Looking at the Big Picture for Sales Success

Forest_ Trees

There are countless opportunities for sales training throughout the life of a sales person. Good sales organizations pursue training and development for their people almost any chance they can—squeezing it in among the myriad of other priorities. For instance, there’s training on negotiating techniques, how to get an appointment and develop a relationship, how to develop a customer solution (no more features and benefits discussions), how to use the new CRM, how to maximize your compensation…the list goes on.

But how many times do we get lost looking at the proverbial trees, and completely forget about the forest? Instead, organizations should develop sales enablement training around the Big Picture, including such topics as:

  • how the strategy of the company is translated into who the sales rep goes to see on a Tuesday morning
  • which measures and metrics to focus on, and which to ignore
  • how sales reps manage time so they can have an impact on the company every week.

Information covered in this sort of training can become a compass for your sales people and provide direction to determine future training needs. Here are the three main components of establishing the Big Picture.

#1: Strategy. How well the sales organization understands the strategy of the business can make or break your year. If they know why they are supposed to sell the new and improved Widget A as opposed to the “Good ol’ Tried-and-True Widget D,” chances are they’ll make better decisions along the way to a sale, including which current and potential customers to call on, how to craft their value proposition, and what’s important during negotiations. At the most basic level, the sales organization should be able to:

  • describe the main points of the sales strategy
  • explain their market environment
  • explain the basic economics of the business
  • describe any variables (regional preferences, for example) that may affect the strategy and impact product offerings.

#2: Key Metrics. We all love numbers. They can tell us so much. But, sometimes, there are just too, too many. Focus on those few metrics that allow the sales organization to see the Big Picture, and to track how their actions impact the bottom line.

#3: Connect the Strategy to Individual Accounts. Once upon a time a company had a poster hanging on its walls that read, “Every Customer Happy Every Time.” Our client, who was new to the organization, saw the sign and ripped it down. “Some customers are not the right fit,” she said, “and making them happy is outside of the realistic capabilities of our business.”

Instead of making every customer happy, train the sales organization to know which customers are the right fit, and then make those people happy every day. The sales organization should be able to:

  • explain how the sales strategy applies to their accounts
  • explain (as a high-level concept, rather than detailed) the financial benefits of certain products and services and certain contract terms
  • design an “ideal calendar week” that incorporates key daily activities to accomplish strategic account goals.

The content for Big Picture training can be updated every year, based on changing strategies and product launches, and incorporated into annual kick-off meetings. But the beautiful thing about Big Picture training is that it shows the sales organization a picture of the complete forest before trying to become an expert on every tree.

The Sales Compensation Diamond Part I: Framing the Plan

SalesGlobe Forum

Sales Comp Diamond

What happens when the sales leadership team takes a hard look at its sales compensation plan? Do they talk with their calculators? Is a spreadsheet the primary conversation piece? Think about what happens at meetings about sales strategy or sales roles and the question of sales compensation comes up. People start talking about whether the commission rate should be increased or decreased. Comments like, “Let’s put an accelerator in place to drive performance. Maybe we need to uncap the plan, or add a threshold for the low performers,” fly through the room.

The team has just started with the middle of the process and is on its way to a non-strategic answer. Only once they’ve aligned their Revenue Roadmap disciplines should they transition to the sales compensation design process.

Once the C-Level Goals and sales roles have been established, there are four facets in the process of evaluating and designing…

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CLevel Goals

“I like to say that the comp plan is the caboose, not the engine,” says Doug Holland, director of HR and compensation at Manpower. “Compensation should never be driving the strategy. The strategy drives the compensation. It’s incredible, especially in times of stress, how that message can kind of get lost. Comp issues are often symptoms of bigger problems, and it’s the easiest, most tangible thing to look at. The challenge is, do we have the right job designs? Do we have the right people? Those are harder conversations. That’s often the struggle with comp plans.”

When thinking about sales strategy and sales compensation, it’s critical to have a framework. We developed the Revenue Roadmap from our decades of work with hundreds of high performing sales organizations to be that framework. The Revenue Roadmap identifies four major layers, or competency areas, and 16 related disciplines that must connect for the organization to grow profitably,

Insight pertains to understanding the market and competitors and how the business is performing. Insight is the highest level competency: understanding the voice of the customer, the macro market, competitor moves, and the performance of the business. That insight will drive certain decisions to the next downstream level, which is sales strategy. Insight includes listening to the voice of the customer; considering the macro market environment; understand competitors’ strategy; and understanding your historical performance as a business.

Sales Strategy defines the sales organization’s action plan to achieve its goal. The sales strategy will drive decisions concerning product and service focus, concentration on certain markets, value propositions, and the resulting approach to market. Strategy includes defining the strategic products and services; segmentation and targeting; account planning; and value proposition.

When developing the approach to market, sales leaders should incorporate decisions about product, service, target segments, value propositions, and potential sales resources into a plan that can be executed by the sales organization. The customer coverage layer converts that plan into action.

 

Customer Coverage defines how the organization will use its channels, roles, processes, and resources to go to market. Customer coverage includes sales channels (third party resellers, referral partners, retailers, or company sales force); sales roles; sales processes; and sales deployment. Sales channels and sales roles integrate with the processes for working with customers. In fact, the best customer coverage models are built from the customer’s buying process with a sales process and roles that reflect how the customer prefers to work. Sales processes lay out the common approaches for how the sales team identifies prospects, qualifies opportunities, develops solutions, manages the momentum, closes the sale, and implements the product or service for the customer.

Enablement supports all of the upstream disciplines within Customer Coverage, Sales Strategy, and Insight. Enablement includes areas such as incentive compensation and quotas, which aligns sellers to the sales strategy. It includes recruiting and retention, which define the current inventory of talent and determine how the organization is going to attract and retain the right talent for the long term.  Training and development builds the capabilities of the organization for people currently in their jobs and in junior roles that will progress into key sales roles. Tools and technology provide leverage by enhancing the effectiveness of gaining insight and implementing the organization’s decisions around sales strategy, customer coverage, and enablement.

Jeff Connor, chief growth officer for ARAMARK, a global provider of food services, facilities management, and uniforms, is involved in the sales compensation process. “People confuse incentives with alignment, and they jump to incentives as the answer, as opposed to the hard work of alignment,” he says. “When you look at the Revenue Roadmap, sales and incentive compensation is at the bottom. In my experience, when you talk sales compensation everybody wants to just take big business objectives and assign incentives, as if the sales people will go after anything where there’s a buck.

“In reality, anybody who’s every worked on sales comp knows it doesn’t operate like that. The alignment work – getting the correct insight, aligning it to the sales strategy – has to happen first. The last think you do at the end of the day is work on the incentive plan. Confusing incentives for alignment happens all the time. People just go right to the ideas without understanding context. I think this idea of alignment is really important.”

The Revenue Roadmap helps a company to align its strengths and ensure everyone is firing on all cylinders. While it begins with Insight, all 16 disciplines are connected, and the decisions and actions flow from one to the next. When looking at sales compensation it helps to know where it fits within the overall framework, downstream from sales strategy and customer coverage. That’s why issues in the upstream disciplines will show up as symptoms in the sales compensation plan.

To learn more, contact Mark Donnolo at mark.donnolo@salesglobe.com or (770) 337 9897.

Making Sure Sales Innovation is Practical

solutions that have worked in the past

When you are working on a new customer solution, what kinds of solutions does the sales organization usually propose? Radically new ideas or – on the other side of the spectrum – solutions that have worked in the past? According to our survey, most people are in the practical middle ground, choosing, “solutions that have some new ideas within an acceptable range.”

There’s a reason the middle ground has a place within innovation. Middle-ground ideas are often pragmatic and able to be implemented efficiently.

Almost every idea has a rough draft. When we talk about sales innovation, we have principles, a process, lots of places to source inspiration, and exercises to make what’s been done in the past new and extraordinary. Many times, you’ll think of an innovative idea that fits your customer’s needs in the middle of the process. But other times you might need to get serious about how all of your creative thinking converges into that final great idea.

It’s time to get serious about your solution, the practical ways it can work, and the details that can make or break it in the end.

Vertical development entails selecting the best ideas, and then digging deep down to build out the solution. Pick the finalists from the list of ideas that will fit the customer situation. You don’t yet have to settle on one. You may select two or three to share with the customer, depending on how willing the customer is to explore options. When I worked in the design world it was common for us to pitch several alternative ideas because we knew it was a whole lot easier for clients to accept our recommendation if they had a chance to reject another option.

To help narrow down the pool, think about how your customer solution helps your customer in each of four ways:

  1. Financial. How does your solution apply to the customer’s growth or profitability, either overall or in specific areas? Often, this appears be the customer’s main challenge and it’s usually the topic the customer talks about most. In the case of the beverage distributor at the beginning of this chapter, if the retailer customer wanted to grow financially they would want to understand how the beverage distributor’s products or services could help them grow.
  2. Market. How does our solution address issues the customer has in specific segments or geographies? Does the customer want to deal with a certain geography or customer segment that may be feeding into that challenge?
  3. Product. What is your customer trying to accomplish from a product or service standpoint? Is the customer’s challenge being driven by any priorities that can be solved with certain products or services?
  4. Resources. Can your solution be implemented with the customer’s current talent and organizational capabilities?

Consider the practicality of your innovative solutions in each of these lights to assess which are your best ideas.

Contact me at mark.donnolo@salesglobe.com with any questions.

Look Closely: Innovation in Sales is Everywhere

Lots of ideas 2

 

Inspiration for innovation in sales is everywhere, if you know where to look. It’s not the flashy new technology products or a hilarious marketing campaign scanning your boss’ face into a dancing meme. Real creativity is sometimes the simple combination of existing ideas.

Don’t be fooled by simple ideas. They can result in customer solutions that win deals, or a new sales strategy that catapults your team to the top of your market.

Paul Johnson, vice president of sales and marketing at Intuit, combined parallels to work through a tenuous situation with the company’s channel partners. “Over the years, we had amassed a lot of value added resellers to take our product to market,” he says. “The name of the game was to get more distribution points, so our sales organization signed some great resellers and a lot of marginal resellers.” The typical partner program allowed them to earn a percent of the product mark-up and receive a lot of vendor support, like training and co-marketing programs. It became a strong package of financial benefits for the reseller.

The problem, he says, was that they provided the same partner program to all resellers, regardless of their level of engagement in the sales process. They had resellers driving sales, and resellers who received leads from the company and lived off of license renewal income. It worked in the short term when they were getting the business up and running, but it was expensive and unsustainable over the long-term.

According to Johnson, “There wasn’t a straight-out way to solve this.” If they decided to remove the lower contributing population of resellers and sell direct, they would take on a huge infrastructure cost of having to hire a new sales organization. Also, they could potentially scare off the good resellers who may have feared that Johnson would eventually go direct to the customer and remove them from the distribution channel. “If we came up with something on our own, it would carry a lot of risk because the resellers would assume that it was to our advantage,” he said. So Johnson and his team talked to the resellers to understand their business priorities and sensitivities. He also put together a reseller advisory team. Instead of proposing a new program to them, Johnson laid out the situation and then posed a range of options that his team pulled together from different technology and distribution environments. None of the components alone was the answer, but they were like puzzle pieces they could put together, overlap, or break apart. They asked the reseller advisory team not to give them a solution but to propose additional pieces from their experiences.

“After a few iterations of working with them, we had some really bad combinations – like going direct for major accounts and outsourcing just the implementation and service – and some better combinations – like segmenting the reseller base by business model, mission alignment with our company, and sales potential,” he says. “We came out with a program that looked at a few major reseller segments. The resellers that didn’t fit this new program weren’t happy, but most understood our logic. But the resellers with the right alignments got a better program than they had before. It made sense for their businesses and ours.”

Where do you see innovative ideas in sales?

Last week I wrote about how to avoid reinventing the wheel. Contact me at mark.donnolo@salesglobe.com with any questions.

Are You (Mistakenly) Trying to Reinvent the Wheel?

Why reinvent the wheel

 

Many people have the incorrect notion that innovation is totally, completely new. That, an idea doesn’t qualify as innovative unless it breaks ground similar to when Al Gore invented the internet.

But of course, that’s not true. Innovative ideas are usually built on top of other ideas, advancing it one step at a time.

Back in the 1980s, I worked for a design firm called StudioWorks in New York. The first time I walked into the StudioWorks loft, it exuded everything I had imaged about the edgy side of New York design. After getting off a rickety elevator on the top floor, the door opened to an expansive sunlit loft space with 20-foot ceilings, drawing tables everywhere, artwork on the walls, and design sketches neatly arranged on a large conference table in the middle of the floor. The most striking sight was the expansive presence of the Empire State Building seven blocks to the north.

Keith Godard, one of the firm’s partners, is a highly regarded British designer who’s been living in the United States since the 1970s. He’s an icon in the graphic design field, and I was lucky enough to have him as my first boss, my mentor, and the person to whom I looked for design guidance.

I was fascinated by how Keith designed. His designs burst at the seams. His work was about the concept, the big idea – an approach that I eventually realized extends directly into problem solving in the sales environment.

One day as I watched Keith work, I commented that one of his ideas might have had an uncanny resemblance to something I had seen before in a great piece of design. I was hesitant with my comment, concerned about saying something wrong or offending him. But instead of a hostile reaction, Keith looked at me wryly and said, “Well that must mean it’s good, mustn’t it?” With that one comment Keith offered me a bit of insight: All good ideas aren’t totally new.

And so it is in sales innovation. One of the challenges is the belief that a good, creative strategy or customer solution has to be completely new. The pressure to innovate and draw out previously unheard of ideas can actually stifle innovation.

Look at what’s been done before in your company, your industry, and even outside of commercial businesses for inspiration to solve a problem. Combine ideas from multiple sources, or take an idea and customize it for your specific sales problem.

Innovation is more realistically built step by step, rather than miles at a time.

 

Last week I wrote about taking apart your problem statement, and using it to source new ideas. Contact me at mark.donnolo@salesglobe.com with any questions.

Using Problems to Source Innovation

deconstructed

 

Creativity in sales is necessary, but not always easy to understand. It certainly has a place in marketing and product development, but how do sales people think creatively?

I’ve written about several effective methods for bringing new ideas into sales. Last week I wrote about using a simple problem statement, taking it apart word by word, and considering other examples (see example above).

Now it’s time to begin mixing and matching the many fractured pieces of our puzzle. Take the ideas generated by examining parallels and put them together to test their logic and potential application. Combining parallels may not be as difficult as you think. For one thing, our brains are hard-wired to find patterns among seemingly unrelated factors. As humans, our brain is our most vital defense mechanism, and as we evolved it was necessary for our brains to be on constant guard for predators. Hearing a stick break and then watching a lion jump out of the grass are two seemingly isolated events, until you watch one eat your neighbor, and then you identify a really important connection.

Scott Huettel, a Duke University professor and director of the Duke Center for Interdisciplinary Decision Science and the Center for Cognitive Neuroscience, has conducted research on the brain’s quest for patterns. According to Huettel, “The human brain really looks for structure in the world. We are set up to find patterns…. It allows us to extract regularity from the world.” The same trait explains why some people are superstitious, says Huettel. If you wear a red hat and your team wins the football game, you might identify a pattern and have a really strong urge to wear a red hat the next time your team plays.

While there’s no evidence that superstitions can influence sports games, this brain adaptation comes in handy when considering innovative ideas. Our brains seek to make sense from unrelated concepts.

Combining parallels is the start of horizontal idea generation. You may be amazed at the ideas you can now easily generate using this technique. Lay out the parallels, and see what new solutions come to mind.

 

Last week I wrote about taking apart your problem statement, and using it to source new ideas. Contact me at mark.donnolo@salesglobe.com with any questions.

The Best Sales People Are the Most Creative

Best sales people are creative

 

Are your best sales people the most creative? In a recent SalesGlobe survey, 64.3% of people “strongly agree” with the statement “Our best sales people tend to be the most creative.”

 

It makes sense: creative people are able to come up with individual solutions for their customers, rather than being boxed in by what was done before. But for those of us who are not naturally creative, there are many ways to get the same, innovative solutions.

 

Last week I wrote about ways to source ideas from generations, and the week before we discussed ways to combine parallel ideas. Another way to generate ideas is to look at potential parallels for each part of our problem.

 

For example, imagine a software company trying to increase their license renewals. We can boil their problem down to one statement: “How can we develop a customer loyalty program that will increase license renewals?” As shown above, we can break this statement into parts. (I’ve emphasized the important element in capital letters.) “How can WE develop a CUSTOMER LOYALTY program that will INCREASE LICENSE RENEWALS?”

deconstructed

Just by looking at the pieces of the sentence, we can look for parallels that might match just one part of the problem. For example:

 

“How can WE develop…” Should your company actually develop the program itself or turn elsewhere for help? For the software company, the team might look at how other organizations use business partners, sales channels, or other credible sources to develop or implement programs. Looking for parallels here could lead them to leverage the talents and resources of their software reseller partners, for example.

 

“… a CUSTOMER…” How do other organizations define their customers? Maybe the sales team shouldn’t try to solve the renewal problem for every customer. Perhaps there are parallels for how other organizations have focused on specific customers, customer segments, or industries.

 

“… LOYALTY program…” Isolating the loyalty component can create a number of parallels to how organizations create relationships and foster trust to build loyalty.

 

“… that will INCREASE…” The element of increasing suggests parallels to growing quantities or – just the opposite – decreasing quantities. So in applying parallels we might look for examples of not only increasing loyalty but also decreasing departure. Decreasing departure could generate parallels around disadvantages of leaving a situation, raising switching barriers, or creating more stickiness in the relationship or product.

 

“… LICENSE RENEWALS…” Focusing on license renewals suggests parallels to categories of agreements in general, and specifically contracts requiring people to stay with someone or something. The team might also look for parallels beyond renewing an agreement for a product to renewing an agreement for other related services that could increase loyalty for the main product. For example, what if the software company found that customers really valued a related professional service they receive from the company, but the most economical way to get that service was to also maintain their software license contract? That would shift the parallel to finding related services that increase retention of core services.

 

 

Last week I wrote about five generations of idea sources. Contact me at mark.donnolo@salesglobe.com with any questions.

Making Sure Sales Innovation is Practical

solutions that have worked in the past

 

When you are working on a new customer solution, what does the sales organization usually propose? Radically new ideas or – on the other side of the spectrum – solutions that have worked in the past? According to our survey, most people are in the practical middle ground, choosing, “solutions that have some new ideas within an acceptable range.”

There’s a reason the middle ground has a place within innovation. Middle-ground ideas are often pragmatic and able to be implemented efficiently.

Almost every idea has a rough draft. When we talk about sales innovation, we have principles, a process, lots of places to source inspiration, and exercises to make what’s been done in the past new and extraordinary. Many times, you’ll think of an innovative idea that fits your customer’s needs in the middle of the process. But other times you might need to get serious about how all of your creative thinking converges into that final great idea.

It’s time to get serious about your solution, the practical ways it can work, and the details that can make or break it in the end.

Vertical development entails selecting the best ideas, and then digging deep down to build out the solution. Pick the finalists from the list of ideas that will fit the customer situation. You don’t yet have to settle on one. You may select two or three to share with the customer, depending on how willing the customer is to explore options. When I worked in the design world it was common for us to pitch several alternative ideas because we knew it was a whole lot easier for clients to accept our recommendation if they had a chance to reject another option.

To help narrow down the pool, think about how your customer solution helps your customer in each of four ways:

  1. Financial. How does your solution apply to the customer’s growth or profitability, either overall or in specific areas? Often, this appears be the customer’s main challenge and it’s usually the topic the customer talks about most. In the case of the beverage distributor at the beginning of this chapter, if the retailer customer wanted to grow financially they would want to understand how the beverage distributor’s products or services could help them grow.
  2. Market. How does our solution address issues the customer has in specific segments or geographies? Does the customer want to deal with a certain geography or customer segment that may be feeding into that challenge?
  3. Product. What is your customer trying to accomplish from a product or service standpoint? Is the customer’s challenge being driven by any priorities that can be solved with certain products or services?
  4. Resources. Can your solution be implemented with the customer’s current talent and organizational capabilities?

Consider the practicality of your innovative solutions in each of these lights to assess which are your best ideas.

Contact me at mark.donnolo@salesglobe.com with any questions.

Sources of Sales Innovation: 5 Generations of Ideas

5 Generations

 

As we mentioned last week, one of the challenges of innovation is the belief that a good, creative idea has to be completely new. But it doesn’t. We call inspiration from other ideas Combining Parallels: look to what’s been done in the past, or even current ideas, and use them as a starting point.

 

Looking beyond your immediate environment can be the greatest source of parallels. Because each step moves progressively further away from your company and market, we refer to these steps as “generations.”

 

  1. First Generation: Parallels Within Your Company. Parallels within your company can be surprisingly diverse, especially if you look to the other divisions, regions, and functions. Often companies have proprietary research that can be leveraged. For example, Tracy Tolbert, executive vice president of global sales at Xerox, benefits from first generation parallels frequently. Xerox is almost 100 different businesses all around the world and Tolbert’s sales organization pulls from the variety of experiences and ideas in all of those businesses. “It gives us some advantage as we create solutions for customers, because we have the ability to lean on different organizations and create solutions that may have an element of a prior solution from another business within Xerox. We’re able to come up with some pretty creative solutions.”

 

  1. Second Generation: Parallels Within Your Industry. Parallels within your industry include what your competitors have done or are doing. It’s likely that your competitors have addressed the strategy challenge or customer situation you’re dealing with at some point too. But remember, you don’t want to replicate their solution; you’re looking for parts of their solution that can be combined with other puzzle pieces to create a new solution.

 

  1. Third Generation: Parallels in Companies or Industries with Similar Business Models. The third generation of parallels looks at businesses outside your direct competitors, but those that have a similar way of generating revenue. Imagine a software company that struggled with customer renewals. To solve the problem, it might look for parallels in other contract-based businesses – like telecommunications or insurance companies who depend upon high customer revenue retention – to examine how they build customer loyalty programs.

 

  1. Fourth Generation: Parallels in Companies with Dissimilar Business Models. Parallels in companies with dissimilar business models extends the reach one step further and forces a sales organization to look at solutions it may never have considered. The software sales team would now look at companies that need to retain customers, but without a contract. Sources might include airlines, hotels, grocery store chains, credit cards, or even magazines. For example, grocery stores may seem completely unlike software companies on the surface and may not even be considered by the sales team. While grocery stores have a considerably different business model, many use loyalty cards that offer discounts to frequent shoppers. By examining the similarities between your business and these businesses, you may find additional parallels that will contribute to your solution.

 

  1. Fifth Generation: Parallels Outside of Business. By the time you reach the fifth generation of parallels, you’re about as far from home as you can get. Once you’ve looked for similarities within every corner of the business world, it’s time to think beyond business. At this point the software sales team might ask, “What happens outside of business to keep people loyal to something?” Examples may include sports teams that create fan bases; non-profit organizations that rely on sponsorships from loyal donors year after year; even certain aspects of family or cultural allegiance can lend some clues. How do groups stay loyal, decade after decade, to a particular tradition?

By the fifth generation, at the bottom of the tree diagram above, you’ll have a pool full of parallels. The ideas will also increase in divergence the further down the tree you travel. Both the abundance and the range of ideas create a plethora of components. Some combinations won’t make sense, but others, can turn into real solutions.

 

 

Last week I discussed combining parallel ideas. Contact me at mark.donnolo@salesglobe.com with any questions.

Where Are All the New Sales Ideas?

Combining Parallels

 

One of the challenges of innovation is the belief that a good, creative strategy or customer solution has to be completely new. The pressure to innovate and draw out previously unheard of ideas can actually stifle innovation. Innovation stage fright prevents a lot of people from ever trying to go beyond the norm. “Why waste the time? I’m not creative. I’m a numbers person. I’m a good implementer…” But with sales innovation, there is an abundant source of opportunity by Combining Parallels.

Parallels are situations analogous to ours. They can come from a different company or industry. Sometimes these ideas are used in a different context or for a different purpose. In fact, parallels may not even come from business, but from other life situations.

One of the principle ideas of sales innovation is Combine Unrelated Ideas. Consider these famous examples: Joseph Pulitzer combined expensive high-speed printing with lucrative large scale advertising to create mass-circulated newspapers. Henry Ford combined Adam Smith’s division of labor and Eli Whitney’s assembly line (although, the Ford Motor Company learned of the moving assembly line through William “Pa” Klann’s visit to Swift & Company’s slaughterhouse in Chicago) to create the first moving assembly line in manufacturing and, subsequently, the first affordable car. My personal favorite is Johannes Gutenberg’s combination of a coin punch and wine press to create the first moveable-type printing press. Each took two well-known ideas and combined them to create a third, totally novel innovation.

In this step of the Innovative Sale Process, Combine Parallels, we put different ideas together, like pieces of a puzzle.

Doreen Lorenzo, president of Frog Design, uses a process similar to combining parallels. “We use provocations … something that might not have anything to do with the particular topic you’re working on, but it will provoke you to think about the ideas differently.” For idea generation, Frog brings people together to think of provocations for a particular client problem. Each provocation leads them to other ideas. After a while, the ideas can be categorized into groups, based on similarities. “It’s really interesting how it unfolds,” says Lorenzo. “It becomes a linear path and we begin to see how these ideas play into something that has value. Through the provocations, unconnected ideas begin to come together.

“Through this process, we’re trying to grow the mind to think about something differently. Businesses have an incredibly elastic memory and they always go back to what they know. It’s so absolutely scary to do something different. It’s so much easier to be gray than to be red.”

Combining parallels is an exercise in gathering more raw materials for idea development. Don’t about the final solution yet; try to think of new ideas without worrying if they’ll fit. Judgment comes later in the creative process.

 

Last week I discussed breaking conventional sales rules. Contact me at mark.donnolo@salesglobe.com with any questions.

Breaking Conventional Sales Rules

Break Rules

 

Malcolm McLean, son of a North Carolina farmer, began his career humbly with the $120 purchase of a pick-up truck in 1934. He and his brother and sister hauled farm products of their native North Carolina up to the ports in New York and New Jersey, where the cargo was then loaded onto great ships. By the end of his career, the U.S. Secretary of Transportation would call him, “A true giant,” and write, “We owe so much to a man of vision;” all because he allowed himself to think outside the rules.

It happened one afternoon in 1937, when McLean delivered a load of cotton bales to a port in Hoboken, New Jersey. As he sat and watched the longshoremen unpack the trucks and load the cargo box by box onto the ship, an idea struck him. What if the trucks didn’t have to be unpacked until they reached their final destination? The longshoremen’s process of loading and unloading was expensive and time-consuming, and happened at least twice: at the departure port and the arrival port, where the cargo was again unpacked from the ship, loaded onto a truck, and driven to its final destination. Instead, McLean, thought, what if the entire body of the truck was lifted off its chassis at the port, onto the ship, and replaced onto a new truck at the arrival port?

McLean’s idea challenged a standing rule of his industry – that longshoremen were necessary for the efficient transportation of goods. When he finally brought his idea to fruition, almost 20 years later, it transformed the shipping industry. By 1966, his company, Sea-Land Services, boasted the world’s largest fleet of container ships, had over 18,000 containers in service, and served 22 ports around the world. The containers shared between trucks and ships revolutionized the way goods were transported by dramatically reducing time and money spent loading and reloading goods.

By breaking that rule McLean built an empire and transformed not only global transportation but also manufacturing. By making transportation so cheap, companies were able to build factories where labor was cheap, as well. In fact, it’s possible McLean’s empire was built because that rule was in place, presenting an opportunity. Sales organizations can follow McLean’s lead: not all rules are meant to be followed, and some are even meant to be broken. When your team hits a wall during a brainstorming session, consider breaking the wall.

There are three major types of constraints: operating rules, procedural rules, and accepted truths.

  1. Operating Rules. These rules are core to the survival and operations of the business. For example, an insurance company might have operating rules about financial and actuarial requirements. These aren’t the rules that are healthy to break.
  2. Procedural Rules. These rules govern the supporting processes of the business. For the insurance company, they would include how the claims administration process works, and how they interface with their customers who make claims for property losses. While these rules are essential, they can also be broken carefully if breaking them improves the company’s capabilities.
  3. Accepted Truths. Many sales organizations have accepted truths about what works in their business. These are different from operating and procedural rules, which are well-established with a specific purpose behind them. Accepted truths, in comparison, are habits and practices a company has “because that’s the way it’s always been done,” regardless of whether there is logic to support it.

 

These practices are legacies; pseudo-rules that have been created informally over time. They’re often limiting for the sales organization and ripe for breaking. Disrupting these legacies are great opportunities for differentiation. Question what’s accepted with the eyes of someone new to the company, or even new to the industry. Ask “why?”

When considering whether or not to break a rule, remember operating rules are usually mission-critical to the business, procedural rules are about how the business functions through various processes, and accepted truths are those legacy constraints that have become well-worn and believed by many people over time. When brainstorming with your own team, ask questions to determine which type of rule is in your way. Can it be broken? Can it be bent?

Be a rebel. Know your internal and customer rules, classify them, and then break them to see what possibilities are revealed.

 

Last week I discussed a new way to brainstorm. Contact me at mark.donnolo@salesglobe.com with any questions.

A New Way to Brainstorm for Sales Innovation

Sales Person Innovation Importance

 

In a recent SalesGlobe survey, 81% of sales organizations said it was “extremely important” for a sales person to be creative when developing customer solutions. But, according to the same survey, 71% of sales people only offer new ideas when they feel it’s safe to do so. That indicates an awareness of the importance of innovative thinking, but a reluctance to create the environment or practices to allow real creativity to happen.

When I was in art school, I suffered through a process called a critique many times. Think of a critique as brainstorming with teeth, but, a major rule is that the critiquer must not simply criticize: he must also offer a positive suggestion which makes the presenter’s idea better.

The critique is like a game of sales-innovation poker. The opening bet is a quality comment. Then, to stay in the game, each player must up the ante by offering constructive criticism that helps develop the idea.

Brainstorming today can – ironically – be pretty stale. The idea of brainstorming has become so ordinary it’s almost ineffective. It usually disappoints for one of two reasons: either it’s too structured and seeks narrow answers. (This was the case of one executive who told me he only wanted ideas which had already worked in the past. So much for new thinking.) Or it’s not structured enough and its output unpredictable and, in the worst cases, completely useless.

One former executive of Comcast Communications described how they used a process similar to a critique to inject some life into their brainstorming sessions. “Our sales leadership team comes together frequently to look at new ideas for programs like sales process design, sales goals, and incentive programs. While the organization is very disciplined in how we work in our day jobs, when we get together for brainstorming sessions, we’re all over the map. It’s tough to make these meetings productive.

“But the brainstorming sessions are important enough that we started to look at some different ways to work together,” she said. “So we structured them like a game with some basic rules. We start with a beginning statement of the problem and then play it around the table. Each person can take a shot at an alternative way to define the problem or an alternative question that might get to the root of the problem. If they don’t have anything, they can pass. We play subsequent rounds, this time refining an idea. Each team member either suggests an alternative or a builds upon a prior idea without criticism. It keeps the conversation open and risk-free, but it helps us make progress rather than having a total free-for-all, and we can apply the approach to just about any sales program challenge.”

How do you structure your environment to encourage innovative thinking?

 

Last week I discussed the people of sales innovation. Contact me at mark.donnolo@salesglobe.com with any questions.

The People of Sales Innovation

Steven Johnson Sales Team

 

Steven Johnson is the author of eight books on how science and technology affect the human experience. In his 2010 book, The Natural History of Innovation: Where Good Ideas Come From, he looked at research by theoretical physicist Geoffrey West, who proved that large cities produce exponentially more ideas than small cities. He writes, “West and his team discovered … A city that was ten times larger than its neighbor wasn’t ten times more innovative; it was seventeen times more innovative. A metropolis fifty times bigger than a town was 130 times more innovative.

Extending that idea to the sales organization, we can conclude that a sales person operating independently won’t innovate as much as a sales team working together. The team can leverage its own talents within the organization or draw in partners, associates, and even customers outside of the organization, creating an ecosystem of ideas. Who is on your team is important. Sales leadership and project teams are often comprised of members who work together on a regular basis. Familiarity plays an important part in establishing the right dynamic. But new blood can also invigorate the team’s thinking.

Greg Johnson, vice president of product delivery and consulting at LexisNexis, likens team collaboration to a larger pool of thought. He describes it as a drawing of a target, with circles inside circles. “I draw a dot in the middle and say, ‘This is a rep’s perspective’” he says. “And this is not a criticism; this is reality. They only touch a certain number of accounts. And then you start drawing the circles around the accounts their manager has. If a manager has eight reps and he’s going on calls with eight reps, it’s a bigger circle and a bigger perspective. Their world is bigger. If you draw a larger circle around a regional manager, that person might be going all over the southeast. The rep has the smallest perspective, usually, and the more people you can get in a collaboration meeting, whether it’s sales managers or product managers or someone else, you expand that knowledge base exponentially. You broaden it in terms of the perspective and the experiences that they have in an industry or in a market or in a geography. And with those additional perspectives come more ideas and more strategies and additional approaches.”

Putting aside the hierarchy of team members is also critical to moving in a productive direction. Bill Chilton is a principal architect at Pickard Chilton, an award winning architectural design firm. He’s led projects for corporations around the world including the ExxonMobil office complex in Houston, Texas; the Four Seasons Place in Kuala Lumpur, Malaysia; and the U.S. Environmental Protection Agency headquarters near Washington, D.C. His work is always the effort of a large team, consisting not only of the client, but people from many other companies including engineers and building contractors. “Many of the people on the team that are essential to the collaboration aren’t trained as architects. They don’t need to be. It’s very much a collaboration between disparate voices that are each bringing their own expertise,” says Chilton. “We’ve had great ideas for buildings that have come out of the structural engineer saying, ‘You know, I’ve been thinking about this, and what if we thought about the structure this way?’ That unlocks our thinking about the expression of the building in a way we never thought of before. But if we weren’t listening to that structural engineer, it would be easier to just say, ‘I’m going to design the building, and you’re just going to make sure it doesn’t fall over.’ We view the structural engineer as a creative, collaborative partner, and the process and the building are better as a result.

On an effective sales innovation team, roles exist independent of position and hierarchy, and team members may work within or outside of the company.

 

Last week I discussed how to ask the right questions and uncover your customer’s real problem. Contact me at mark.donnolo@salesglobe.com with any questions.

How the Right Questions Lead to Sales Innovation

Customer Challenge Dimensions

Across hundreds of sales organizations, we’ve consistently found that the most effective sales teams aren’t the ones telling the customer what they can do. The best sales teams ask the customer relevant questions, and then determine what the customer should do. They do their homework and they approach the customer’s challenge from multiple perspectives – with questions, not assertions.

To start, you can ask questions related to your customer’s challenge, specifically in terms of financial performance, its markets, its products, and resources. These questions deal with the business’s priorities.

  1. Financial challenges apply to the customer’s growth or profitability, either overall or in specific areas. Often, this appears be the customer’s main challenge and it’s usually the topic the customer talks about most.
  2. Market challenges refer to issues the customer has in specific segments or geographies. Ask your team: are there specific challenges the customer is trying to address for certain markets? Does the customer want to deal with a certain geography or customer segment that may be feeding into that challenge?
  3. From a product or service standpoint, what is your customer trying to accomplish?  Is the customer’s challenge being driven by any priorities that can be solved with certain products or services?
  4. Resources are the customer’s challenges relative to talent and organizational capabilities. How can your sales coverage model and your organization’s pool of knowledge contribute to addressing the overall challenge?

The right questions help to clarify the customer’s problem – for both you and the customer. For example, if your customer thinks he has a problem with growth in a particular product category, the right questions – around financial, market, product, and resources goals and limitations – can help you dig deeper and uncover whether another problem lies hidden underneath.

The answers you receive from those questions are very valuable information. They help you to re-define the customer’s problem. Is it really a growth problem, as your customer suspects? Or is it a problem with that customer’s resources (talent, supplier capabilities, etc.) that are in fact inhibiting his growth? Or, perhaps conditions have changed in the overall market, affecting growth.

Re-defining the customer’s problems does several things:

  1. It gives you the opportunity to really listen and respond to your customer. You’re not just shoving samples at him.
  2. It differentiates you from competitors who ARE shoving samples at him.
  3. Finally, it gives you the chance to actually solve his problem.

Addressing superficial needs might temporarily solve the problem. Addressing the root cause of the problem has a better shot at a long-term solution, and a long-term relationship with that customer.

How can re-defining the customer’s problem help your customer?

Last week I discussed how innovation and sales work together. Contact me at mark.donnolo@salesglobe.com with any questions.

How Do Sales and Innovation Work Together?

Innovative Sale 4 stages

 

Every couple of weeks I get calls from clients asking questions such as, “How do other companies in my industry implement cross-selling?” Or, “How do companies in my industry motivate their teams on multi-year selling?” But they don’t really want to know how other companies in their industry do it. What they want to know is, “What should I do,” because right before they called me, they were grasping for solutions and replicating the status quo.

The Innovative Sale Process is a left-brained thinking process that helps to generate right brain innovation. Sales organizations need the structure of such a method to address the range of variables that define sales challenges and the constraints of time, product, price, and organizational capabilities among others. They also benefit from the defined steps in the process that ensure the team moves beyond the known approaches – the solutions they’ve developed in the past – and pushes through to a phase of discovering new ideas. Sales organizations can use this process to develop external solutions – in customer situations where the need to differentiate determines whether a deal is won or lost. The process can also be used internally for the development of other sales programs, such as a new channel partner plan, a new incentive design process, or a new value proposition for a customer segment that fits within the overall sales effectiveness strategy.

As illustrated above, the Innovative Sale Process consists of four phases: Conditions, Known Approaches, Discovery, and Application; and eight steps within those phases: Define the Challenge and Constraints; Gather Insight; Create the Initial Approaches; Destroy False Assumptions; Combine Parallels; Explore Horizontally; Develop Vertically; and Implement and Communicate. The Innovative Sale Principles are at the center of the Innovative Sale Process.

  1. Conditions: In the first phase, Conditions, the sales rep defines the challenge through a problem statement. In this phase we also define any constraints or conditions that are important to consider, including time, price, or product specifications that the customer has requested.
  2. Known Approaches: Phase two consists of Known Approaches; discussing ideas that have worked before. Almost all sales organization brainstorming consists of this phase – in fact, typically, this is the entirety of their brainstorming. Sales executives list their Known Approaches and then immediately jump to Application to begin implementing their “solution.” They’ve reached their solution development limits early and hit an innovation roadblock. While going with what’s familiar may feel like the right thing to do, they’ve missed the opportunity for Discovery and put the sales team in an undifferentiated position. Known Approaches are what everyone else is doing. But, by moving from that 4:00 position – Known Approaches – over to the 10:00 position of Application, we miss the whole area of Discovery.
  3. Discovery: Phase three, Discovery, is where the innovation happens. We destroy assumptions, think of a range of ideas, create combinations, and then test their ability to be implemented. A sure sign you’ve hit the Discovery phase is when your team starts to complain about feeling lost, with phrases such as, “I think we’ve gotten a little off-course. Perhaps we need to re-set our approach and bring it back to center.” Recall the imperative Get Comfortable Being Lost. Sales organizations tend to resist Discovery because it’s uncomfortable, it’s new, and because frankly, it takes work.
  4. Application: Finally, the fourth phase is Application. This is where we bring sales innovation in for a landing and make the solution work. Check that the idea makes sense, and collaborate with the customer to implement it.

 

 

Last week I discussed principles of innovation. Contact me at mark.donnolo@salesglobe.com with any questions.

How Often Are New Ideas Brought Up in Your Sales Organization?

Safe Ideas

 

Not everyone is wired for creativity. People fear innovation because it can veer far from the ordinary, and there’s usually some risk involved. New ideas aren’t always proven to have a nice ROI.

In fact, in more than 70% of sales organizations, sales people bring new ideas to the table only when they feel it’s safe to do so, according to a recent SalesGlobe survey.

But one of the rules of innovation is to Get Comfortable Feeling Lost.

Years ago, before my work with corporate sales organizations began, I was a young art student at Philadelphia’s University of the Arts. Of all my classes – including many of my MBA classes — my Principles of Art class was one of the most influential for my career.

We spent the semester exploring eight specific concepts: pattern, variety, unity, contrast, movement, harmony, proportion, and balance. These ideas, my professor explained, are the tools used in art and design. Just as necessary as a pencil, paintbrush, or T-square, the principles of art shaped my projects because they shaped my thinking. They organized my ideas before I began a project, while I worked through a project, and how I evaluated it once I had finished.

These principles appealed not just to my creative side – the side that wanted to explore all the ways I could possibly use pattern, variety, and contrast – but also to my logical side, which sought some order among the chaos of creativity.

As I graduated from an art student to a design professional, I carried these principles with me and used them regularly in my work. And, to my surprise, when I returned to school to earn my MBA and began working with large sales organizations, I again found support from these principles. Pattern, variety, unity, contrast, movement, and harmony, it turns out, with a few modifications to their application, pertain beautifully to sales.

Today, the Innovative Sale Principles are associated with six of the eight original Principles of Art I learned more than 25 years ago. Each principle has three imperatives that apply directly to sales.

So what should you do with this information? Consider where you may have strengths and weaknesses, and how you can incorporate some of these ideas into your work. What team members might have strengths in particular areas that complement your developmental areas?

Hopefully, these principles can introduce you a new way of thinking about creating sales solutions that brings together proven approaches from the creative world with the goal-orientation of the sales world.

Principle One: Pattern
Pattern refers to our instinct to find related ideas in any given situation. Have you heard or read about a similar customer situation? You might leverage those ideas, rather than reinventing the wheel each time.

Consider three ways to incorporate this idea into real sales situations:

  1. Get Comfortable With Feeling Lost
  2. Combine Unrelated Ideas
  3. Become a Student of History

Principle Two: Variety

While Pattern uses similar elements, shapes, colors, textures, and values, Variety prefers a range of these in any single composition. 

The same idea, naturally, applies to innovative thinking in sales. You are more likely to have the elements of the right solution for your customer if you work with abundance. If, as too many sales organizations do, you stick to just the few tried-and-true solutions, you may never differentiate with a better answer.

Consider three ways to incorporate this idea into real sales situations:

  1. Produce an Abundance of Ideas
  2. Think in Divergent Directions
  3. Know that Less is More

Principle Three: Unity

Unity describes how all of the elements and principles in a composition work together to make sense. In sales innovation, Unity also refers to how all of the elements work together to make a whole – although, in a sales organization we replace color and shape with sales team members. With a sales innovation team, the collaboration of diverse individuals creates a type of energy and output that’s greater than a single point-of-view.

Consider three ways to incorporate this idea into real sales situations:

  1. Assemble the Right Team
  2. Collaborate as an Individual
  3. Understand Other Perspectives

Principle Four: Contrast

Contrast describes the differences among elements used to create interest and tension. Contrast can break up the repetition and movement created by Pattern.

In sales innovation, contrast invites the sales team to critically question and push back against established practices. With Contrast, sales teams also get comfortable with divergent opinions and the initial criticism that almost invariably accompanies new ideas.

  1. Break Rules
  2. Don’t Accept the Accepted
  3. Get Comfortable with Criticism

Principle Five: Movement

Movement creates the action in design. In sales innovation, Movement refers to the natural progression of ideas as we proceed through the thinking process. Unfortunately, innovative ideas rarely occur in a flash, and we have to be disciplined in our approach to development.

Consider three ways to incorporate this idea into real sales situations:

  1. Ask the Right Questions
  2. Grow With the Flow
  3. Walk Away From the Problem

Principle Six: Harmony

Harmony is achieved when there are several different but related elements in a composition. By using similar elements throughout, the piece appears uncomplicated. If something is harmonious, we often say, “It works.”

Sales teams working toward innovation can use the principle of Harmony like a checklist to make sure what they’ve designed can be implemented by the organization. Do the elements of the idea work together in a cohesive way? How can we implement this new idea so it works for the customer?

Consider three ways to incorporate this idea into real sales situations:

  1. Keep Perspective
  2. Check Degrees of Change
  3. Be Persistent

How can these concepts apply to your sales organization?

 

Last week I discussed how constraints enable creativity. Next week I’ll discuss how sales and innovation work together. Contact me at mark.donnolo@salesglobe.com with any questions.

Realities of Sales Innovation

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It’s hard to be innovative. Too often in sales, people feel they cannot be creative or innovative with their customer solutions because of pesky realities like time and financial limits. But here’s a reality check: constraints and limitations actually enable creativity in sales. It sounds like a paradox at first, but think about it.

Without constraints, options are unlimited. For example, if your customer needs a new CRM system and has no budget or time constraints, it would be easy to sell them a product. However, it’s more likely that customer has a tight budget, a three-month time frame, and must get approval from the CFO, who may or may not be a fan of your product. You probably need to get creative to close this deal.

The Apollo 13 space mission is a great example of constraints within functional creativity. This rocket was bound for a moon landing until, on April 13, 1970, a spark from an exposed wire in an oxygen tank caused a fire. In an instant, the mission of the three astronauts on board, and the many scientists in NASA’s Houston control center, changed from lunar landing to a nearly-impossible safe return home.

Commander Jim Lovell couldn’t just turn the rocket around and head full-speed back to Earth. The astronauts were now in the desperate situation of not having enough power, so they turned off all non-essential systems. The constraints they faced were life-threatening, and they inspired creative thinking at its most impressive. Prime crew member Ken Mattingly, who was grounded from the mission just 48 hours before lift-off after an exposure to German measles, worked tirelessly in the Apollo simulator. He recreated the astronauts’ situation and experimented within the constraints of severely limited power and water, which was needed to cool the capsule’s necessary systems. He configured and reconfigured ways the space craft could safely burn through the Earth’s atmosphere. Finally, thanks to the ingenuity at mission control, Mattingly, Lovell, and the rest of the crew were rewarded with that famous safe landing.

Constraints in sales are usually less life-threatening, but still important. They most often include:

  • Time. A deadline must be met.
  • Organization Limitations. The talent, manpower, or policies of the organization limit what can be achieved for the customer.
  • Supplier Capabilities. Providers have practical limitations including the amount of product they can provide to the organization and how quickly they can provide it.
  • Cost. Labor and material costs limit the company’s margins.
  • Quota. The organization must reach a performance objective.
  • Customer Requirements. Customers have high expectations and performance hurdles.
  • Competitive Environment. Competitors’ capabilities sometimes dictate what the customers want.
  • Price. The customer or market values the offer at a certain dollar amount.

What are your common constraints? How can they compel you to become more creative?

Last week I discussed how myths about innovation impede creativity. Next week I’ll discuss a few basic principles of sales innovation. Contact me at mark.donnolo@salesglobe.com with any questions.

Sales Innovation & The Dilemma of Perception

Innovation in our org is

Raise your hand if your company currently has “innovation” as part of their strategy, major marketing campaign, or talk in internal meetings. Innovation – as a goal, a high-level concept, or a weary buzzword – is everywhere. But where are all the new ideas for sales? In more than 66% of sales organizations, innovative is either just a high-level message or not discussed at all, according to a recent SalesGlobe survey. So how can sales organizations think creatively – differently from their competitors – and bring customers better solutions?

One of the first steps is knocking down a few misperceptions about creativity and innovation that seem to keep real, applicable, innovative ideas at bay.

Perception: You have to be born with creativity.

Reality: Most creators and innovators have learned how to be creative. And as in any other discipline, practice and tenacity are required before producing results.

Perception: Creative ideas come from eureka moments.

Reality: Creative moments are usually the culmination of a creative problem solving progression. In a majority of situations, brilliant results come amid numerous other ideas that never see the light of day.

Perception: You have to work in a heralded innovative organization to be creative (think Apple and Pixar).

Reality: Any organization can adopt innovative practices, and any individual can use innovative principles independently.

Perception: Innovation doesn’t apply to sales. Innovation belongs in product design or marketing, but not sales.

Reality: Innovation wins deals. Innovation can be the differentiating factor in a competitive sales situation and continued innovation can help retain customers.

Perception: Creativity is creativity; it’s all the same. A painter, musician or poet can translate those talents to creativity in the business arena.

Reality: All creativity is not created equal. Most creative endeavors fall into one of two categories: artistic creativity – which does not necessarily have a purpose beyond art; and functional creativity – which seeks to solve a problem.

As president of The University of the Arts, Sean Buffington understands both artistic and functional creativity. “We tend to think of creativity as something that resides in people who we think are creative,” he says. “We believe that creativity is a thing that some people have and other people don’t have. I would argue against that. While not everybody is necessarily visually acute or has the same kind of ability with their hands or can sing, everybody does have the ability to create; that’s something that is fundamentally human.

“But even though we’re all creative, our goals are different. Our purposes are distinct. In the case of the arts, the process is iterative and lifelong; it’s a process of learning and reacting and changing and adjusting,

“But in business timeframes are shorter and goals are different. In business, you don’t have the luxury of saying ‘I made these four pieces of ceramic art and they didn’t really come out the way I like, so, I’m just going to put them on the shelf and go back into the kiln.’ In the case of business, the decision is more immediately consequential. The company either made money or it didn’t make money. It successfully entered that new market or it didn’t, and there could be real consequences that have to do with revenues, whether people are able to keep their jobs or not, whether the company can hire people or not.”

“Innovation” shouldn’t just be a buzz word. Sales organizations can use innovative thinking to develop better sales strategies, paths to market, and better solutions for their customers. Don’t be dissuaded by common myths about creativity, and don’t be afraid to take risks on new ideas grounded in functional creativity.

How do innovation and functional creativity fit into your sales organization?

Next week I’ll write about how constraints – such as time and money – can actually contribute to innovative solutions. Contact me at mark.donnolo@salesglobe.com with any questions.

Sales Productivity: Where Does the Time Go?

STO 2

 

In sales, the idea is people connect with potential customers and get them to buy our products and services. Their whole role is to sell, right? But the reality is, sales people – in any type of sales role — typically spend a significant portion of their time on non-selling roles and activities.  These activities can include internal meetings, training, preparation time for meetings, business planning, customer service, travel, administrative tasks – you get the picture, and can probably easily add to the list.

These other activities can be very frustrating for the sales people and the sale leaders who are trying to squeeze more quota out of an already business workforce.

But it’s not a lost cause. The truth is non-selling activities are so common in many sales organizations these activities are considered part of the job. But a closer look at how much time is spent not selling can be eye-opening, and can provide a major opportunity to increase the sales capacity of the organization.

Often, when we sit down with sales leadership, they have no idea how much time their front line sales people are spending on these non-selling activities. And when they realize it, either from stories and examples, complaints, or a sales time tracking tool, they’re usually fairly alarmed. The need to remove many of the non-selling activities – we call it decontaminating the sales role – becomes a priority.

Decontaminating sales roles can have a significant impact. For example, for an organization with $2B of revenue and 500 quota bearing reps that spends only 50% of its time selling (the average across organizations), adding 5% more selling time at only 20% of the current revenue per hour yields an additional $40M in sales capacity (see chart above). That’s $40 million more from the sale sales people.

When planning for 2015, considering gathering the insight you need to make your sales team more efficient. Find out how they are spending their time, how much time is spent on non-selling activities, and decontaminate their role.

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To learn more about the Sales Time Optimizer Tool for sales organizations, or to request a free trial, email Mark Donnolo at Mark.Donnolo@SalesGlobe.com.

Top Five Sales Productivity Challenges

Sales organizations are always challenged with getting the most productivity from their people as they can. Below are the top five challenges we hear year after year.

  1. Voice of the Customer. How do we interact with the customer and make our time with her most productive? How do we ask the right questions, understand the problems, and search for the right solution?
  2. Sales Capacity. How do we become most efficient with the resources that we currently have? The answer could be through decontaminating their sales jobs from customer service, technical, or billing issues; or it could be through shifting and lifting — moving some jobs to more strategic selling and having other jobs focus on more transactional selling.
  3. Actionable Strategy. One of the big challenges we hear is how to translate the overall business strategy to the sales organization? How do we communicate the sales strategy so they understand what they’re supposed to do Monday morning when they go out and start actually working? How do we get that message through to them?
  4. Account Planning. This is a common problem. Almost all organizations have some sort of account planning process and for many of them, it’s a futile effort. Too often, account plans are those 50-60 page documents that we create and end up going in the file cabinet or off in a file on your computer. Maybe they see the light of day once or twice a year. How can we turn those account plans – some of which are very good — into living account plans, referring to them weekly and using them as a basis for coaching? Successfully using account plans can become a huge driver of productivity.
  5. Sales Compensation. Sales people are typically motivated by money; and hopefully your compensation plans are designed to incent 110% effort from each employee. This isn’t always the case, however. Are we designing plans that link to our strategy, so our people are selling what the business wants them to? Are we motivating them to sell the strategic products and services? Are we rewarding our top performers, or demonstrating that they don’t earn much more than the lowest performers. Or, are we punishing our high performers with higher quotas next year?

What changes can you make to enhance productivity next year?

 

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The Sales Time Optimizer Tool is designed to calculate where the sales organization is spending its time. Contact Mark Donnolo at mark.donnolo@salesglobe.com for a free trial today.

Sales Productivity: Selling vs. Non-Selling Time

“We live in zero overhead growth environments. Productivity is something that we have to do every day. When we want to grant the organization a 3% merit pay increase we have to find it within the organization. So if we’re not getting 3% more productive, we’re underwater.” – Sales Operations Executive, Consumer Products Company

Almost all sales roles have non-selling administrative or customer service aspects. But too often those non-selling activities take up more time than the selling activities. When we talk about our Revenue Roadmap, the first step is to gather insight. The same is true for increasing the productivity of your sales team. The first step is to understand where they are spending their time, and quantify the amount of time spent on selling versus non-selling activities.

Often, the sales organization doesn’t even realize how much time is spent on non-selling activities. Or, customers call with problems that should be passed off to customer service or another department, but the sales person feels it’s his responsibility to personally solve the problem, since it’s his customer.

Help the sales organization to gather insight around their own productivity. Identify and track the non-selling activities, and remove as many of those activities as possible. Often this means hiring sales support resources or simply passing customer service issues to another organization better equipped to solve the problems.

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The Sales Time Optimizer Tool is designed to calculate where the sales organization is spending its time. Contact Mark Donnolo at mark.donnolo@salesglobe.com for a free trial today.

Communicating the New Sales Comp Plan: Key Steps Part 3

Communications Points

This is the third in a three-part series. Click here to read: Part I: Start Strong, or Part 2: Craft the Change Story.

See the Organization’s View

Company culture plays a huge role in making change. Some cultures operate on stability and are naturally change averse, while others are change tolerant and even change seeking. It’s important to know the organization’s and individuals’ comfort level with change in order to message and manage well.

Assume that most people will see any change as potentially negative. This is particularly true when it comes to compensation. From a sales organization view, unless the current compensation plan is a complete disaster, they often assume the only reason to change the plan is to manage pay or improve the company’s financial position. If you have a sales program that allows people to make money, and you want to make a change to compensation plan, you have to be crisp and clear about what those changes mean. Otherwise, the immediate thought process of a salesperson is, ‘They’re trying to figure out how to take money out of my family’s life,’” says Jeff Schmidt, global head of business continuity, security, and governance for BT Global Services.

Beyond risk, resistance also comes from reluctance to alter routines. If the new incentive plan steers the organization toward new products or perhaps selling to new customers beyond their current accounts, that can be plain uncomfortable.

In our work, we see that about 20 percent of an organization are acceptors and embrace the new plan without argument. Another 50 percent are observers who will wait and see. If the plan is designed, communicated, and managed well, this group will usually join the first group of acceptors. But as much as 30 percent of the organization may resist the new plan. The resistors range from passive resistors to active resistors.

You may recognize some of the passive resistance behaviors, which include apparent confusion, hesitancy to act, and lack of urgency. On the aggressive side, behaviors might include outright opposition and involvement in trying to change the course of the implementation by demonstrating why the program will not work. The good news is that most resistors tend to be on the passive side, although they are not always easy to identify and engage. The key to working with passive resistors is to connect, sense, and communicate at the field level to understand their resistance points before the implementation. If ignored, their resistance can become contagious. As for active resistors, they’ll test leadership’s resolve for change, as we’ll describe shortly.

 

 Contact me at mark.donnolo@salesglobe.com with any questions.

Communicating the New Sales Comp Plan: Key Steps Part 2

Communications Points

This is the second in a series. Click here to read Part I: Start Strong.

Craft the Change Story

Looking back on the Revenue Roadmap and the C-Level Goals established at the beginning of the process can help the management team explain why it decided to change the sales compensation plan this year. Usually, the organization will make a plan adjustment if there is a change in sales strategy, a change in how the organization goes to market with its sales resources and sales process, a need to respond to a competitive situation, or if the plan simply isn’t doing what the organization intended and needs some adjustment or redesign.

The change story can be told in a variety of forms, including planned messages from leadership and informal hallway conversations. In any situation, the story should be concise, consistent, and positive. The story tellers, from CEO to first line sales managers, should be well-versed in the key messages and the range of possible questions. The components of the story include:

  • Why the change is happening. Where is the organization now, and why is this change important?
  • What is changing. Is it an overall change to the organization or a tactical change to a component of the sales compensation plan?
  • Who will be affected. Will this impact certain groups or the organization overall?
  • Where the change will take place. Is it happening in certain geographies first or will it be introduced as a big bang?
  • When the change will take place. Will it happen this year? How long will it take?

To craft the change story, go back to the C-Level Goal areas of Customer, Product, Coverage, Financial, and Talent. Draw out the messages from each area that should be communicated to the sales organization and use them as the elements of the change story.

At CA Technologies, the CEO communicates the strategic vision to the entire company and then allows the sales compensation team to show how the new plan connects to his strategy. “The CEO gave us a platform upon which to make any of the changes we need to: organizational, sales model, sales compensation. We were overly transparent against the strategy and the objectives. Then we as sales leaders could literally take that and run with it for changing the organization, and it worked beautiful, absolutely beautifully,” says BJ Schaknowski, vice president of solution provider sales at CA Technologies.

It’s human nature to resist change, so positioning your change story is key to moving the organization in the right direction. Think about how you might tell the story in one of four ways. Each method can be described by its timeframe and orientation toward pain or gain as shown in Figure 8-1. Many organizations want to communicate an aspirational story that excites the team about changing to capture future opportunities (quadrant one). A sales manager or sales rep hearing this message might find it worthwhile to be part of the dream as long as it’s within the not-too-distant-future and doesn’t require too much near-term sacrifice to her lifestyle.

If a rep hears a story about avoiding risk or great pain in the future (quadrant two), that may capture a little more of her attention. For example, an executive a few years ago described her company’s situation to me, saying, “It’s all comfortable now, but our competitors are encroaching on us. We’re like the big ship in the harbor having a party, and all the little speed boats are coming in around us, and they’re going to eventually overtake and board us. People need to clearly understand where we’re heading on our current track.” Future risk can be more motivational than future vision alone if the organization can understand the eventual threat.

Gaining some benefit in a shorter timeframe (quadrant three) can be a positive motivator to make a change, especially if it’s tangible and achievable. If a rep can picture her family in a better position as her kids get to college age, she’s likely to be fully on board and put in the hard work necessary to support the plan.

The greatest motivator for change, of course, is alleviating near-term pain (quadrant four). If the company has attempted to tell a quadrant two, risk reduction story and the organization hasn’t listened, events may have transpired and the message now may be, “If we don’t make this happen by next year, this organization may have to downsize half of our people.” To a member of the sales organization, change doesn’t look quite as scary at that point because the alternatives are worse. In this case, the rep may not be fully on board but she’s also proactively looking for ways to help.

 

Next week I’ll write about how to see the organization’s view. Contact me at mark.donnolo@salesglobe.com with any questions.

Communicating the New Sales Comp Plan: Key Steps Part I

Communications Points

Whether changing the sales compensation plan or making a change further upstream in the Revenue Roadmap, a change management plan with a heavy focus on communication will increase the likelihood of acceptance, and mitigate confusion in the sales organization. Doug Holland, director of HR and compensation for Manpower Group North America, says, “If we’re making a big change that’s going to affect a lot of people, the first question our CEO will ask is, ‘Why? What is the rationale for the change?’ His sensitivity is, ‘What is it going to do for the performance in the field?’  He’ll say to me things like, ‘You know Doug, if you present a compensation change for HR, marketing, finance, or IT, and it’s a bit disruptive, it’s not going to bother me. I understand that. But if you introduce a change that’s disruptive, in a bad way, in the field, that is going to bother me.’ That plan could be the greatest plan in the world. It almost doesn’t matter if people don’t understand it, if people don’t know how they’re going to grow their pay,” says Holland. It’s tempting to make one announcement or send out an email describing the new plan and consider it done. But don’t assume that because the people who designed the new plan understand it, that anyone else will. Real understanding – and the questions that pop up along the way from the end users – takes days, weeks, or sometimes months. Begin your change plan by looking at the entire process from evaluation, to plan inception, to design, to implementation. Put yourself in the shoes of the sales organization, concerned with their livelihood and any possible disruption, and develop your change plan to drive the strategy with the sales team in mind. When making your next change, consider the following six steps:

  1. Start strong. Conduct your due diligence to make sure the program is bullet-proof and ready to go.
  2. Craft the change story. Be honest about the reasons for the change, and develop a clear message around the C-level goals.
  3. See the organization’s view. Expect some resistance, and identify who those resisters might be so you can get them on board.
  4. Get the change forecast. Know your organization’s readiness for the change and your team’s resolve to see it through.
  5. Leverage the learning modes. Use multiple methods to communicate with the organization to increase the impact of your message.
  6. Follow the process. Begin communication early and follow your approach until well after introduction.

Start Strong Make sure you cover a few important checkpoints so the plan is ready for introduction. First, enlist the opinion leaders for input at the start of the process. Bring together not only executive stakeholders, but also highly-regarded representatives from the field who have a tactical operating view on the business. These opinion leaders can provide valuable input and help communicate the right messages to their peers. Second, pressure test the plan during the design phase. When the team has arrived at a good set of design drafts, expose the plan to a select group of managers or even top-performing reps for a cold look. This group could also include the opinion leaders. Pressure testing is most easily done in a small group setting or one-on-one. The objectives are to get beyond the team to see how the end users will see the plan. Ask them to react to it, describe how they think the organization might interpret it, and ask them to try and outsmart it to find the loopholes or behaviors the company may not want to motivate. This process also gains additional buy-in from the group because they’ve taken a role in the plan design. The goal is not to negotiate with them or change the design on the fly but to gather intelligence as the plan is finalized. Third, financially test the plan under a range of performance scenarios. Modeling at a high level by looking at target incentive, revenue, and cost of sales tells only part of the story. Payouts and cost of sales can vary dramatically depending upon the organization’s overall attainment of quota and how many reps attain quota. That’s because a sales compensation program often includes payout curves that reward at accelerated rates for high levels of achievement, and incorporates multiple measures that may pay independently from the primary revenue measure, So, very simply, the organization could reach its goal in aggregate but pay more or less than the targeted cost of sales based on how the team reached its goal. If the team reaches its goal on average, but does it with a combination of very high and very low performers with few average performers, then the plan may trigger upside accelerators, increasing the cost of sale for those high performers, while low performers may not cover the cost of their base salaries – a perfect storm. Know every financial angle of your plan to minimize the potential for surprises.   Next week I’ll write about how to craft the change story. Contact me at mark.donnolo@salesglobe.com with any questions.

From History to Opportunity: Five Quota Setting Methodologies

Quota Methodologies

Quota-setting methodologies vary based on the market and types of accounts. Approaches can range from one-size-fits-all, to a historic view to a forward-looking opportunity view.

  1. Flat quotas are simple and effective in the right situations. Organizations often start out this way or may use this approach in new markets it enters. Everybody gets the same quota because it is assumed that all opportunities and resources are equal. While this may seem like a primitive approach, it can be effective in environments with unconstrained opportunities where there is abundant sales potential and the capability of reps is similar. The flat quota approach is common in new business development situations where reps don’t have an existing base of business to manage and may have few boundaries to their sales opportunities. It’s survival of the fittest.
  2. Historic quotas are the most common in companies, yet they create some of the biggest issues by assuming that history is predictive of the future and of potential in a market. This approach creates quotas that recreate history. A majority of companies use a historic quota-setting process either primarily or in combination with other methods. While history is a good starting point, it should be enhanced by turning the attention to future opportunities.
  3. Market opportunity-driven quotas are developed by starting with historic information and building on it based on the characteristics of the market. Market opportunity might consider predictors of potential that indicate how much opportunity might reside in an account. For example, the number of employees at an account location may be correlated to revenue potential. Those indicators can become part of a larger predictive model that either estimates the potential of a territory or compares that territory with other territories to help allocate the goal correctly across those territories. This approach can be effective for a large number of accounts.
  4. Account opportunity-driven quotas consider characteristics of the accounts as well as the market. By looking at the sources of revenue retention, penetration, and new customer acquisition, and the existing and planned sales pipeline, a sales organization can build the account opportunity components, bottom-up. Those growth estimates can be compared with top-down intelligence on the overall market, and growth predictions. The company can also consider sales capacity and the capabilities of reps to capture that account opportunity.
  5. Account planning can be used for growth planning, coaching reps to the plan, and of course, setting quotas for the account. This process is effective in situations where there are a small number of large accounts. The account plan provides information on growth targets in the account as well as tactics the team will use to grow the customer relationship.

By considering and combining these methods the organization can develop a quota-setting approach that matches each type of account segment and can increase the opportunity to hit the company’s overall sales objective.

 

Next week I’ll begin a series about communicating the sales compensation plan and changes to the organization. Contact me at mark.donnolo@salesglobe.com with any questions.

Ten Success Factors for Better Quotas: Part 2

Quota Risks

This is the second in a two-part series of Ten Success Factors for Better Quotas. Click here for Part I.

 Not setting effective quotas can critically injure even the best sales compensation plans, according to SalesGlobe research, including de-motivation, missing growth targets, and loss of high performers within the sales organization. Below are five additional steps to consider when designing quotas for your sales organization. (You can find the first 5 here.)

  1. Move Beyond History

Most organizations set quotas by looking backwards. Historic sales performance may be the primary driver of the quota, which is usually determined by taking a snapshot of the most recent year’s performance and applying a fairly standard growth rate on top of that performance. This historic approach is the source of most performance penalties that simply add a bigger expectation on top of a rep that had a great sales year. Historic quota-setting may also create a “porpoise pattern,” where sales and quota attainment leap up and then dive in alternating years. For example, a rep with great revenue performance (a leap) in year one resulting in an inflated quota in year two will often have low attainment of that inflated quota (a dive) in year two. Of course, this may then lead to a lower quota in year three followed by another leap in great performance over that low quota. And so the pattern continues. Challenge your team to acknowledge history but to lean toward forward-looking indicators of market opportunity.

  1. Balance Market Opportunity with Sales Capacity

Market opportunity should be a primary driver of the quota. More specifically, territory opportunity relative to other similar territories can give you a good indication of what portion of the total goal should be allocated to each territory.

Indicators of territory opportunity may be characteristics of accounts that correlate with revenue potential. For instance, a company in the bar-code scanning business determined that the square footage of a retail grocery store and the number of beds in a hospital were both metrics that were predictive of the potential annual sales for its scanning solutions. By applying a formula to all customers and prospects in a market or territory, the company got a relative sense of the sales potential across all markets or territories. But that indicator of market opportunity was only half of the answer. The other half was the practical physical ability, or capacity, of the sales force to close a certain amount of business. This sales capacity considers the number of hours each rep works in a year, the percentage of that time that is spent actually selling versus handling other operations and administrative activities, and the productivity of those selling hours given the time it takes to manage or close an account and close rates.

Fifteen years ago, Jeff Connor, chief growth officer for ARAMARK, had a sales force that was cut from 25 reps to 15, but the quota went up. “The executive for whom I was working at the time had some bold leadership traits. He walked into the meeting and said, ‘I’m doing away with quotas. I don’t know what the right number is. I know you guys are the best of the best and it’s a big market. Now, my number, is $100 million, and there are 15 of you. So you can all go figure it out if you want. But there are no quotas, and I’m not measuring to a quota. I want to see what we’re capable of as a team,” Connor describes.

“And guess what happened that year?  That team sold about $127 million. It was the best number ever – highest per person – and we never set a quota for anybody. The organization had a target and there were a certain number of people, but there were no incentives at the target. The compensation plan paid off of what they drove home for the business. To some extent he set the people free. It was a powerful enabler to say to your people, ‘You’re the best of the best, and I just don’t know how good you can be.’ He’s a motivator and a very good team builder, and kind of an impassioned leader. I don’t think everybody can get away with that,” says Connor.

By understanding and balancing the two sides of market opportunity and sales capacity, you can get a multi-dimensional view on how to allocate the quota.

  1. Fit the Methodology to the Account Type

One quota-setting approach does not fit all situations. While a more analytically-driven, standardized quota may work well for small accounts with a transactional sales process, a more bottom-up market opportunity approach might be better suited for a mid-sized account segment. Near the top of the account pyramid, national account quotas may be more accurately based on the information and strategies developed in an account plan. That account plan might provide input for quotas and also serve as a planning and coaching tool for sales managers to use with their account managers. Apply an appropriate approach for each type of segment or market.

  1. Make Your Approach Scalable

A telecommunications organization we worked with had reengineered and piloted its new quota process that incorporated top-down and bottom-up inputs, predictive market data, and precise steps for the entire team to work through the process. It all worked well during the pilot phase only for the company to find out after full introduction that the process was just too complicated, delicate, and unwieldy. The process that worked perfectly in a contained environment just couldn’t scale in the organization without coming apart at the seams. Further, it was creating workload demands to manually manage steps and exceptions that weren’t captured in a non-scaled environment. Err toward the side of simplicity. Accounting for every possibility may not be much more accurate but can certainly be much more manpower-intensive than using a simpler, streamlined approach.

  1. Don’t Over, Over-Allocate

A sales leader in a Fortune 100 transportation company recently asked me a very straightforward question: “Why is it that our CFO reported to Wall Street that we were on plan for revenue for the quarter, yet leadership is beating on us because we’re behind plan in the field?” As we examined the question, the answer became clear. It was a case of over, over-allocation of the quota.

Over-allocation refers to the approach of taking the sales goal for the business overall and, as it is allocated to the next level of management, adding a little extra to that goal. The sum of all unique, non-overlapping front line sales quotas compared to the company’s goal is a simple measure of quota over-allocation. For example, a company with a $1 billion corporate goal with a sum of all front line quotas of $1.05 billion has over-allocated its goal by five percent. Most organizations over-allocate quotas by about three percent to five percent from top goal to front line. That little extra allocation acts like an insurance policy. If the manager has a sales position that remains unfilled for a period of time with no one to effectively cover that territory, the over-allocation makes up for some of that loss. If a rep falls dramatically short on his quota, the over-allocation also makes up for some of that performance shortfall.

Over-allocation, within limits, can keep the organization on-track with its quota. However, when the quota is over-allocated too much at too many levels, it can lead to distortion on the front-line. In the case of the transportation company, the company had over-allocated its goal to a point where the C-level and the front line had two different realities. The sun was shining at the C-level while the front line saw only cloudy skies. Keep your quota allocation trim so that executives and reps all participate in the company’s success.

 

Next week I’ll write about 5 different quota-setting methodologies. Contact me at mark.donnolo@salesglobe.com with any questions.

Ten Success Factors for Better Quotas: Part 1

quota challenges

So what makes good quota-setting so challenging? We see 10 issues that make a difference when setting quotas. Knowing the causes and leveraging these success factors could help you set clear quotas for your organization.

  1. See Beyond a Single Number

When executives design a good sales compensation plan, the team steps back and admires the final product. To the design team, it’s not just a sales compensation plan, it’s a sales compensation program. The plan may be a work of elegance and intricacy, because sales compensation plans for the entire organization can be a complicated and exhaustive logic puzzle. When the plan is presented to the sales person, the first thing she does is read through it, carefully.

The quota, by comparison, is simply a number. It carries the same level of impact as the sales compensation plan but often lacks the attention it requires. It’s $5.3M or perhaps $24.6M. Regardless of how high or low the number is, we know one thing for sure, nobody really likes their quota, It’s not elegant. It’s not intricate. The thinking that went into setting that number may not be apparent. From a rep’s perspective, his boss might have just come up with that number yesterday to try and dole out the punishment from above. In truth, the work that goes behind a good quota may not be simple at all. Emphasize the importance of a good quota-setting process and don’t let its seeming simplicity minimize its significance.

  1. Remember the People

As we saw from the top challenges, quota setting is about the people and the process as much as the numbers. If managers and reps are in the dark, or their input isn’t reflected or explained in the result, the same effect could be produced by just giving them a number. If they understand the process, the process is transparent, they have input, and they see the results of their input the resulting quota will be better received by all.

 

  1. Involve the Right Team

Quotas involve a different set of players than sales compensation. During the sales compensation process, sales or human resources is often in the driver’s seat. With apologies to finance organizations across the world, many wild quota-setting rides begin and end with these very bright people behind the wheel. Finance, unfortunately, rarely has visibility, like the front line, on where the market opportunities are. Instead, their vision is usually set to investor requirements for growth. Finance often needs some market-sensitive guidance. Make sure the quota-setting team, including finance, is oriented toward market opportunity as well as corporate growth expectations.

Jay Klompmaker, longtime professor of business administration at the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School, likens the necessity of including both finance and front line sales reps in the quota setting process to the old anecdote of a group of blindfolded people each feeling only one part of an elephant.

“One group feels its leg and thinks it’s a tree. Another group feels only its trunk and thinks it’s a snake. But multiple perspectives are critical to understand the whole situation. With quotas, you have to include the top and the front line. You get a much better view of what’s happening if you include both groups. And, you’ll get more buy-in and active participation from that sales force when they’ve got some role in that quota setting,” he says.

  1. Don’t Get Lost in the Legacy

One of the most popular quota-setting approaches is called “the way we’ve always done it.” This familiar but flawed quota approach has a way of living on like a crazy old aunt who shows up at Thanksgiving. She may not be perfect, and nobody can understand her, but we only have to deal with her once a year, and that’s easier than changing our address. If your quota process isn’t working, be a champion of change, not a defender of the legacy.

  1. Get a View from the Bottom-Up

One of the easiest ways to set quotas is to divide the big corporate number and allocate it down to the organization in some pro-rata fashion like size of territory or portion of total sales. While it’s easy, it’s also a one-way street from the top of the organization down to the field that usually results in a disconnect and reluctant quota ownership by the field. By combining a bottom-up view with the top-down expectations, you can consider granular information from the field on account opportunity and reconcile it with a bird’s eye view of how that opportunity looks across markets and overall macro forecasts or trends for market growth.

Andy Summerfield, sales director for Everything Everywhere, the UK’s largest mobile operator, follows a bottom-up, top down process. “We choose a target setting that’s at a budget level. So when we’re building the budget from bottom-up, in the July timeframe for the following year, we work out what will happen to our existing base, what level of dilution we can tolerate, and what we need to add into the top in terms of acquisition. And the budget then tends to drive out the KPIs [key performance indicators] and the metrics that we translate straight into targeting. Then we do the usual of adding some stress to go with the buffer across all of those models. The process works very smoothly for us,” says Summerfield. “If all of my sales guys hit their relevant numbers, we know that we will comfortably hit our budget.”

Next week I’ll write about the next 5 steps in setting effective quotas. Contact me at mark.donnolo@salesglobe.com with any questions.

Your Sales Compensation Report Card

sales comp report card

Designing a great sales compensation program that integrates with the Revenue Roadmap can be complex and time consuming, but the return can be significant. Follow the link below to a free tool – your sales compensation report card.

http://salesglobe.com/report-card

So now is the moment of truth: How does your sales compensation plan hold up?

 

Let me know how your plan holds up! Next week I’ll begin a two-part series: Ten Success Factors for Better Quotas. Contact me at mark.donnolo@salesglobe.com with any questions.

Differentiating Top Performers Part 2: Upside and Downside

Upside Potential

This is the second in a two-part series. Read Part I: The Reverse Robin Hood here.

At the risk of fogging out the right-brainers for a few minutes, we’ll share a very impactful calculation that can be helpful at an executive level. To see what a company is really paying in upside, it can evaluate actual upside earnings by comparing incentive payouts to the portion of target incentive earned at various levels of performance for the main performance measure in the plan.

For example, we recently worked with a company and plotted their quota attainment, which ranged from the 1st percentile, (lowest performer), to the 100th percentile, (highest performer). In this case, the 40th percentile performer was at 100 percent of quota attainment. That’s because the organization has about 60 percent of reps performing at or above quota.

We measured actual incentive paid divided by target incentive for each rep. If target incentive is $30,000 and actual incentive is $30,000, then actual incentive divided by target incentive equals one, or 100 percent on the vertical axis. Reps were earning about 100 percent of target incentive at about the 40th percentile of performance. As we noted earlier, the rep at the 90th percentile should be paid some multiple (for example, 200 percent) of target incentive. Similarly, the plan should also pay low performers (those around the 10th percentile) a significantly lower multiple of target incentive than an average performer.

To ensure the organization is paying a fair upside, check for two points. First, look at the excellence level, that 90th percentile indicated by the cross on the right. Make sure the company has enough upside to offer those top performers. In this example, that’s hitting about 275 percent or 300 percent of target incentive. That’s pretty significant upside. So if target incentive for all reps is $30,000, a data point in that range might represent a high performing rep who earned $90,000 of actual incentive divided by $30,000 of target incentive, which equals 300 percent of target incentive.

Second, look at the threshold area at the bottom, the people who are down at the 10th and 20th percentile payout level. In this example, they’re still being paid pretty handsomely for what they’re doing, which means the company is paying out a lot for minimal performance. In fact, there are some people getting paid near or even above target incentive, and they’re down in the 5th or the 10th percentile in performance. If the 10th percentile in this example represented the entry point where the plan started to pay incentive – at, say, 60 percent of quota – it might pay out a very minimal level of incentive, such as one percent to five percent of target incentive. This actual amount, of course, depends on the design of the payout curve.

Making sure the plan adequately differentiates high performance from average and low performance is critical to supporting a sales-oriented culture.

 

Next week I’ll offer a free sales compensation report card. Grade your comp plan and see where you have opportunities for improvement. Contact me at mark.donnolo@salesglobe.com with any questions.

Differentiating Top Performers Part 1: The Reverse Robin Hood

Upside Potential

Let’s look at one of the most exciting components of the sales compensation plan. It’s the part that can support or detract from the desired sales culture, and it lets top performers know whether they can really be significant earners. Upside potential is the incentive pay, above target incentive, that a sales person can earn if she exceeds quota and reaches the higher levels of performance in the sales organization. A top performer is usually a person at the 90th percentile of performance or above.

Typically the upside potential earnings at that 90th percentile point of performance is set as a factor or multiple of pay at risk. Upside potential refers to an earnings point above which the rep can continue to earn. Upside potential doesn’t indicate that there’s a cap on incentive pay.

Upside is defined as a ratio of target incentive. For instance, a plan may have the potential to pay 200 percent of target incentive to a 90th percentile performer. In this case, if target incentive is $50,000 with a 50/50 pay mix, the plan would have upside potential of an additional $50,000, paying 200% of target incentive to the 90th percentile performer. In the same fashion, a plan could also pay 300 percent of target incentive to a top performer. The amount of upside potential is usually determined by the competitiveness of the market to attract and retain top performers and the margins of the business to sustain a certain level of pay for top performance.

Without the upside potential, the incentive compensation plan favors the company because it only pays up to quota. The risk is all assumed by the rep; if she doesn’t make her quota, she won’t earn her total target compensation. But if she knocks her quota out of the park, she’s not rewarded much more. Upside potential balances out the risk and reward equation for the rep, making it worthwhile for the rep to put that pay at risk rather than just take a flat salary.

Believe it or not, some companies have very little to offer reps above quota. There’s minimal incentive to reach beyond their goals. In that case, usually the employee seeks a job with a company willing to pay her upside.

Organizations that know how to use the Reverse Robin Hood Principle typically set the pace with the leaders in their industries as one example illustrates with a top performer who recently made $4.5 million in one year. “We had another person who made $2 million, another who made $2.5 million and then we had about 10 to 15 people that made over $1 million,” says Lucky Young, director of compensation design and operations at Salesforce.com. “That’s probably eight to 10 times their target. So, there’s no question; we have a very aggressive comp plan that pays well. The incentive plan is a motivator. That’s the bottom line.”

How much cash should a top sales person potentially earn in a given year? More than her manager? More than the head of sales? More than the CEO? The answer to this question is indicative of an organization’s pay philosophy and its ability to attract and retain the best talent in the industry. When we asked C-level executives, nearly all agreed that a top sales person could earn more cash in a year than the head of sales. While that high earning rep may be a different person each year, and this earnings level may not be attained every year, that event would not be unheard of in the organization. In fact, C-level executives noted that these events would be motivational to the organization. As for earning more than the CEO, many C-level executives philosophically agreed that this wouldn’t be an issue given the right level of sales production, but it’s not usually realistic. Nevertheless, “sky’s the limit” potential is inspiring to reps who see no limits to their capabilities.

The Reverse Robin Hood Principle states that an organization doesn’t overpay the low performers but instead significantly rewards the high performers. Instead of paying low performers below threshold, the organization uses those funds to reward the top. That’s a big challenge for a lot of organizations. This principle makes a statement about philosophy that ultimately affects the sales culture. If the company operates as a meritocracy that emphasizes accountability and applauds performance, then the Reverse Robin Hood principle fulfills the promise of opportunity. If it operates with a collectivist view on balancing rewards, the Reverse Robin Hood Principle can wreak havoc on the culture. That may not be a good thing if the organization likes that collectivist culture. However if its strategy, according to the upstream decisions in the Revenue Roadmap, is to move the roles and talent in a more sales-oriented direction, the Reverse Robin Hood Principle may be just what it needs.

 

 

Next week I’ll write about upside and downside. Contact me at mark.donnolo@salesglobe.com with any questions.

The Six Dimensions of Sales Roles

6 Dimensions of Sales Roles

Defining sales roles has a direct connection to the sales compensation plan. When identifying those roles, consider six dimensions. A sales role (channel or job) is comprised of multiple factors that make it effective, yet can stretch its capabilities to a point that either maximizes or limits its effectiveness.  The factors below must be considered when structuring and managing sales roles. You can use these to define sales roles pretty specifically down to what you will need for the organization and for the compensation plan.

  1. Sales Strategy Responsibility

This dimension defines the type of customers the organization is targeting. Is the company retaining current customers? Is it penetrating current customers through either product penetration (selling more of the same products) or buyer penetration (getting additional buyers)? Is it pursuing customer acquisition? This combination of possibilities provides overall direction for the job.

  1. Product Responsibility

This dimension describes the products, services, and offers the job will bring to market. Does the rep sell one product, multiple products, or the whole portfolio? The more products each rep is asked to represent, the more his bandwidth is stretched. A product specialist, for example, should be focused and narrow. A rep selling the whole portfolio may need some overlay specialists for support, especially if it’s a complex offering.

  1. Market Segment and Channel Responsibility

For reps working directly with customers, this dimension identifies the groups and characteristics of those customers. Market segments can be defined as simply major accounts, key accounts, middle market accounts, and core accounts; or they might be defined by customers, values, or needs. Market segments may also be described vertically, such as healthcare or transportation, or a combination of these variables.

Channel responsibility refers to coverage and management of third party channels. An organization might use distributors, resellers, referral partners, or other types of third party businesses to help get to customers. In that case, it will usually use a role that works with its channel partners. In fact, it may need two roles: a channel acquisition role (someone to go out and acquire those relationships) and a channel management role (somebody to manage, cultivate and develop those relationships).

  1. Sales Process Responsibility

This dimension refers to the breadth of the sales process the job will span. The sales process may be expansive covering lead generation, qualification, solution design, proposal development, deal closing, and even implementation.

If you ask a sales person to do all of those things – going from lead generation all the way through the close and the implementation – it stretches his bandwidth. That requires a broad set of skills, as compared to having some jobs that are lead generators or maybe – odd concept – marketing generating an abundance of leads. One role may pick up qualified leads, close them, and turn them over to an implementation specialist. Many organizations over-simplify what’s really required in the sales process.

  1. Marketing, Technical, and Operations Responsibilities

Some jobs will have dual responsibilities, performing disparate functions. Some jobs are contaminated with other operations roles and have been cobbled together over time. Moving non-selling roles to other functions out of sales can help clean up the sales job and increase its effectiveness.

  1. Management Responsibility

This dimension identifies roles the job may have in managing other people in addition to selling. The classic jobs affected by management responsibilities are the selling sales manager and the selling branch manager. These combination roles often appear in organizations with emerging management levels. Having a seller straddle both sales and management is sometimes a first step toward pure management jobs that allows the organization to still attach a unique quota to the job and align its cost with a revenue stream. The reality is sharing a dual selling and management role can create conflicting priorities. A pure management role, effectively defined and staffed, can provide a much greater revenue impact through leadership and development of multiple sellers.

The big concept concerning sales roles dimensions is that the more a job is asked to do, the more stretched it gets, the less effective the job becomes. This customer coverage discipline of job definition is important to understand to make the organization more effective and to have a solid foundation for the compensation program. Once you decide which breeds of dogs your organization needs and clarify their priorities, it’s time to begin compensation plan design.

 

Next week I’ll write about how to differentiate your top performers. Contact me at mark.donnolo@salesglobe.com with any questions.

Ten Success Factors for Better Quotas: Part 1

quota challenges

The above graph is from a survey SalesGlobe did earlier this year, asking major sales organizations about their top quota-setting challenges.

So what makes good quota-setting so challenging? We see 10 issues that make a difference when setting quotas. Knowing the causes and leveraging these success factors could help you set clear quotas for your organization.

  1. See Beyond a Single Number

When executives design a good sales compensation plan, the team steps back and admires the final product. To the design team, it’s not just a sales compensation plan, it’s a sales compensation program. The plan may be a work of elegance and intricacy, because sales compensation plans for the entire organization can be a complicated and exhaustive logic puzzle. When the plan is presented to the sales person, the first thing she does is read through it, carefully.

The quota, by comparison, is simply a number. It carries the same level of impact as the sales compensation plan but often lacks the attention it requires. It’s $5.3M or perhaps $24.6M. Regardless of how high or low the number is, we know one thing for sure, nobody really likes their quota, It’s not elegant. It’s not intricate. The thinking that went into setting that number may not be apparent. From a rep’s perspective, his boss might have just come up with that number yesterday to try and dole out the punishment from above. In truth, the work that goes behind a good quota may not be simple at all. Emphasize the importance of a good quota-setting process and don’t let its seeming simplicity minimize its significance.

  1. Remember the People

As we saw from the top challenges, quota setting is about the people and the process as much as the numbers. If managers and reps are in the dark, or their input isn’t reflected or explained in the result, the same effect could be produced by just giving them a number. If they understand the process, the process is transparent, they have input, and they see the results of their input the resulting quota will be better received by all.

 

  1. Involve the Right Team

Quotas involve a different set of players than sales compensation. During the sales compensation process, sales or human resources is often in the driver’s seat. With apologies to finance organizations across the world, many wild quota-setting rides begin and end with these very bright people behind the wheel. Finance, unfortunately, rarely has visibility, like the front line, on where the market opportunities are. Instead, their vision is usually set to investor requirements for growth. Finance often needs some market-sensitive guidance. Make sure the quota-setting team, including finance, is oriented toward market opportunity as well as corporate growth expectations.

Jay Klompmaker, longtime professor of business administration at the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School, likens the necessity of including both finance and front line sales reps in the quota setting process to the old anecdote of a group of blindfolded people each feeling only one part of an elephant.

“One group feels its leg and thinks it’s a tree. Another group feels only its trunk and thinks it’s a snake. But multiple perspectives are critical to understand the whole situation. With quotas, you have to include the top and the front line. You get a much better view of what’s happening if you include both groups. And, you’ll get more buy-in and active participation from that sales force when they’ve got some role in that quota setting,” he says.

  1. Don’t Get Lost in the Legacy

One of the most popular quota-setting approaches is called “the way we’ve always done it.” This familiar but flawed quota approach has a way of living on like a crazy old aunt who shows up at Thanksgiving. She may not be perfect, and nobody can understand her, but we only have to deal with her once a year, and that’s easier than changing our address. If your quota process isn’t working, be a champion of change, not a defender of the legacy.

  1. Get a View from the Bottom-Up

One of the easiest ways to set quotas is to divide the big corporate number and allocate it down to the organization in some pro-rata fashion like size of territory or portion of total sales. While it’s easy, it’s also a one-way street from the top of the organization down to the field that usually results in a disconnect and reluctant quota ownership by the field. By combining a bottom-up view with the top-down expectations, you can consider granular information from the field on account opportunity and reconcile it with a bird’s eye view of how that opportunity looks across markets and overall macro forecasts or trends for market growth.

Andy Summerfield, sales director for Everything Everywhere, the UK’s largest mobile operator, follows a bottom-up, top down process. “We choose a target setting that’s at a budget level. So when we’re building the budget from bottom-up, in the July timeframe for the following year, we work out what will happen to our existing base, what level of dilution we can tolerate, and what we need to add into the top in terms of acquisition. And the budget then tends to drive out the KPIs [key performance indicators] and the metrics that we translate straight into targeting. Then we do the usual of adding some stress to go with the buffer across all of those models. The process works very smoothly for us,” says Summerfield. “If all of my sales guys hit their relevant numbers, we know that we will comfortably hit our budget.”

Next week I’ll write about the next 5 steps in setting effective quotas. Contact me at mark.donnolo@salesglobe.com with any questions.

 

The Three Strategies for Revenue Growth

RPN

When companies grow from year to year, they don’t grow in a straight line. They hold onto some revenue from current customers, they lose some revenue and customers, and they grow in other areas. Analyzing the ebb and flow of revenue and profit can help a company understand how it grows, plan for future growth, align sales roles, and motivate the right results in those roles.

The dimensions of buyers (both current customers and prospects) and offers (current and new products or services) describe a range of possible revenue flow opportunities. Among the possibilities are really just three basic strategies.

  1. An organization can retain the revenue from its current customers, which is called retention selling. While it may not actually lose any customer companies from one year to the next, an organization will usually lose some of its current revenue from current offers. It’s deceptive. The customer remains, but some of the business is lost. In fact, the average business-to-business sales organization retains only about 84 percent of its prior year revenue. So, to grow it has to find new revenue.
  2. A company can grow revenue from its current customers, which is called penetration selling. Penetration selling breaks into two different types of selling. Buyer penetration is gaining additional buyers for the same product or service. For example, a shipping company that focuses on ground transportation would try to get more buyers within the same large customer account to use their services instead of another carrier or shipping method. Product penetration is growing with additional products the customer may not be purchasing. So that same shipping company might capture more current customer growth by selling its air shipping service to a customer that’s already using the ground service.
  3. A company can create revenue through new customer selling, which also breaks into two types. New competitive wins provide growth through new customers who are already purchasing similar products from competitors. The shipping company may win a new contract of international shipping from a competitor who held that business last year. New market selling is developing a new opportunity with a new customer that hasn’t purchased that product before. For example, the shipping company may offer logistics services to a new customer to help them improve the operations of their warehouse facilities. Of course this strategy could ultimately result in the company winning the customer’s shipping business, too.

This is a good tool to plan coverage and sales roles and determine what breeds of seller the organization needs.

 

Next week I’ll write about the six dimensions of sales roles. Contact me at mark.donnolo@salesglobe.com with any questions or visit www.SalesGlobe.com. 

 

Sales Compensation ROI: Not Just Your CFO’s Calculation Part 2

This is the second in a two-part series of Sales Compensation ROI. Click here for Part I.

 

Step 4:  The Who? Determine the Resource Cost – “The Denominator”

To keep it simple, companies have defined their resource costs as base salary plus incentive pay excluding benefits, or actual total compensation. At SalesGlobe, we call this the surface-level ROI as it is fails to understand the influence of other elements necessary in the overall sales compensation program. This is the biggest moving piece in ROI calculations across companies. Through our client work and interviews, most companies use the surface-level ROI defining their resource cost in one of three ways:

  • Bottoms Up: Total actual cost of sales compensation (base salary plus incentive, excluding benefits).
  • Top Down Amount: A flat dollar amount based off history or projected analytics.
  • Top Down Ratio: Percent of projected sales.

These are all valid approaches to determine the resource cost used in the ROI calculation. However, we propose two additional categories of investment to surpass the surface level ROI. The first category is to align specific resources to a specific growth objective. For example, if the objective is to retain revenue from the top 20 customers, the company may align resource costs such as account managers, reporting and tools that specifically help achieve that objective. A ROI would be measured on that specific breakout of resource costs and productivity value. The second category is the non-compensation factors that allow sales personnel to optimize their productivity, thus making it easier to sell. This would include:

  • Training and development programs and resources
  • Sales leadership resources
  • Recruiting / talent acquisition resources and processes
  • Sales operations resources
  • Crediting, approval, and quota setting processes
  • Real-time reporting tools such as performance analytics and pay estimators
  • CRM and compensation administration systems
  • Territory management

These costs can have a direct correlation to the productivity value in your ROI calculation.

 

Step 5: When? Setting Expectations

In the previous steps, we walked through the framework and considerations for the productivity value (numerator) and the resource cost (denominator). Now that the measurement is defined, the next step is to determine when we will define it, over what time period, and how often. In addition, expectations should be set regarding the look of the reporting, the distribution, and definitions of success.

A CFO from a conferencing software client measures the ROI of new sales professional over a 12-month period. The ROI calculation is the individual’s annual revenue divided by his/her total compensation excluding benefits. Instead of calculating as percent, the company uses an absolute dollar value comparison. The expectation is that the sales professional should be paying for himself within that 12-month period. However, these guidelines do change based on the sales professional type (small accounts versus major accounts), level within organization, and annual revenue responsibility. This definition has been consistent for several years and is simple such that all sales employees can calculate their own ROI. Compensation plan changes can impact a sales professional’s behavior quickly, so it is important to have a process in place to measure the appropriate ROI early and often.

 

Step 6: What? Communication Plan – Speak the Same Language

Many stakeholders are involved in defining and creating a sales compensation ROI – sales, sales operations, human resources, finance, etc. Getting all stakeholders to speak the same sales compensation ROI language is an iterative and on-going process. This is one of the more challenging tasks during sales compensation design. In general, the sales or sales operations teams will own the design. However, finance manages the budget and plays a significant part in the process. In order to capture full engagement of the sales team, everyone should have a full understanding of the strategy, sales compensation plans, and ROI components. We often conduct field interviews for our market studies and receive responses such as, “I don’t know what I will earn until the check appears through my direct deposit,” or, with regards to strategy, “We have one, but I do not know what it is.”

Success of the sales compensation plan and its ROI comes from full understanding by the sales team. To achieve success, company leaders need to reinforce the strategy message outside of the compensation plan through frequent feedback loops such as forecast reviews, frequent questioning of results, metrics, dashboarding, and coaching. All stakeholders must be in sync with the strategy and compensation message in order to accomplish this. In order to ensure the ROI process and results are communicated effectively, the audience should be able to answer three questions:

  • How do we measure success or effectiveness of our resources?
  • How much is the sales compensation plan going to cost us?
  • Have we achieved success based on our results?

Clarity of the above ensures that the company has alignment between optimal sales resources and organizational priorities, which can lead to maximizing returns and sustaining organizational and individual performance. In simpler terms, everyone wins.

 

Step 7: What Else? Don’t Operate in a Silo

A part of your ROI success or failure will come from factors that are outside the control of the sales compensation plan. No matter how well you define your strategy, design your sales compensation plan, and determine your ROI measures, other influences will be there. Your success may also be a result of marketing efforts, new products, change in competitive landscape, or customer satisfaction levels. Companies must analyze the whole picture, not just the sales compensation plan in a silo – you must analyze product, market, and customer readiness as well in order to ensure success. A great sales compensation plan without these readiness factors risks failure from a ROI perspective. While the sales compensation plan is a huge factor on driving productivity, it does not predict everything. When selling a strategic product, the sales compensation plan can motivate sales professionals to sell it, but there are other factors such as product availability, the right markets, the right sales messages and process, and the appropriate sales personnel that contribute to that product’s success. Attributing success to the sales compensation plan because it helped achieve certain objectives often comes with the understanding that sales compensation was just one piece of it.

 

Sales compensation is one of the single largest expenses a company incurs. Maximizing the impact of the investment is critical to gaining a competitive advantage. We find it very useful to move focus away from the number. Take the focus – and the argument – away from the number alone and break down the components driving that number. Then, the conversation is a lot more productive. The key points from the chapter to remember are:

  • Strategy and ROI go hand-in-hand. The strategy needs an ROI to ensure success and an ROI needs the strategy to provide direction of what should be measured. If one area changes, then the other one needs to change as well.
  • Take the time to define your ROI. Take some time in your compensation planning process to determine your best objective definition of ROI and stick to it as long as it continues to align with your strategy. Include all stakeholders to research, build, communicate, and sustain it. You will see the benefits.
  • Look beyond traditional measures of ROI. Push your thinking to incorporate elements of productivity value and resource cost outside of the simplest measures. There are many factors that contribute to the success of your sales compensation plan. Consider them in your ROI so that you can adapt them to your benefit.
  • Numbers can lie. To ensure the ROI is credible, it is imperative that the framework and components are broken down in simple, non-financial verbiage. The process should be consistent from period to period to maintain objectivity and consistency in the message.
  • Conflict will exist. The framework we outlined cannot be done in a silo. In general, sales, sales operations, finance and HR are the key players at the table. Each function has its own priorities, challenges, and opinions. It is vital to consider the perspective of each party. For example, finance wants better results with less money, while sales wants to attract and retain the best talent without a price tag. HR can help by providing external benchmarks minimizing this conflict. Sales operations can provide reporting with objective evidence of a particular issue at hand.
  • ROI is not one size fits all. The metrics for ROI will vary by sales strategy, customer type, product mix, role type, contract length, and revenue type. Also, several ROI calculations may be needed depending on the structure of your sales team and strategy components.
  • ROI is not one and done. While financial statements are issued annually, the sales compensation ROI is an on-going process. The framework of the productivity value and resource cost may not change from period to period, but the components need to adapt to rapidly changing business needs and strategy. Keep it simple so that you can adapt quickly.

Next week I’ll write about three strategies of revenue growth. Contact me at mark.donnolo@salesglobe.com with any questions.

 

Sales Compensation ROI: Not Just Your CFO’s Calculation Part I

Return on investment (ROI) pertains only to financial transactions such as acquisitions or product purchases, right? And, it’s really just a calculation that finance professionals use, right? Wrong.

Most C-level executives want to know the answer to two questions:

  1. What are we getting out of our sales compensation plan?
  2. How much does it cost us?

ROI has many definitions depending on the type of investment. The most common definition for sales compensation is productivity value divided by the resource costs that were committed.

Picture1

This sounds like a simple concept, however, similar to ideas like “strategy” and “change management,” sales compensation ROI is a grey area and not a simple task. Productivity value is a measure of a specific value or set of values that are derived from the compensation plan. These measures include many things beyond just financial metrics. For example, productivity value could include areas such as customer satisfaction, employee satisfaction, and product success in the marketplace. Resource costs are a measure of the financial costs invested in the compensation plans. These costs primarily include what sales professionals are paid. However, other important measures include investments made in process (approval and crediting processes, for example), talent acquisition in sales and support personnel, and tools and technology.

Below are the key drivers to develop your ROI definition – The 7 Essential Sales Compensation Questions.

Step 1: Why? Define the Strategy & Business Objectives

In simple terms, the strategy and business objectives are the company’s action plan to achieve its goals. The strategy is critical as it drives decisions on product focus, customers, and the go-to-market plan. Knowing and understanding this strategy will determine how your ROI definition is developed. For example, your company may be interested in growing revenue in a certain area of the business or focusing on a new product set. Metrics associated with the return on those facets of the business will drive how you develop what is important in your ROI definition. Your strategy may dictate that you need to invest more in an emerging market or technology that is new or different from your traditional business. In that case, you could calculate a separate ROI on those business lines or products in order to understand that specific return. Setting a company’s strategy is a collaborative exercise that evaluates goals broken out by customer, product, coverage, financial, and talent[1] and is clearly communicated throughout the sales and sales support organization. It is from this point that you can start to develop critical elements for your sales compensation plan.

 

Step 2: How? Sales Compensation Plan Alignment to the Strategy

The movie Moneyball told the story of how Billy Beane, manager of the Oakland A’s, achieved one of the longest winning streaks in history with one of the smallest budgets in baseball. He did this by focusing on the numbers alone – no one else was doing this. He invested in people and processes that supported new metrics as a recruiting and training strategy (on-base percentage and minimizing outs). Billy Beane’s strategy was clearly defined and the metrics heavily influenced the desired outcome. This Moneyball concept can be leveraged when aligning your sales compensation plan to your company strategy. Placing specific, identifiable elements in the plan that drive towards the overall strategy is critical to meeting your company’s objectives.

This seems simple, but we have found many instances of the sales compensation plans not aligning and often mis-aligning with the company’s strategy. For example, a company we have previously worked with had a strategy of driving long-term revenue growth. However, one of the largest and most lucrative components in its sales compensation plan was a one-time payment for the sale of products that encouraged the opposite – short-term revenue growth. This product represented a revenue line in the Profit & Loss statement that was not sustainable in long-term growth. This is a great example of a mis-alignment between the stated company strategy and the compensation plan. It is a well-known fact that the sales compensation plan will drive sales behavior. To ensure that the company is driving the right behavior, it is imperative that the sales compensation plan and ROI definition align with the strategy.

Step 3: Where?  Define Productivity Value –“The Numerator”

At SalesGlobe, we go beyond the basic definitions of ROI. The concept of moving deeper requires innovative thinking from finance and compensation leaders beyond traditional means. Traditionally, when we ask finance leaders how they would measure sales force effectiveness and productivity (i.e. numerator of equation) it would be the top-line of all financial statements: revenue. Instead ask: what does revenue mean?

  • Overall Revenue – The true top-line number impact.
  • Retention Revenue – Repeat revenue from existing customers. This revenue is a result of strong account management in key accounts focusing on customer satisfaction.
  • Penetration Revenue – New revenue from existing customers. This revenue is the result of a sales person focusing on developing new relationships or new products in a current account.
  • New Revenue – New revenue from new customer. This revenue is result of a sales person’s efforts with relationships, acquisitions, and new opportunities outside of the current accounts.

These different revenue components demonstrate innovative ways to redefine productivity value in terms of revenue. Company strategy will dictate which revenue component is most critical. There may be multiple ROI calculations if multiple revenue components are critical. For example, if new revenue is a focus, the ROI calculation would take new revenue divided by the resource cost specifically focused on new customer acquisition. An example of a calculation is

Picture3

In addition, penetration revenue may be important for an account manager role. A separate ROI calculation could be used for this plan that divides penetration revenue for these accounts by account manager resource costs. An example of this calculation is

Picture4

Regardless of the financial measure, companies should consider categories that align to their strategy. For example, it may be important to segregate by product type, accounts, geographies, or target markets. Whether it is specific type of revenue, operating income, profit/margins, volume of widgets sold, or net present value of customers, the productivity value should tie back to the strategy and be a major component of the sales compensation plan. It is recommended that the measures are quantifiable financial measures. However, there are other important considerations for productivity value outside of more traditional financial measures. While sometimes difficult to measure in relation to a sales compensation plan impact, these measures include brand awareness, customer satisfaction, net promoter scores (NPS), low turnover, or employee satisfaction. In fact, customer satisfaction measures can be broken down into categories related specifically to sales that will provide quantifiable value. For example, surveys can be administered to customers to determine their satisfaction with the sales professionals – their knowledge of the product, their confidence, their ability to understand the customer’s needs, etc. This feedback ties directly back the sales professionals’ motivation, happiness, and understanding of how they are paid. Another measure of a good compensation plan is essentially an NPS among sales professionals. Would your sales professionals recommend your company to other sales professionals in the market?  This, too, can create brand awareness in the marketplace.

 

Next week I’ll continue to write about how to calculate the ROI of your sales compensation plan. Contact me at mark.donnolo@salesglobe.com with any questions.

 

[1] Donnolo, Mark.  What Your CEO Needs to Know About Sales Compensation. New York, NY: AMACOM.

 

The Sales Compensation Diamond Part 3: Operating For Results

Sales Comp Diamond

 

This is the third in a three-part series of The Sales Compensation Diamond – evaluating and designing a best-in-class sales compensation program. Click here for Part I: Framing the Plan or here for Part 2: Linking Pay and Performance.

10. Institute the Governance Process

Beyond the core design of the sales compensation plan are processes and policies for operating the broader program. A good governance process is like the constitution of the sales compensation plan that advances it from a set of plans to an effective and impactful program that helps the company grow. Without a clear approach to governance, the organization will probably create the governing laws throughout the year as it goes, sometimes in a reactive mode.

At their worst, some of these situations can create serious liability for the company in the form of employee challenges or suits for disagreements and misinterpretations of the plan. We’ve all heard of courts awarding millions in favor of sales employees who were bilked out of commissions for a major deal that the company thought was outside of the reps’ control and outside of the plan.  Is there a well-defined Sales Compensation Constitution? Does it consider the wealth of information the company likely has about past plan operations practices? Is the governance process clear or subject to interpretation, opening the company to increased risk?

11. Operate the Program

With the sales compensation program developed, the sales organization is ready to operate.  The first step is communications and roll-out. Actually, communications should start back during the plan evaluation process, with employee and stakeholder input, and continue through the design process with testing and socialization. If the communications process starts with the program introduction, the leadership team may be in a catch-up position.

Operating the program throughout the year will draw from all of the strategic connections made, components designed, and governance established. From a tactical standpoint, technology may also be leveraged to track performance, administer pay, and provide a communications portal for the reps and management.

12. Evaluate the Program

Program evaluation should be an ongoing and regular process throughout the year, drawing upon the dashboard and tools to monitor relationships between pay and performance, attainment of goals, differentiation of high and low performers. How does the program operate now? What improvements can be made? How is the plan communicated to our participants? What is the support process to regularly inform and reinforce our messages? Is there a regular plan evaluation process installed to view the performance and impact of the plan at any time, or is it a mad scramble to compile pieces of information from different sources?

Keep this process in your pocket; even have it laminated for your team, because we guarantee you’ll refer back to it, especially when you get deep in the conversations on design and analysis. One of the keys to great sales compensation design is having a playbook for your team that everyone references to make sure you’ve considered each step. With your team’s playbook defined, you can then layer in your strategic alignments, business performance and results, best practices from similar businesses, and the creativity you’ll need to develop an impactful solution for your business.

Next week I’ll begin a two-part series about how to calculate the ROI of your sales compensation plan. Contact me at mark.donnolo@salesglobe.com with any questions.

 

The Sales Compensation Diamond Part 2: Linking Pay and Performance

Sales Comp Diamond

This is the second in a three-part series of The Sales Compensation Diamond – evaluating and designing a best-in-class sales compensation program. Click here for Part I: Framing the Plan.

Linking pay and performance actually begins with performance thresholds, which we covered last week. The next step is to develop the measures.

  1. Develop Measures and Priorities

Performance measures define the focus areas that are most important for each role. Each measure should represent the most significant pieces of the sales strategy that the role can control. A challenge for many organizations is determining which few of many possible measures should be included in the sales compensation plan, which should be part of the performance management program, and which should simply be core expectations of that job. Do the measures represent the top two or three financial and strategic priorities for each job? Has the message of the plan been diluted with too many measures, creating a buffet plan from which reps can pick and choose? Do reps have significant control over each measure in their plans?

  1. Set Levels and Timing

            For each measure, the organization must define the level at which that measure will be tracked for the plan. For example the organization may define a revenue measure for a sales rep at an individual level or a region level. Each measure will also be measured and paid on a certain timeframe, for example monthly or quarterly. The decisions around measurement levels and timing can have a direct impact on rep behavior. Measure too high and the rep may have little control. Measure too frequently and the cycle may be out of synch with a long sales process. Do our measurement levels match with reps’ ability to impact those measures? Does the frequency of our measurement and payment match the rhythm of the sales cycle or it unnaturally speeding or slowing the cycle?

  1. Design Mechanics

Mechanics create the connection between performance and pay. It’s the area most sales executives will jump to first rather than working through the previous steps. If your team is starting here, then they’ve missed half the process. While mechanics can seem complex with various rates, hurdles, gates, accelerators, and point systems, they can be divided into three types. A rate-based mechanic (also known as a commission) usually pays a certain percentage of revenue or gross profit, or a certain dollar amount per unit of sale. A quota-based mechanic typically pays a target incentive for reaching a specific quota or goal and may scale its payout above and below that performance level. A link creates a relationship and interdependency between two measures or mechanics. For example, attainment of a goal for a product mix measure may result in a multiplier that links and magnifies the payout of a total revenue commission. Are the plan mechanics easy to understand and calculate? Do they create an alignment to goal attainment or can a rep simply earn to a level where she’s comfortable? Are old commission rate structures causing the organization to work backwards by structuring territories (an upstream discipline) to manage pay levels (a downstream discipline)?

  1. Align the Team

            A full sales compensation program will include a range of sales, sales support, and management roles. To work together as a team, plan designs must interface as a complete system. This alignment point checks for how sellers will work together as teammates and peers in the sales process that may include business developers, account managers, field representatives, product and market specialists, sales support, and channel partners. This alignment point also checks for vertical integration from the front line up through each layer of management. Does the program promote teamwork or does it have points of potential conflict? Are managers and the front line operating with congruent measures or are there priorities not intersecting?

  1. Set Objectives and Quotas

Quotas are the linchpin between the sales compensation plan and performance. Objectives and quotas should be market based, representing the relative opportunity in each account assignment or territory, and be created with a process that’s well-understood by reps, optimally incorporating their input. Over time, quota processes for an organization will usually move from more internally or historically-based approaches to more market-based approaches as the market and organization become more developed. In early stage companies or in newer markets, an organization may allocate the same goal to each rep, with the assumption that each has similar market opportunity and sales capability. While this may hold true over a period of years for a new business developer with an un-bounded territory, usually the normal growth of accounts will accumulate to create an installed base of recurring or expected revenue for each rep that will vary by territory or account assignment. Reps with more established accounts may carry a larger installed revenue base than those with newer accounts.

For many companies, looking at historic performance and projecting a trend forward seems to work for a period of time. However, they quickly learn that they’re either saddling their highest performers with ever-increasing goals or they’re overpaying reps who manage large bases of slow growth recurring revenue while under rewarding the brave new business developers bringing in new customers. Does each rep own a portion of the total business plan that represents a stretch level of achievement? Are quotas forward-looking or steeped in history? Do reps understand and buy-in to the objective setting process?

 

Next week I’ll write about the final step in the sales compensation design process: operating for results. Contact me at mark.donnolo@salesglobe.com with any questions.

 

The Sales Compensation Diamond Part I: Framing the Plan

Sales Comp Diamond

What happens when the sales leadership team takes a hard look at its sales compensation plan? Do they talk with their calculators? Is a spreadsheet the primary conversation piece? Think about what happens at meetings about sales strategy or sales roles and the question of sales compensation comes up. People start talking about whether the commission rate should be increased or decreased. Comments like, “Let’s put an accelerator in place to drive performance. Maybe we need to uncap the plan, or add a threshold for the low performers,” fly through the room.

The team has just started with the middle of the process and is on its way to a non-strategic answer. Only once they’ve aligned their Revenue Roadmap disciplines should they transition to the sales compensation design process.

Once the C-Level Goals and sales roles have been established, there are four facets in the process of evaluating and designing a sales compensation program. These include framing the major components of the plan, linking pay and performance, aligning the team and financials, and operating the plan for results. We’ve developed this process over the course of designing thousands of incentive compensation plans. The facets contain steps the organization can use in two passes. First, work through these steps while analyzing the plan, gathering technical, strategic, and behavioral information about the performance of the plan. Then, go back and follow the steps while designing the plan.

Before starting on compensation, set the foundation of C-Level Goals and sales roles. Sales role definition is a direct output of the customer coverage level in the Revenue Roadmap and the C-Level Goals. Understand the sales roles and the key requirements of every job to isolate the critical strategies and success factors of each. Pinpoint the job’s customer, product, and sales process roles as well as any marketing, operations, or management roles.

We’ll cover the first part of the Sales Compensation Diamond this week – Framing the Plan.

Framing the Plan

  1. Determine Target Pay

Consider the relevant labor market. The market targeted for talent may be different than the market in which the business competes for customers. Depending upon the strategy, a sales organization may not source people from the same talent pool as its competitors. Within the relevant labor market, a company may choose not to pay at the same level or in the same way as its labor market competitors. The strategy and value proposition to the sales talent are factors that help determine target pay for each role. Target pay for each role will result in a target total compensation (TTC), which will be the starting value that will flow through the design of the incentive plan. Has the organization defined its relevant labor market? Is it aiming toward the organization and roles of the future or is it referencing past strategies or assumptions?

  1. Set Pay Mix

Pay mix defines the proportion of salary and incentive at target performance, meaning performance to goal or quota. The total of the salary and incentive at target should equal the TTC for the job. Pay mix will vary by job type in an organization and is driven by about ten factors that include sales process characteristics, types of sale, and types of customers. For example, a role that is focused on new customer acquisition for mid-sized accounts will likely have more incentive pay as a percentage of target total compensation (perhaps 50 percent base salary and 50 percent target incentive) than a role focused on current customer management for major accounts (perhaps 70 percent base salary and 30 percent target incentive). Do pay mixes align by role? Are there any plans with significant pay at risk driving aggressive behaviors that are out of sync with the desired sales process? Are plans with high base salaries creating a pay entitlement culture?

  1. Establish Upside Potential

Upside potential is the incentive pay available to top performers, typically the 90th percentile, and is often determined as a multiple of target incentive. Upside is a critical component to help the organization attract and retain the best talent in its market. Define high performance for the organization. Are the top earners really the top performers? Do we significantly differentiate incentive pay for top performers from average performers?

  1. Establish Performance Thresholds

Threshold refers to the entry point of achievement where the plan begins to pay incentive.  Threshold usually represents the minimum acceptable level of performance, below which a rep would not typically stay employed with the organization. A company may have a hard threshold, in the case of an account manager with a significant base of retained business. Or it may not have any threshold, in the case of a new business developer for whom every sale is incremental growth. What’s the minimum acceptable level of performance for a rep to keep her job or to earn any incentive? Are underperformers overpaid?

 

Next week I’ll write about Linking Pay and Performance. Contact me at mark.donnolo@salesglobe.com with any questions.

Setting Your C-Level Goals

CLevel Goals

 

As sales executives determine priorities for their business related to sales compensation, they need to set their C-level goals. These will define the major priorities for the organization that will be converted to the sales compensation plan. Those priorities provide clarity for how they will design the plan and the behaviors the plan’s going to drive in the organization. Once set, the C-level goals will force answers to the key questions that will lead to the program’s success. They will also help overcome resistance as sales leaders become deeply involved in the design of the compensation plan.

While the Revenue Roadmap defines all our possible destinations, the following dimensions, the five C-level goals, help us to make the right strategic alignments and stay on track.

There are five C-level goal areas that can describe our strategy. Articulating these from the C-level to the organization helps to simplify the critical few from the trivial many that can emerge from an overall examination of the 16 disciplines of the Revenue Roadmap.

Most organizations can concentrate on building programs that support these five major areas.

  1. Customer. The Customer dimension describes priorities in terms of buyer types and segments. Who are the right types of companies and buyers for our business?
  2. Product. The Product dimension identifies which offers will get the most focus. What products and services should be emphasized? Which are strategic and which are critical for cash flow? What are the priorities for cross selling?
  3. Coverage. The Coverage dimension articulates the major methods of matching sales resources to each customer segment. What are the routes to market? What is the role of third-party channels? What will the sales organization look like?
  4. Financial. The Financial dimension specifies monetary goals. What growth results are necessary for revenue, profit, and market share? How is the return on investment measured, with improvements in the organization and sales programs?
  5. Talent. The Talent dimension defines who the sales organization needs in its coverage roles to reach its goals. What types of skills will execute the strategy? What’s the talent inventory? Where does the organization need to build strength? Where do we need to source new talent?

Looking at the complexities of the growth plan, setting the priorities around the Customer, Product, Coverage, Financial, and Talent goals can provide clear direction for a range of sales effectiveness programs, including sales compensation.

Bob Brennan, former CEO of Iron Mountain, a Fortune 1000 information management services company, has been through similar challenges with his sales organization: “How do you want to incent the right behavior? I think about sales compensation from a perspective of what’s strategically important to the business, and how we can motivate people to that end.”

Brennan asks the same three fundamental questions at each of his touch points in the compensation design process:

  1. How does what we’re trying to sell strategically fit?
  2. Do we have the ability to execute?
  3. How can we drive strong returns on the presumption that it fits strategically and can be executed?

How do you connect your sales compensation plan to the strategy of the organization?

 

Aligning Sales Compensation to the Sales Strategy

Revenue Roadmap“I like to say that the comp plan is the caboose, not the engine,” says Doug Holland, director of HR and compensation at Manpower. “Compensation should never be driving the strategy. The strategy drives the compensation. It’s incredible, especially in times of stress, how that message can kind of get lost. Comp issues are often symptoms of bigger problems, and it’s the easiest, most tangible thing to look at. The challenge is, do we have the right job designs? Do we have the right people? Those are harder conversations. That’s often the struggle with comp plans.”

 

When thinking about sales strategy and sales compensation, it’s critical to have a framework. We developed the Revenue Roadmap from our decades of work with hundreds of high performing sales organizations to be that framework. The Revenue Roadmap identifies four major layers, or competency areas, and 16 related disciplines that must connect for the organization to grow profitably,

 

Insight pertains to understanding the market and competitors and how the business is performing. Insight is the highest level competency: understanding the voice of the customer, the macro market, competitor moves, and the performance of the business. That insight will drive certain decisions to the next downstream level, which is sales strategy. Insight includes listening to the voice of the customer; considering the macro market environment; understand competitors’ strategy; and understanding your historical performance as a business.

 

Sales Strategy defines the sales organization’s action plan to achieve its goal. The sales strategy will drive decisions concerning product and service focus, concentration on certain markets, value propositions, and the resulting approach to market. Strategy includes defining the strategic products and services; segmentation and targeting; account planning; and value proposition.

When developing the approach to market, sales leaders should incorporate decisions about product, service, target segments, value propositions, and potential sales resources into a plan that can be executed by the sales organization. The customer coverage layer converts that plan into action.

Customer Coverage defines how the organization will use its channels, roles, processes, and resources to go to market. Customer coverage includes sales channels (third party resellers, referral partners, retailers, or company sales force); sales roles; sales processes; and sales deployment. Sales channels and sales roles integrate with the processes for working with customers. In fact, the best customer coverage models are built from the customer’s buying process with a sales process and roles that reflect how the customer prefers to work. Sales processes lay out the common approaches for how the sales team identifies prospects, qualifies opportunities, develops solutions, manages the momentum, closes the sale, and implements the product or service for the customer.

Enablement supports all of the upstream disciplines within Customer Coverage, Sales Strategy, and Insight. Enablement includes areas such as incentive compensation and quotas, which aligns sellers to the sales strategy. It includes recruiting and retention, which define the current inventory of talent and determine how the organization is going to attract and retain the right talent for the long term.  Training and development builds the capabilities of the organization for people currently in their jobs and in junior roles that will progress into key sales roles. Tools and technology provide leverage by enhancing the effectiveness of gaining insight and implementing the organization’s decisions around sales strategy, customer coverage, and enablement.

Jeff Connor, chief growth officer for ARAMARK, a global provider of food services, facilities management, and uniforms, is involved in the sales compensation process. “People confuse incentives with alignment, and they jump to incentives as the answer, as opposed to the hard work of alignment,” he says. “When you look at the Revenue Roadmap, sales and incentive compensation is at the bottom. In my experience, when you talk sales compensation everybody wants to just take big business objectives and assign incentives, as if the sales people will go after anything where there’s a buck.

“In reality, anybody who’s every worked on sales comp knows it doesn’t operate like that. The alignment work – getting the correct insight, aligning it to the sales strategy – has to happen first. The last think you do at the end of the day is work on the incentive plan. Confusing incentives for alignment happens all the time. People just go right to the ideas without understanding context. I think this idea of alignment is really important.”

The Revenue Roadmap helps a company to align its strengths and ensure everyone is firing on all cylinders. While it begins with Insight, all 16 disciplines are connected, and the decisions and actions flow from one to the next. When looking at sales compensation it helps to know where it fits within the overall framework, downstream from sales strategy and customer coverage. That’s why issues in the upstream disciplines will show up as symptoms in the sales compensation plan.

C-Level in the Sales Comp Process

Picture1Recently, I met with a couple of the senior sales leaders of a high-tech hardware company at a coffee shop in Dallas. They were at the end of their compensation design process – just waiting for the final nod of approval from their CEO.

Unfortunately for them, their CEO decided he wanted to get involved, at the end of the process. While he had received updates throughout the prior months, it was only now – after all the intricate details had been woven together – that he decided to take a closer look.

“He (the CEO) started digging into the financial modeling and challenging us about why the plan would pay more than the targeted cost of sales if we hit our company goal on average but had a lot of high performers,” said one of the sales leaders. “The team had agreed on the above-quota accelerators, and that’s what happens with accelerators. We worked hard on keeping him informed, but when he finally locked in, we were at the end of the game.”

C-level involvement in the sales compensation program is critical. It helps ensure that the plan connects directly to the strategy of the business. However, C-level engagement must come at the right times in the process, typically much closer to the beginning than what our friends in Dallas encountered. In-depth conversations about the strategy and ways to tie it to the comp plan should happen in the beginning. And, it’s essential the comp design team gets feedback from the C-level that he or she is absorbing the updates along the way, rather than scanning an email.

Eventually, the Dallas sales team completed the plans and rolled them out for an introduction albeit one quarter behind schedule. Was the re-design better than the proposed design? The CEO thought so, but it was hard to say. The senior sales leadership team had a lot of clean up to do with re-communication and incentive pay true-ups. Sales leadership had lost some credibility with the sales organization. And the executive steering committee, including the CEO, may have learned a lesson about getting real C-level engagement and support much earlier in process.

When does your C-level get involved in the incentive design process?

Mark Donnolo is the author of “The Innovative Sale” and “What Your CEO Needs to Know About Sales Compensation,” and managing partner of SalesGlobe. Email him at mark.donnolo@salesglobe.com .

Grade Your Sales Compensation Plan

Picture1Designing a great sales compensation program that connects the strategy of your business to the front line sales people can be complex and time consuming, but the return can be significant.

“The comp plan is the caboose, not the engine,” says Doug Holland, director of human resources and compensation for Manpower Group North America, a global workforce solutions company. “Compensation should never be driving the strategy. The strategy drives the compensation.”

Too many companies get that wrong, however. We’ve created a quick report card to help you see how well your sales compensation plan drives the correct behaviors. Fill out the report card and receive a grade for each of the five categories: C-Level Goals & Sales Roles; Framing the Plan; Linking Pay and Performance; Aligning Team and Financials; and Operating for Results.

Select the grade that most closely represents your organization’s performance in each area. Once you are done, have each of your team members do the same, and compare results and potential actions.

http://whatyourceoneedstoknow.com/reportcard/

Let us know your thoughts.

Get Comfortable with Criticism

Criticism

In any business, when new ideas bubble up people tend to be attracted to them if they’re at a safe distance, or to reject them if they’re a potential threat. An unfortunate reality is that, while many businesses want to say they’re doing “that innovation thing,” people don’t want to go through any actual changes to their daily practices.

Common responses to new ideas are: “We already tried that,” or, “It won’t get past HR or finance.” As creatures of habit, we naturally defend what’s known.

So how easy is it for you to suggest something new?

Consider this situation: In a large team meeting, you propose a new solution for a client that you believe will lead to increased revenue. It is your creation and you feel vested in it. Within a matter of minutes, everyone in the room has debunked the idea and has moved on to another topic. Would you:

  1. Say very little for the rest of the meeting.
  2. Continue participating in the meeting as you normally would.

A person accustomed to pitching innovative ideas would choose b, and continue participating in the meeting without embarrassment, regret, or anger.

If you’re breaking procedural rules or accepted legacies don’t be surprised if your new idea runs headlong into rejection from your colleagues or customers. In fact, try to get over the surprise and learn to be attracted to rejection. As a sales innovator, you need to embrace both a comfort with feeling lost as you develop your ideas, and a comfort with rejection as you propose them.

 

Mark Donnolo is the author of “The Innovative Sale” and “What Your CEO Needs to Know About Sales Compensation,” and managing partner of SalesGlobe. Email him at mark.donnolo@salesglobe.com .

 

Is Breaking Rules Good for Sales?

Pompidou

Sales organizations are built on rules: both internal rules and adherence to their customers’ rules. Obeying these rules is good – and has made many companies successful over the years. But when is it right to bend, or break, the rules?

Consider architect Richard Rogers. When Rogers and his partner Renzo Piano designed Pompidou Centre in Paris, they broke conventional rules of architecture by positioning the building’s infrastructure – electricity, plumbing, and HVAC – outside of the building. The goal was to optimize the internal space’s functionality for social and cultural exchange. Because they understood the rules, they could protect the ones that keep buildings standing, and then selectively break the rules that create new opportunities. By doing this, Rogers advanced post-modern architecture and changed how we interact with physical space.

Applied to the sales environment, look for the following two types of rules.

Operating Rules. These rules are core to the survival and operations of the business. The insurance company customer in the earlier example had operating rules about financial and actuarial requirements. These rules exist to pinpoint the risk they can underwrite so their premiums and claims balance out profitably. For the sales innovator, these aren’t the rules that are healthy to break.

Procedural Rules. These rules govern the supporting processes of the business. For the insurance company, they would include how the claims administration process works, and how they interface with their customers who make claims for property losses. Procedural rules could also include how the company operates its RFP process with vendors. While these rules are essential, they can also be broken carefully if breaking them improves the company’s capabilities. For example, the sales team might have proposed a dramatic change in how the insurance company interfaced with its best customers through a dedicated claims concierge service, breaking the current procedural rules to improve the company’s customer experience.

“And at the end of the day, break every rule you can,” says Pat Murn, vice president of sales at LexisNexis. “Breaking rules is very effective. Now, if you’re just blatantly irresponsible about it, obviously that’s not good. But if you’re creative, it actually shifts the culture of an organization. That’s how people within an organization actually grow, by breaking rules. If you’re just a law-abiding citizen at all points in time, you’d become part of the masses. But it’s really effective in a corporate environment: find every rule you can break, because you get attention and you get followers that way.”

Be a rebel. Know your internal and customer rules, classify them, and then break them to see what possibilities are revealed.

What rules would you break if you could?

Mark Donnolo is the author of “The Innovative Sale” and “What Your CEO Needs to Know About Sales Compensation,” and managing partner of SalesGlobe. Email him at mark.donnolo@salesglobe.com .

 

Using Patterns to Find Innovation in Sales

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Within each of the six Innovative Sale Principles (pattern, variety, unity, contrast, movement, and harmony) are details about how to act on these ideas.

For example: what does pattern mean in a sales context?

I’m glad you asked.

In sales, Pattern refers to our instinct to find related ideas in any given situation. Have you been in a similar situation before? Have you heard or read about a similar customer situation? You might leverage those ideas, rather than reinventing the wheel each time.

Consider three ways to incorporate this idea into real sales situations:

1.      Get Comfortable With Feeling Lost

In customer situations that are really challenging – situations that demand something different to keep the business or win it in a competitive situation – sales teams typically lock in on an answer from a menu of choices they’ve used before. If they temporarily step off the map of their expertise, they quickly retreat.

Don’t retreat too early. When you’ve exhausted your first round of typical solutions, tally up the hours you’ve spent to that point. Then take an additional 20 percent of those hours and commit to working beyond where you stopped. Being temporarily lost is often part of innovative thinking. Consider the signals of retreat as indications to continue ahead, and see what outcomes are on the other side.

2.      Combine Unrelated Ideas

There are countless examples throughout history of new inventions that are actually, famously, the combination of two previously unrelated ideas. Joseph Pulitzer combined expensive high-speed printing with lucrative large scale advertising to create mass-circulated newspapers. Henry Ford combined Adam Smith’s division of labor and Eli Whitney’s assembly line (although, the Ford Motor Company learned of the moving assembly line through William “Pa” Klann’s visit to Swift & Company’s slaughterhouse in Chicago) to create the first moving assembly line in manufacturing and, subsequently, the first affordable car. My personal favorite is Johannes Gutenberg’s combination of a coin punch and wine press to create the first moveable-type printing press.

Combining ideas and significant accomplishments from another industry, culture, or even period in history and retrofitting them to your unique sales problem can spark original answers.

Don’t reach for the convenient answer that repeats the same patterns. Look beyond your company walls and your industry norms for solution components you can borrow.

3.      Become a Student of History

Becoming a Student of History can give you a rich inventory to source those unrelated idea combinations. We’ve been on the earth for 40,000 years, give or take a few millennia. Since then, two truths have held for sales. First, since many of our greatest innovations were actually inspired by advancing historic ideas with new technologies, it helps to know a lot of historic ideas. If Gutenberg had had to invent both the wine press and the coin punch before inventing a printing press with moveable type, his innovation would have been seriously delayed. Similarly, in sales, we don’t have to reinvent the wheel every time; we can build on what’s been done.

Second, history tends to repeat itself. Some goods – such as computers and industrial products – become commoditized as buyers become educated. That pattern may hold for your business, too. Other goods or services – such as document imaging and outsourcing – become more complex over time, and these companies are forced to change their sales process. That pattern may hold for your business as well. In which direction are your products and services heading, and how can you take a first step in that direction?

History builds the hooks upon which you can hang new ideas and quickly create new associations. Without this knowledge, you’ll operate with limited vision. Know the history of your business and sales model. Understand how your customers’ businesses evolved. Look for the patterns and trends that may continue ahead and give you additional insight.

 

Mark Donnolo is the author of “The Innovative Sale” and “What Your CEO Needs to Know About Sales Compensation,” and managing partner of SalesGlobe. Email him at mark.donnolo@salesglobe.com .

Meet Mark, via BusinessInterviews.com

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A recently published Q & A highlights some of managing partner Mark Donnolo’s unique facets: including how his undergrad degree in art school translated into some unusual wisdom for sales.

BusinessInterviews.com: Why do you think that the ability to incorporate creative thinking strategies to sales is so rare?

Mark: In sales, everybody has a number to hit; there’s time pressure and numerous constraints that prevent people from taking the time to think creatively. Sales organizations fall into the trap of then replicating customer solutions that they’ve done before. Too often we go into “execution mode” when we should be going into innovation mode to differentiate ourselves from competitors. It’s hard to be introspective when your pants are on fire, but having a set of principles and a methodology around innovation can help you be creative in an efficient way. In the end, most deals are won or lost not on price but on addressing the customers’ specific needs; more often than not, this requires some real thinking.

 

BusinessInterviews.com: What are some trends that you’re excited about or think that our readers should be paying attention to?

Mark: We see an emerging trend of innovation not being just about products, but moving into sales. People are starting to ask the questions, “How does innovation apply to sales, and how can we help the customer develop a better solution?” This requires us to make innovative thinking practical and provide access to innovative thinking to people that may not consider themselves naturally creative. Sales organizations are starting to ask how they can take the creative principles that have been developed over time in fields of the arts and design and apply them to a hard-charging, goal-oriented profession like sales. Sales organizations won’t tolerate pontification about creativity. They need answers they can apply quickly. We developed the Innovative Sale process to combine the best of left brain and right brain thinking around sales.

 

BusinessInterviews.com: Congratulations on your newest book, “The Innovative Sale: Unleash Your Creativity for Better Customer Solutions and Extraordinary Results.” Can you share a bit about the process behind writing it and what you hope the average reader walks away with?

Mark: The idea for the book has been in my head for years. I graduated from The University of the Arts and started my career in the arts as a designer in New York; then I followed my stockbroker roommates to UNC Chapel Hill and earned an MBA. Over the years I saw that the consulting work I was doing with sales organizations was different than a lot of my colleagues. We weren’t just benchmarking and replicating what other companies were doing. We were thinking about new ways to approach sales strategies. While I tried to put the art school days behind me to and have a serious business career, I realized all the creative principles came to bear in solution development for business. For example, sales organizations tend to jump to one or two solutions they’ve seen before rather than doing effective divergent thinking. They may also be dissuaded by barriers that prevent them from achieving their goals when in fact many of those barriers can be destroyed. It was at that point that I realized that sales organizations more broadly could benefit from this combination of creativity and sales effectiveness.

I went back to the world of the arts and talked to leading designers, architects, and advertising professionals about how they develop creative solutions. Then we went to sales leaders in major companies and talked to them about how their sales teams apply creativity in the sales environment. We told their stories in the book, and also drew upon our work in the field to develop an approach for creative solution development that anyone can apply. We also identified how to measure sales creativity on six dimensions so sales teams can become more effective at strengthening those areas.

BusinessInterviews.com: What advice would you give to a startup in need of a sales strategy?

Mark: I ran two venture backed companies, so I understand the importance of generating revenue and having a strong sales strategy. First, you need to understand the importance of generating revenue and not living off of venture funding. Too often start-up companies live on an idea and aren’t sustainable because their business model doesn’t generate cash flow. Always bring it back to how sales can contribute to the business model.

Second, understand your target market and your true accessible potential. Saying, “If we can just get 2% of the market we can go public” isn’t enough. You need to build your market one customer at a time in the right segments.

Also, set clear and reasonable goals. It’s great to think where the rubber meets the sky, but you have to work where the rubber meets the road. You have to set practical reasonable goals. Don’t bet on a buyout to save you.

And finally, hire true sales professionals. If you’re a founder or a leader in the firm don’t try to do it all yourself. There are too many other functions to be performed in the company to leave sales to the general managers. If you’re more passionate about your product and application than you are about sales itself, than hire someone who’s passionate about sales. If you can’t pay market rates, put a highly leveraged variable plan in place and sell the vision of the company to attract talent.

Read the full article here.

Mark Donnolo is the author of “The Innovative Sale” and “What Your CEO Needs to Know About Sales Compensation,” and managing partner of SalesGlobe. Email him at mark.donnolo@salesglobe.com .

Innovation Principles for Sales

Two weeks ago I wrote about how my experiences in art school shaped my thinking about sales – specifically, how creative thinking can churn out better customer solutions. I promised to complete the list of Innovation Principles, but a great question about cold calling last week caused me to digress.

In addition to the concepts of Pattern and Variety, there were several other design principles that, with a few practical modifications, apply beautifully to sales.

3. Unity describes how all of the elements and principles in a composition work together to make sense. All of the shapes, colors, lines, and spaces operate as a whole, rather than as separate parts. Pointillism, a style of post-Imperssionism painting, is an example of unity. In Georges-Pierre Seurat’s “A Sunday Afternoon on the Island of La Grande Jatte” (c. 1886), he uses thousands of colorful dots to create an easily discernible scene of Parisians in a park. We don’t look at the dots and colors, we see the whole picture.

In sales innovation, Unity also refers to how all of the elements work together to make a whole – although, in a sales organization we replace color and shape with sales team members. In Seurat’s painting, the individual dots come together as a whole with a greater vibrancy and energy than if the scene had been painted with single solid forms. With a sales innovation team, the collaboration of diverse individuals creates the same type of energy and output that’s greater than a single point-of-view.

4. Contrast describes the differences among elements used to create interest and tension. Contrast can break up the repetition and movement created by Pattern. One simple example of contrast is light and dark colors.

In sales innovation, contrast invites the sales team to critically question and push back against established practices. With Contrast, sales teams also get comfortable with divergent opinions and the initial criticism that almost invariably accompanies new ideas.

5. Movement creates the action in design. Closely related to Pattern, Movement uses elements of art – especially scale and proportion – to establish direction. In graphic design, movement is also described as flow. It usually starts with a dominant shape or color and leads the viewer a certain way.

In sales innovation, Movement refers to the natural progression of ideas as we proceed through the thinking process. Unfortunately, innovative ideas rarely occur in a flash, and we have to be disciplined in our approach to development.

6. Harmony is achieved when there are several different but related elements in a composition. By using similar elements throughout, the piece appears uncomplicated. If something is harmonious, we often say, “It works.”

Sales teams working toward innovation can use the principle of Harmony like a checklist to make sure what they’ve designed can be implemented by the organization. Do the elements of the idea work together in a cohesive way? How can we implement this new idea so it works for the customer?

 

How do you think these ideas might apply to your work?

 

Mark Donnolo is the author of “The Innovative Sale” and “What Your CEO Needs to Know About Sales Compensation,” and managing partner of SalesGlobe. Email him at mark.donnolo@salesglobe.com .

Creativity in Cold Calls

Cold Calling

A sales person recently asked me the following question:

Q: What is the best way to get the attention of managers when you cold call them?

 

A: You have a great question. Too often we approach the cold call — or even the call with a customer we know — from our own perspective. We think about what we can offer them and what we’re trying to accomplish. We do a lot of training in this area, and I suggest the following ways of thinking:

1. What do you want to say? List the things that you think are important about what you need to accomplish, what you can offer, and what you want to communicate to the manager. Make it an exhaustive list of what you would say in that first call or meeting.

2. Change your perspective. Imagine yourself in the shoes of the manager. What are the different roles she plays in her company? What is her day like in her job? What does she need to accomplish this month or this quarter? What might she be concerned about? What is she thinking about relative to the staffing services you could offer?

3. Mind the Gap. What’s different about what you would say and what might be on the manager’s mind? Is what you have to offer her dealing with 50% of her concerns or only 5%? How much of a gap is there between what you want to say and her perspective?

4. Do Your Homework. This part may seem like a pain, especially if you’re making a lot of calls. However, it can make the difference between you being an insightful thought partner and being one of the pack. Understand what is happening with that manager’s organization from four points:

a. Financial. What is the organization trying to accomplish financially and what are the challenges? Why and what is causing that?

b. Product or Application. What is the organization trying to accomplish in terms of what it offers to its customers or internal users and what are the challenges? Why and what is causing that?

c. Market or User. Who is the organization trying to address in terms of external customer segments or internal user groups and what are the challenges? Why and what is causing that?

d. Resource. How is the organization trying to make that happen and what are the challenges? Why and what is causing that?

 

By asking these questions, you will get beyond the surface level challenges the customer has and start to provide some second generation ideas. These points are great for doing some initial fact-finding and getting beyond the deadly surface level questions like “What’s keeping you up at night?” They are also great question areas to use as a structure for an initial (or follow-on) conversations. They can elevate your perceived level of insight.

5. Develop a More Effective Value Proposition. Following your initial meeting, using the information above can help you re-define the customer’s challenge and respond with a more insightful value proposition about how you can help in each area.

 

Mark Donnolo is the author of “The Innovative Sale” and “What Your CEO Needs to Know About Sales Compensation,” and managing partner of SalesGlobe. Email him at mark.donnolo@salesglobe.com .

 

Everything I Needed to Know About Sales I Learned in Art School

classhands

The hallways bustled as several hundred art school students hustled to their last studio class of the day. But the day, like most days at University of the Arts, was far from over, and would continue long into the night with an impossible workload to prepare again for tomorrow.

For my next class, I crossed the street, entered an old building and walked into a modest room. It was a small class, but one of the most valuable I would attend. It was called Principles of Art. We spent the semester exploring eight specific concepts: pattern, variety, unity, contrast, movement, harmony, proportion, and balance. These ideas, my professor explained, are the tools used in art and design. Just as necessary as a pencil, paintbrush, or T-square, the principles of art shaped my projects because they shaped my thinking. They organized my ideas before I began a project, while I worked through a project, and how I evaluated it once I had finished.

These principles appealed not just to my creative side – the side that wanted to explore all the ways I could possibly use pattern, variety, and contrast – but also to my logical side, which sought some order among the chaos of creativitiy.

I used those principles every day of my undergraduate life. I never deliberately memorized them, or referred to them in any structured way. But they were a vital part of my tool kit, always in the back of my mind, reminding me how to work with creativity. As I graduated from an art student to a design professional, I carried these principles with me and used them regularly in my work. And, to my surprise, when I returned to school to earn my MBA and began working with large sales organizations, I again found support from these principles. Pattern, variety, unity, contrast, movement, and harmony, it turns out, with a few modifications to their application, pertain beautifully to sales.

Today, the Innovative Sale Principles are associated with six of the eight original Principles of Art I learned more than 25 years ago.

Principle One: Pattern
Pattern refers to our instinct to find related ideas in any given situation. Faced with a problem, our mind begins flipping through our own portfolio of experiences first; finding no suitable solution we may then jump to stories we’ve heard from friends, co-workers, accounts from the news, or examples from the past. We are seeking a match, preferably one that carries an answer we can apply to our current situation.

 

Principle Two: Variety

Variety describes the dissimilarities or contrast. While Pattern uses similar elements, shapes, colors, textures, and values, Variety prefers a range of these in any single composition. The same idea, naturally, applies to innovative thinking in sales. You are more likely to have the elements of the right solution for your customer if you work with abundance. If, as too many sales organizations do, you stick to just the few tried-and-true solutions, you may never differentiate with a better answer.

 

Next week: how Unity, Contrast, Movement, and Harmony can lead to innovation in sales.

What do you think? Can principles of art and design teach us something practical?

Mark Donnolo is managing partner of SalesGlobe and author of The Innovative Sale and What Your CEO Needs to Know About Sales Compensation.  Contact him at mark.donnolo@salesglobe.com.

 

 

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