit a principal. And we have the possibility of 100 or more at any one time who may come to work with us in the future. The building of this pool has not been an accident. Every sales manager should have a list of several dozen sales candidates within their contacts or background on which they can draw at any given time.
Recruit the Best Recruiters
The worst recruiting practice is to wait until you have an opening
The next best thing is to build a network of recruiters who are loyal to you. However, a loyal recruiter may be an oxymoron. And if you count on human resources (HR) or advertisements to send you the right candidates, you are abdicating responsibility for your own future.
If you’re counting on recruiters, proceed with caution. Many recruiters try to play both sides of the fence. They may be using you as a net destination and a net supplier at the same time. You need to meet face to face with these recruiters, define your outline, and sell them not only on why your company is a good place for their candidates to come to work but also why you need to have a partnership with them. Make it clear that if they ever recruit from you at the same time they are sending you candidates, that will be the end of the relationship.
You have to be willing to share with selected recruiters the rules of engagement, including your compensation plan, competitive advantages, the direction of your company, and your recruiting process. In this way, they understand how to proceed with you and won’t see it as an unduly lengthy process. The only thing that will keep recruiters loyal to you is the prospect of future business. Once they see your company in trouble and people starting to leave, unless you have a personal relationship with a particular recruiter, they will start to prey on you and take people out of your organization. It’s a double-edged sword they use. Don’t let them use it on you.
If you count on HR or advertisements to send you to the right candidates, you are abdicating responsibility for your own future.
Recruiters to Reps—Solve Two Problems at Once
Another best practice used by some organizations is to hire full-time internal recruiters. Why waste a sales headcount on a recruiter? These people are actually salespeople because they can go into organizations and find people who are not yet looking for a job and pull them out along with their friends.
The only thing that will keep recruiters loyal to you is the prospect of future business.
When I was rebuilding my region, my company had a number of these (most of them were ex-military Recon types.) They made great recruiters, and most of them went on to have successful careers in sales and sales management. It was one of the best investments we ever made. Not because we saved recruiting fees, but because we got top-level talent.
All I ever saw in my recruiting efforts were A and B prospects. I wasted very little time talking to turkeys because of the efforts of these people. We were able to rebuild our region from middle of the pack to number one within a year. This is an excellent investment, but like many best practices, it requires a certain economy of scale to be able to afford a full-time, aggressive internal recruiter who is not just a paper passer.
If you’re recruiting, how do you know what to look for unless you sit down and define what a successful salesperson in your organization looks like? What traits, experience, skills and personality will predict success in your organization and in your industry? Unless you write it down and test it against your current performers—you’re guessing. In the absence of a profile, you’ll be hiring on hope. You will be opportunistic instead of purposeful. People tend to hire on hope and fire on faults—a very expensive habit.