Every manager has, or will, confront this troublesome issue. It’s arisen in every workshop for sales managers or branch managers I’ve done.
One or more of your sales people has leveled off. Their performance hasn’t improved much in the last few years. Where before you were able to count on significant increases each year, now you can not. You know that these experienced sales people can do better, but they seem unable or unwilling to break out of a certain level of performance. You are scratching your head, frustrated, and loosing sleep at night wondering how to improve the situation. What do you do?
Here’s a simple, effective strategy. First, verify that a problem exists. Then, place the responsibility for solving the problem where it belongs.
First, verify that it is a problem.
It may not be a problem at all. On the surface, there is nothing wrong with a sales person becoming comfortable at a certain level of performance. Aren’t sales people allowed to become comfortable in their jobs? Isn’t your warehouse manager comfortable and competent? What about your customer service managers, or your CFO? Don’t you expect them to perform, year in and year out, in a predictable manner? Are sales people any different?
For a lot of people, the answer is, “Yes, sales people are different.” We really do have a different set of expectations for our sales people than we do for other job titles. Sales people are supposed to sell, and sell more each year.
So we need a way to sort this out. On one hand, it may be perfectly acceptable to have a sales person that has leveled off. On the other, it may be a problem. Before you rush to judgment on this particular person, you need to ask, and answer, two important questions about this sales person’s performance. First, “Is the sales person appropriately profitable?” Second, “Is the sales person appropriately directable?” Let’s look at each of these.
Is this sales person appropriately profitable? Don’t be fooled by looking at net sales or even total gross profit produced by the sales person. Profitability is a function of the difference between costs and revenues. In order to answer this question of profitability with any degree of objectivity or accuracy, you need to compare the total direct cost of this sales person with the total absolute dollars of gross margin this sales person has generated.
We can help you with this calculation. Download a free copy of “How to Kreate Kahle’s Kalculation.” This booklet will take you through the process of creating an accurate measurement of productivity for your sales force.
Once you arrive at either a percentage (relationship of cost to revenue) or an absolute dollar amount (total margin contribution) that describes the profitability of this particular sales person, you need to compare that with the rest of the sales force.
For example, your sales person in question may have a productivity number of 19%. In other words, he/she costs the company about 19% of the gross profit he/she brings in. The actual numbers may be something like this:
Gross profit produced in the last 12 months = $394,737.00
Total direct costs of this sales person = $ 75,000.00
KK (Kahle’s Kalculation) productivity measurement = 19%
Total margin contribution = $319,737.00
Now you can answer the question, “Is this sales person appropriately profitable?”
Compare this sales person’s number with the rest of the sales force. Let’s say the median productivity number is 20%. That means that half of the sales force costs the company more, as a percentage of margin, than this sales person does.
If this sales person’s profitability rates him or her in the upper half of your sales force, like our example, then that is acceptable. It’s not a problem. If, however, his/her profitability is in the lower 1/3 of the sales force, you clearly have a problem. Anything in between is a judgment call on your part.
So, you’ve dealt with the issue of profitability. Now, how about the second question, “Is this sales person appropriately directable?” Directable means that this sales person can generally be counted on to do what you ask of him/her.
Here’s an example. Your marketing department has put together a hot new program. You call the sales force together at your monthly meeting, and lay out the program. You let each sales person know that you expect each person to present the program in each of his or her top twenty accounts in the next 30 days.
What’s the likelihood that they actually will do that?
That’s a measure of directability. If your plateaued sales person nods “yes” to you at the meeting, and then does just what he/she wants to do without giving serious consideration to your expectations, you have a problem. If, however, that same plateaued sales person follows through on your directions, and can be counted on to do so consistently, then there is no problem of directability.
OK, let’s recap. If you have a plateaued sales person, the first issue is to ascertain whether or not this is really a problem. If the sales person is appropriately profitable, and appropriately directable, it’s not a problem. Leave him or her alone; you have more pressing issues with which to deal.
However, if either question reveals a deficiency, then you have a problem that requires your intervention. Your strategy now is to place the responsibility for solving the problem where it belongs.
The responsibility is not yours, it’s the sales person’s. Don’t bother staying up all night, tossing and turning over this issue. Don’t be crabby to your spouse and short with your kids as you mull over what you should do. It’s not your problem; it’s the sales person’s. You just need to let that person know it.
There could be a thousand reasons why this particular sales person has plateaued. It may be that he/she is:
- comfortable with his/her income
- having personal relationship problems
- in behavioral ruts
- has lost interest
- is working on a personal business on the side
- doesn’t like you
- is depressed.
It doesn’t matter. It’s not up to you to ferret out the underlying cause and see if you can correct it. That’s the job of the sales person. Your job is to put the problem squarely on the sales person, to clearly explain your expectations, and to provide specific and clear direction to the sales person.
Here’s how to intervene in order to accomplish this:
- Prepare your case. Note exactly what the problem is. Profitability? Directability? Be detailed and specific. Prepare the numbers, outline your perceptions.
- Meet with the sales person face-to-face. No written memos, no cell phone calls, no e-mails. This person deserves your best efforts. So, set aside special time, have your secretary hold your calls, and meet with him/her eyeball to eyeball.
- Communicate specifically, clearly, and non-emotionally. Explain the problem. Communicate your expectations for the kind of changes that you need to have this person make. Provide a time frame. Make sure your sales person understands. You may even ask him/her to summarize the conversation.
- Let the sales person know that you are on his/her side. You want them to be successful. You’re here to help. Toward the end the meeting, ask this question, “How can I help?” There may be some things that you can do, some changes that you can make that will help this person achieve at higher levels. If your conversation uncovers some of these kinds of issues, make sure you follow through and do what you say you are going to do.
- Schedule the next meeting to follow up and review progress. This establishes the seriousness of the situation and interjects some urgency.
- After the meeting, consider documenting the meeting in writing. If it goes well and you feel like the sales person will rise to the task, you may want to skip this step. If, however, you sense that this meeting may eventually lead to the sales person parting from your company, you may want to capture your notes while they are fresh in your mind. You may also want to summarize the meeting in a memo to the sales person, to add to the seriousness of the event.
Now, the problem is squarely on the sales person to improve his/her performance. You can sleep at night and get on with other issues. At some point, probably on the date of the next meeting, you will have some decisions to make about the future of this sales person. But until then, it’s not your problem.