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The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
The sales quality_revolution
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The sales quality_revolution

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  • 1. The sales Quality Revolution THE ART AND SCIENCE OF SELLING By: Howard Stevens and Geoffrey James Based on 20 Years of World Class Sales Research Across 80,000 B2B Customers and 7,300 Sales Forces
  • 2. As seen in our previous special report (Measuring Sales Performance), companies can now measure their sales teams in many different ways. However, there is another way to measure sales teams that actually can predict future performance, not with total accuracy perhaps, but with much more accuracy than was possible in the past. This kind of metric is based upon empirical research into the roles that sales professionals play, the behaviors they exhibit, and how those behaviors are likely to play themselves out in the real world. This new way of measuring sales draws upon decades of corporate experience in manufacturing improvements. This special report discusses what we call “the sales quality revolution,” and explains how these new metrics are applied in order to improve the effectiveness of sales management, both at the strategic and tactical level. Introduction
  • 3. 4 The Art and Science of Selling The history of sales management is a history of two competing narratives about the nature of selling. The first narrative is built around the concept that “selling is an art.” In this nar- rative, the activities of the sales professional are seen as essentially mysterious and tied to the basic personalities of the individuals involved. This narrative creates a management style that emphasizes personal development and sales managers are primarily seen as coaches and “people pickers” who can find the sales stars with the innate skill. The second narrative is built around the concept that “selling is a science.” Here, the activities of the sales professional are seen as easily replicated behav- iors that can be taught to virtually any employee with basic social skills. This narrative creates a management style that emphasizes sales process and sales managers are primarily seen as administrators who measure sales activity and take corrective action as necessary. Sales trainers and sales training firms have traditionally fallen into both camps. There are many sales trainers such as Art Mortel, Jeff Keller, and Anthony Rob- bins whose seminars are primarily motivational. However, the bulk of the sales training presented today by firms such as Richardson, Advantage Performance Group, and AchieveGlobal fall into the second category, emphasizing process and measurement, and the replication of “best practices” skills. In other words, it appears that the “selling is an art” camp is, in a certain sense, retreating from the success of the “selling is a science” camp. This is not to say that motivational programs and personal development seminars are useless, but only that the overall trend in terms of how managers think about selling, and how they invest in sales training, is toward the “selling is a science” narrative.
  • 4. 5 This “victory” (if that’s the right word for it) is the direct result of a rapid increase in the amount of data, and the types of data, that companies can gather, both about individual salespeople and about the performance of sales teams and groups. Now that most companies track sales processes, they can use analyti- cal tools to draw conclusions about sales performance, make better forecasts, and build stronger and more effective organizations. These new ways of measurement often result in surprising insights about selling. For example, as described elsewhere in this book, it was once widely assumed that sales professionals who are highly successful at one type of selling will be equally successful at some other type of selling. However, when sales perfor- mance is actually measured, it becomes clear that a top performer is LESS likely than an average performer to be successful at a different sales environment. In this special report, we’ll look at some of the breakthrough ways that sales managers are measuring the sales process, the conclusions that they’re drawing from those measurements, along with specific recommendations for imple- menting these methodologies inside sales organizations. When it comes to measuring themselves, sales teams (and their management) are prone to measure success and then attempt to strengthen or replicate the behaviors that created that success. That’s why the vast majority of sales train- ing and sales technology is positioned as a way to implement “best practices” or “what the best salespeople do.” However, as explained in the previous special report, “The Changing Role of the Sales Professional,” the behavior of the top salespeople may be something that’s inherent rather than teachable. Top salespeople may, in fact, be near sa- vants who are uniquely talented and peculiarly well-suited to a certain kind of sales task and may not be able to articulate what they’re doing or why it works. Summary: • Sales theories fall into two categories: 1) sales as an art and 2) sales as science. • Over time, the concept of sales as a science has proven more resilient. • Increasing levels of data collection have made it easier to apply science to selling. • Scientific measurement and analysis of data produces surprising results.
  • 5. 6 The Deceptiveness of “Best Practices” Similarly, what’s a “best practice” for one firm may not necessarily work for another firm, especially if it’s in a different industry or has a different market position. For example, branding consultants frequently cite world-renowned brands like Sony and Coke as exemplars for corporate investment in branding, despite the fact that the Sony brand is decades old and the Coke brand has been around for well over 100 years. While Sony and Coke possibly are executing “best practices” for their own situation in their own markets, it’s unclear how that’s relevant, for example, to a recently launched company with a regional sales territory. The concept of “best practices” can be particularly deceptive when it’s assumed that what’s good for large companies is automatically good for medium-sized companies and small companies as well. Under this way of thinking, companies are seen as being part of a continuum with the very largest firms at one end and the very smallest firms at the other. In standard business communications, this continuum is usually segmented into two rough groups: 1) Enterprise, which is basically the Fortune 1000 and 2) Small and Medium Business (SMB), which is everybody else. The assumption, made constantly by technology firms and sales training firms alike is that what works well for the Enterprise will probably work well in SMB. Sometimes, this assumption works from big to small, as when Oracle or SAP tries to move the Enterprise Resource Planning (ERP) concept from their tradi- tional enterprise base and into the SMB space. At other times, the assumption works in reverse, where technology (like Sales 2.0) is positioned as being able to make huge enterprises as nimble and innovative as smaller ones. However, the concept of a continuum between different-sized companies (and therefore the portability of best practices) is actually artificial, because differ- ent-sized firms must behave in different ways in order to remain successful. Consider: large enterprises, regardless of industry, tend to be similar in terms of corporate structure (hierarchical) and fiduciary structure (public ownership). Furthermore, within specific industries, large enterprises almost always have nearly identical marketing and sales models. For example, there is very little difference, in terms of general activities, between Toyota and General Motors and Volkswagen. In these environments, the value of automation is found in creating ever-deeper layers of integration in order to create an incremental advantage over the competition. That’s why these behemoth firms are willing to invest in the ERP concept.
  • 6. 7 Small businesses are also similar in terms of corporate structure (little to none) and fiduciary structure (generally private and often family-owned). Within in- dividual industries, small businesses are often quite different, not because they sell very different things, but because they’re small. Their marketing and sales processes are, by definition, simplistic. In these environments, the value of au- tomation is the ability to bring up some kind of a basic application that can add at least some level of automation – and then extend it piecemeal. That’s why small businesses are willing to buy into the concept of simple customization via mix-and-match applications. By contrast, mid-market firms enjoy a wide variety of corporate structures (networked, collaborative, consensus-driven, loose affiliations, etc.) and a wide variety of fiduciary responsibilities (venture capital, wholly owned subsidiary, private but planning to go public, public but planning to go private, etc.). Furthermore, mid-market firms always have sales and marketing processes that are both unique and complex. The reason is simple. If what a mid-market firm provides isn’t both unique and complex, it is inevitable that a large enterprise will enter that market and use the power of its deep pockets to force those mid- market firms out of business. For example, two decades ago, thousands of small chain stores erupted around the country that provided high speed copying services to small businesses. One of these chains, Kinko’s, now FedEx Office, eventually achieved critical mass and used economies of scale to undercut the other local franchises, eventually driv- ing them out of business. This was possible because providing reproduction services to small businesses is insufficiently complex and unique to justify the presence of a mid-sized firm. Because the service is all a matter of who can buy the equipment and paper cheapest, there’s no reason for a mid-sized firm to exist, except temporarily (as when Kinko’s was originally growing.) By contrast, there are many regional banks throughout the country that offer financial services to small businesses. These regional banks continue to survive and thrive, even though they can’t possibly compete head to head, in terms of financial resources or services, with giant international banking concerns like Wachovia or Bank of America. However, in servicing small businesses, regional banks do something that’s complex and unique – assessing the value of a cus- tomer based upon personal relationships and local knowledge. This is not to say that it’s entirely useless to study what other firms do when small firms to steal ideas from larger firms and vice versa. However, it’s clear that there are limitations to measuring and attempting to replicate best practic- es in exactly the same way that there are limitations to measuring and replicat- ing “what the best salespeople do” within a sales team. Summary: • The study of best practices is sometimes over-simplistic. • Companies of different sizes require different sales strategies. • Small businesses must differentiate themselves from large enterprises. • There are severe limitations to the “what the best salespeople do” concept.
  • 7. 8 TOTAL QUALITY SALES MANAGEMENT A more useful approach to increasing sales effectiveness may lie in measuring, not the successes of a sales group, but the errors that take place in the sales process. While this concept seems exceed- ingly odd to most sales professionals, under the terminology Total Quality Management or TQM, it’s been the primary way that corpo- rations have measured and improved their manufacturing teams for decades. Before we proceed with the discussion, it’s necessary to provide a little background for context. According to Wikipedia: TQM is an integrative philosophy of management for continuously improv- ing the quality of products and processes. [It] functions on the premise that the quality of products and processes is the responsibility of everyone who is involved with the creation or consumption of the products or services offered by an organization. In other words, TQM capitalizes on the involvement of management, workforce, suppliers, and even customers, in order to meet or exceed customer expectations. In a TQM effort, all members of an organization participate in improving processes, products, services and the culture in which they work. At its core, Total Quality Management (TQM) is a management ap- proach to long-term success through customer satisfaction. Another, somewhat more modern variation of TQM is Six Sigma*, originally developed inside companies like Motorola and General Electric. According to Wikipedia: Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufac- turing and business processes. It uses a set of quality management methods, including statistical methods, and each Six Sigma project carried out within an organization follows a defined sequence of steps and has quantified financial targets (cost reduction and/or profit increase). * Six Sigma is a registered service mark and trademark of Motorola Inc.
  • 8. 9 Specifically the Six Sigma doctrine asserts that: 1. Continuous efforts to achieve stable and predictable process results (i.e., reduce process variation) are of vital importance to business success. 2. Manufacturing and business processes have characteristics that can be measured, analyzed, improved and controlled. 3. Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management. 4. There must be a clear focus on achieving measurable and quantifiable financial returns from any Six Sigma project. 5. The success of such methods requires emphasis on strong and passionate management leadership and support. 6. A special infrastructure of “Champions,” “Master Black Belts,” “Black Belts,” “Green Belts,” etc., is necessary to lead and implement the Six Sigma approach. 7. A key element is a clear commitment to making decisions on the basis of verifiable data, rather than assumptions and guesswork. The term “Six Sigma” comes from a field of statistics known as process capabil- ity studies. Originally, it referred to the ability of manufacturing processes to produce a very high proportion of output within specification. Processes that operate with “six sigma quality” over the short term are assumed to produce long-term defect levels below 3.4 defects per million opportunities. Six Sigma’s implicit goal is to improve all processes to that level of quality or better. As of 2006, Motorola reported over $17 billion in savings from Six Sigma and other early adopters of Six Sigma who achieved well-publicized success include Honeywell (previously known as AlliedSignal) and General Electric, where Jack Welch introduced the method. By the late 1990s, about two-thirds of the For- tune 500 organizations had begun Six Sigma initiatives with the aim of reducing costs and improving quality. While Six Sigma has some elements (like the various colored belts indicating expertise) that many sales professionals are likely to consider risible, there’s no question that both TQM and Six Sigma have had an enormous impact on how companies build products. Given the ubiquity of these data-driven methods, it’s surprising that it’s taken so long for companies to apply the TQM concept of measurable and predictable error reduction to Sales and Sales Management.
  • 9. 10 Some of this reluctance may be a lag in technology. TQM requires a system of precise measures – objective and accurate enough for statistical analysis and, up until quite recently, sales organizations tend only to gather and record subjective and overly-general data (like the movement of an “opportunity” into “prospect”) that’s too imprecise and, therefore, too fallible to support the level of accuracy that TQM requires. It’s only been recently, through the massive application of technology to the sales environment, that it’s become possible to measures sales activities at anywhere near the level of granularity that companies measure their manufactur- ing groups. Extending the concepts of TQM and Six Sigma into the realm of selling creates a set of techniques and mea- surement tools that Chally Group Worldwide calls Total Quality Sales Management or TQSalesM™ . This ap- proach focuses primarily on identifying the “causes of failure” of sales and service people who may be other- wise qualified -- an approach that runs directly contrary to the more common identification of the criteria for success as typically seen in job analyses and competency studies. History Modern The Future • Messaging is salesperson’s responsibility • Ad hoc / event-driven development • Sales pitch • Vendor / product oriented • Salesperson as product expert • Static text and documents • Media programs created by production professionals • Presentations • Training events • Sales support through four- legged, in-person calls • Based upon proven, common methodology • Used value and message maps • Relevant conversation • Address customer needs and issues • Trusted advisors and coach • Dynamic visuals, audio and multimedia content • Visual support for conversations • JIT continuous coaching • Web Assisted Selling Sales + TQM will provide a hard business “Science” or Total Quality Sales Management - TQSalesM™ Sales will meet professional criteria • Education standards • Specialization • Certification Solid Research will drive better results Sales 1.0 Sales 2.0 Sales 3.0
  • 10. 11 The initial requirement for TQSalesM is an accurate measure of any individual’s skills, competencies, motivational drivers, work habits, and potential for de- veloping future competencies. The assessment process should be criterion validated to be predictively accurate measures of the very specific sales compe- tencies for 14 functionally different sales roles well beyond the 55-65% accuracy most commonly reported. The TQSalesM approach establishes a single process that can measure all of the relevant competencies with an accuracy level robust enough to support substantial quality gains in the management of a company’s sales teams. The result is a TQSalesM Audit system – an information repository where organiza- tions have a complete inventory of strengths and weaknesses for all employees in every key position. The competency set is not limited to sales roles and also includes management and other key positions; this relational database can distinguish the job performance potentials for key talent located anywhere in the organization. Summary: • TQM and Six Sigma are widely recognized quality improvement methodologies. • The logic behind these methodologies is generally applicable to business problems. • Sales technology now creates sufficient data to apply similar concepts to selling. • Chally Group Worldwide calls this approach Total Quality Sales Management (TQSalesM). • TQSalesM provides the basis for a more scientific approach to improving sales quality. TQSalesM™ and TQSM™ are trademarks of Chally Group Worldwide.
  • 11. 12 The Application of TQSalesM™ Most businesses can identify with a simple operating principle first reported in 1906 by Italian economist Vilfredo Pareto who created a mathematical formula to describe the unequal distribution of land in his country, observing that twenty percent of the people owned eighty percent of the land. However, far from being just an observation about human nature and the scar- city of real “go getters” or “land barons” in Italy, it turns out that the 80/20 rule actually describes a normal curve or random distribution of land ownership across the very large, average, and land poor citizens. There is a caveat to this rule of thumb when it applies to more fungible assets, such as people. Real estate tended to remain in the same family for genera- tions in 1906, leaving the land poor to stay land poor indefinitely. However, the poorest salespeople usually leave the profession to be replaced by at least aver- age performers. So the Pareto principle when applied to sales actually changes to the top 20% or “Sales Stars” generate 52% of the total revenue … not 80%, but still pretty impressive. Middle 60% = $200 Million Total Sales $6 Million $150K/person $90 Million $750K/person $104 Million $2.6M/person Bottom 20% of salespeople Top 20% of salespeople Consultants today say,“Study the techniques of the top 20% and train the middle 60%.” ABC Company: 200 Salespeople and $200M in Sales
  • 12. 13 It turns out, for most business to business sales forces, there are as many poor performers as strong performers, so it’s also possible to say that “20% of our salespeople bring in a minimal percent of our sales revenue.” However, the observation about the top 20% doesn’t provide actionable insights, because the behaviors of the top 20% are usually unique to those salespeople, and not very replicable because it is difficult, if not impossible, to hire a sales force full of superstars. By contrast, the observation that the bottom 20% is selling very little, while per- haps less inspiring, is highly actionable, at least by any manager who’s not afraid to re-deploy poor performers to other roles or ask them to find employment elsewhere. That’s an important insight, because the out-of-pocket costs (before variable compensation) of a poor salesperson are as high as or higher than a top performer. In other words, examining (and rectifying) what IS NOT working well in a sales organization (i.e., quality control) is more likely to produce actionable informa- tion than examining what IS working well. More importantly, realizing that you’re dealing with a normal, random distribution curve provides an immense opportunity for productivity increases, because replacing the weak output of the poorest performers to the level of just average performers will have a disproportionately positive impact on a company’s sales, typically in excess of 10%. That’s because with today’s sales tools, beating chance by a few percent- age points can result in substantially improved performance. In other words, the key to increasing productivity is not trying to find more su- perstars, but instead, eliminating the hiring of and investing in poor performers. To do this, TQSalesM focuses on finding and reducing the failure points in every step of the sales management process. Because this is a fairly radical approach to improving sales quality, it may be helpful to show how similar methodologies worked inside a completely differ- ent industry.
  • 13. 14 As mentioned previously, there’s a dynamic between the concepts of “sales is an art” and “sales is a science.” Another way of looking at this is to see the “art” side of selling as raw sales talent, and the “science” side of selling as using statistics to deploy that talent. That’s analogous to sports, where managers use science in order to make their talent (the athletes) more effective. That wasn’t always the case. Historically, managing baseball was considered as much an art as playing the sport itself. That all began to change with that advent of what’s now called “Moneyball,” based upon the eponymous 2003 bestselling business book. In that book, author Michael Lewis described how Oakland Athletics’ General Manager Billy Beane used an analytical, evidence-based approach to assemble a competitive baseball team, despite being at a financial disadvantage relative to other major league baseball teams. What Beane learned was the basic competencies that actually did predict success, which turned out to be considerably different from the conventional competencies that “seemed” to be important, at least anecdotally. As a result, the Oakland team made tremendous gains in wins for the 2002 season using above-average players, when they couldn’t afford the superstars. However, while the Athletics competed well above expected, they still didn’t win the World Series that year. Instead, it was won by Boston, a team that had more money to spend on top talent. However, the fact that big money (and hence big talent) managed to trump science doesn’t mean that the science didn’t work. In fact, there’s significant evidence that the “Moneyball” concept has radically changed the game of baseball. One example is the apparent demise of the long-term dynasties of winning teams. From 1991 until 2001, before the Oakland Athletics introduced the use of predictive science, two teams, the Yankees and Toronto won half the cham- pionships. When you look at longer periods of time, the dominance of the dynasties is even more dramatic. In the history of baseball, three teams (The Yankees, the Cardinals and the Athletics) won 47 percent of all the World Series played. The other twenty or so teams collectively won the remaining 53 percent. In the past ten years, however, only one team (the Red Sox) has won the World Series twice. All the other years have featured a different team that won only once. In other words, the application of statistical science (i.e., the “Moneyball” concept) has tended to “level the playing field,” quite literally in this case. The same is true with sales environments. Talent is important, but science (even without much talent) is almost as good, while talent supported by sci- ence is stronger and more effective than either alone. Summary: • The famous 80/20 rule is a mathematical phenomenon. • It’s difficult or impossible to turn average sales performers into stars. • By contrast, eliminating poor performers is relatively easy. • To accomplish this, you reduce “failure points” in the sales process. • A similar concept, implemented in professional baseball, yielded dramatic results.
  • 14. 15 TQSalesMTM AND THE HIRING PROCESS Most companies envision sales hiring as a process of trying to find “sales stars” who can replicate the success of the top salespeople who account for the bulk of the company’s sales revenue. However, since top sales performers tend to be idiosyncratic and thus rare, the attempt to find candidates with similar charac- teristics may be doomed from the start. A better technique, based upon the TQSalesM concept of error elimination, is to screen out poor performers so that those selected or promoted are at least above average. For example, suppose an organization has 200 salespeople and $200 million in sales. Under the actual 54/20 universal average for B-B sales forces, the top 20 salespeople will be bringing in $2.6 million each for a total of $104 million. However, by the nature of the bell curve, the bottom 20 salespeople would be bringing in only $150,000 each for a total of $6 million. Since it is unrealistic to find more superstars (in effect counting on serendipi- tous hiring), the TQSalesM approach suggests replacing the bottom performers with average salespeople who should be relatively easy to recruit or transfer. In this case, the increase in sales would be approximately $17 million and the aver- age salesperson productivity would climb by $11 million or more. ABC Company: 200 Salespeople and $200M in Sales = $223.7 Million Total Sales $119.7 Million $104 Million Top 20% of salespeopleBottom 20% replaced by average and above salespeople Talent Analytics says: Reassigning or replacing the bottom 20% with just“average” competency levels will increase production by a minimum of 9%. If we now train the rest of the sales force and get a 5% gain, we get an additional $5.7 Million.
  • 15. 16 Please note that, after making this change, the organization’s sales results will still follow a normal bell curve distribution. However, since the low end of the curve is built upon a higher baseline, the overall performance of the sales group increases. Of course, similar or even larger performance improvements would result if the lowest performers were replaced by sales stars, but the likeli- hood of hiring several sales stars is far smaller than being able to hire average performers. More importantly, the TQSalesM approach of focusing on error elimination yields an easily achieved $11M improvement in sales, while the “hire more of the best” simply results in an endless quest for candidates that are extremely rare, hard to identify (unless already selling in the same industry and to the same market), and thus unlikely to be hired in any case. Most companies rely on recruiting to competency profiles (based on the profile of top performers and creating matching job descriptions). However, while personality tests and similar kinds of selection screening as well as carefully planned interviews can be more effective than “gut feeling” when it comes to hiring sales personnel, they’re still dependent upon the competencies found in most top performers. There is a critical flaw that dooms this “benchmarking approach” to ultimate failure--the assumption that the identified competencies are causally tied to the success of the top performers. In most cases, companies build a composite profile of the ideal candidate from the profiles of several top performers, selecting attributes from each performer that seem relevant to sales success. Unfortunately, such composites tend to ignore the fact that top performers often have different profiles and differ- ent ways of approaching selling. One top performer may be charismatic and a strong public speaker, while another may be introspective and an excellent listener. While both these top performers may be achieving similar results, they’re doing so in different ways. Building an ideal profile thus becomes an exercise in futil- ity. Either the ideal profile must include diametrically opposite competencies (e.g., the successful candidate will be charismatic and introspective) or the ideal profile will simply reflect the pre-conceived notions of the manager creating the profile.
  • 16. 17 In other words, a manager who believes that being charismatic is a key element of sales success will tend to ignore the fact that one top performer is being suc- cessful even though he or she has a very different competency. The ideal profile concept also does not account for the ability of top perform- ers to find workarounds for parts of the job that don’t jive with their particular personality. A classic example is salespeople who know they hate detail and paperwork, but who make their own arrangements to have these needs cov- ered in some other way. They thereby satisfy the job requirement in a way that allows them to concentrate on their stronger skill set. Ironically, when companies perform an analysis of the entire sales group, they often discover that the poor performers have many, if not all, of the same skills demonstrated by the top performers. A poor performer, for example, may be highly charismatic; in fact, the poor performer may have been hired specifically as the result of the charisma shown during the job interview! The presence (or absence) of these particular skills or competencies may not be predictive of either success or failure. In fact, they may be skills or characteris- tics that are common to all people interested in sales as a career. This is not saying that it’s impossible to isolate critical skills. However, this must be done through a “validation” process involving actuarial statistics that identify the critical skills at which top performers routinely excel, but which poor per- formers routinely fail. In other words, it’s only through the studying of failure and errors (as in TQM) that it’s actually possible to identify the characteristics of a top or average performer! This shift in thinking has profound implications. Most people would define suc- cessful salespeople as assertive, outgoing, and aggressive with good commu- nication skills. While these attributes are common among salespeople, they do not necessarily predict success. In order to accurately predict sales success, one must first identify the specific type of sales roles needed and then identify the granular, role-related behaviors that predict success. It will be these behaviors that differentiate the top performers from the bottom performers. Summary: • Replacing the worst performers with average performers yields a disproportionate benefit. • Studying the behavior of top performers does not provide useful inputs to this process. • Profiles for average performer should be built around easily replicated behaviors. • Stereotypical “sales personalities” are not predictive of sales success.
  • 17. 18 TQSalesM™ AND EMPLOYEE TURNOVER All organizations expect a certain amount of turnover. In small amounts, turn- over keeps the organization fresh with new talent and ideas. However, when turnover is higher or unwanted, the result quickly turns negative, costing the organization considerable time and money to hire and train new personnel. For sales teams, this expense can be surprisingly large. The direct replacement costs for a telesales employee can range from $75,000 to $90,000, while top sales positions can cost a company as much as $300,000. While these figures are dramatic enough, they don’t reflect the fact that many sales positions are specifically compensated for sales results, which means that a company pays an opportunity cost (in terms of lost sales and lost customers) while the replace- ment is being trained. This problem is compounded by the fact that for sales positions there is no easily identified resource pool. Statistically, more than one out of every two college graduates in the United States, regardless of their majors, are likely to become salespeople. However, of the 4,158 colleges in this country, only a few dozen have sales programs or offer sales courses. Engaged salespeople with the skills to succeed are usually self-motivating, but unwanted turnover (top performers who leave on their own) still occurs. So what is the cause? Many organizations mistakenly believe that employees leave jobs primarily for better wages, benefits, or both. The actual causes are quite different: Reason #1: Poor Job Fit. Research based upon several thousand exit interviews shows that one of the primary causes for top performer turnover is actually poor job fit. Employees become frustrated when they can’t do the job they want to do. Talent Audits demonstrate that as much as 65% of job dissatisfac- tion which leads to unwanted turnover is a result of these job mismatches.
  • 18. 19 In order to overcome the problem of poor job fit, a Talent Audit can identify sources and causes of failure for each position, identify the key skills to over- come those failure points, and assess incumbents against the skills that ensure success. It also provides a guide for conducting exit interviews, documenting turnover causes, and establishing a plan to reduce the defects. Reason #2: Incompatibility with Management. The other well-known cause of turnover is incompatibility between subordinates and their managers. As with any organization, the responsibility to correct that error must lie with manage- ment itself. Ideally, the process should be that management do an analysis to determine which managers are best in which jobs, managing which people. However, it should be noted, that relatively few superstars leave as a result of tension with their supervisors. The reason is quite simple. Most managers have their hands full dealing with bigger problems. Even when superstars bend the rules (and they usually do), their contribution is too valuable to disrupt. Hence the typical sales manager’s lament “I’d fire him--but he keeps beating quota.” Historically, time and the vast amounts of data needed to perform that analysis have made that process prohibitive. However, the Chally research has produced a job skills database that distinguishes top managers in different management jobs from weaker or less successful managers. By identifying which managers are likely to thrive in any given role, companies can improve the job match of managers and subordinates, reducing unwanted turnover, or worse – continually under producing, “less-engaged” employees. Summary: • Replacing sales personnel is an extremely expensive process. • Companies should therefore avoid losing trained salespeople. • The most common reason salespeople leave is a poor job fit. • The next most common reason salespeople leave is incompatible management. • TQSalesM helps companies place sales personnel more appropriately. • Such personnel remain longer because they’re in compatible roles and organizations.
  • 19. 20 TALENT AUDITS Through a TQSalesM approach to systematically capturing, defining, and measuring data, companies are finding that the problems around skills and job performance are more about skilled personnel in the wrong jobs than a lack of available skills. There is a persistent belief among executives that companies consistently underutilize the talents of their people, leaving a significantly untapped talent reserve. With the help of a Talent Audit skills database, companies can more ac- curately identify job performance skills and competencies, much like insurance companies use health and behavior metadata to accurately access and predict their financial risk. Once the defects – or health risks in the case of the insurance company – are dis- covered, an action plan can be put in place to systematically reduce the defects. A Talent Audit database also provides organizations with a complete inventory of strengths and weaknesses for all employees in every key position. In looking at the salesperson job function as an example, the Talent Audit identifies why job mismatch is so prevalent. Companies frequently have a single job descrip- tion for sales representatives, regardless of the customer need. By contrast, a Talent Audit uses competency scores that have been developed from research that has identified a full range of unique sales positions and various sales roles according to their unique markets and customer needs. For example, “Hunters” (new business development specialists) need skills such as qualifying prospects with standard probes and closing using logical, incre- mental steps. Meanwhile, “Farmers” (account management and penetration specialists) need to be driven to produce increased sales to existing accounts.
  • 20. 21 Through Talent Audits and the application of the TQSalesM concept, companies have been able to: • Identify salespeople most adept at developing new business • Determine which salespeople have the skills to move into management • Identify skill gaps that can be remedied with training This last issue is particularly important. Most estimates of effective training sug- gest that individuals can improve their skills by no more than 20%. This means that people in the wrong positions with skill scores below the 40th percentile are unlikely be trainable to become top or even average performers, only that their “bad” skills can be improved to “not quite as bad.” Clearly, training is too expensive to waste on a poor job match. The Chally re- search indicates that, for training to be effective, four common challenges must be overcome: 1. Maximizing people strengths rather than overcoming several weaknesses 2. Training the right personnel for the right jobs 3. Training the “most trainable” personnel 4. Focusing on the people with the highest potential to improve In the attempt to address these challenges, companies frequently come to the same conclusion: Training must be flexible and tailored to each individual job function. Summary: • Talent Audits help companies identify hidden sales resources. • They also help companies identify failure points that drain productivity. • Talent Audits create the conditions for more effective sales personnel deployment. • They also help reduce sales training cost by focusing it where it will do the most good.
  • 21. 22 CASE STUDY: CARDINAL HEALTH NUCLEAR PHARMACY SERVICES (NPS) Cardinal Health NPS is the U.S. market leader in compounding, dispensing and delivering radioactive drugs for use in nuclear medicine diagnostic studies and therapeutic applications. It recently transformed its sales organization to better align itself to meet new market realities. This transformation involved building new role profiles, assessing the sales force, providing targeted feedback and development, and establishing tools for evaluating and hiring new sales personnel. As a result, the company’s sales organization is better positioned to deliver greater customer satisfaction and retention, along with improved sales performance. Headquartered in Dublin, Ohio, this business unit of Cardinal Health oper- ates 150 nuclear pharmacies that deliver products and services to more than 4,000 hospitals and clinics. To assist with the sales transformation processes, the company worked with international business improvement company AchieveGlobal. First, Chally performed job analysis and validation studies that helped clarify the duties, tasks, responsibilities, and observable work behaviors necessary for Cardi- nal Health NPS sales professionals to be successful in each of the newly identified sales roles. From these studies, sales role profiles were developed. These profiles helped Cardinal Health NPS determine the skills and competencies that its sales organization would need to develop and possess for these roles. This role identification process highlighted, for the Sales Leadership Team, the skills and competencies the sales team would need to win in the future and further helped the company understand the changing skills and behaviors the sales organization would need to develop in order to meet the demands of a rapidly changing market. The second step in transforming the sales approach at Cardinal Health NPS was to complete a Talent Audit of the existing sales team. To drive this part of the transformation, Chally assessed the competency level of the sales person- nel using an online assessment. Assessment results were then compared to a large database of validated data, which in turn highlighted organizational and individual strengths and opportunities. This data was used to assist sales directors in giving more meaningful feedback to current employees, to create group and individual development plans, and to introduce roles to employees that were more of a natural fit. This allowed the firm to recommit to giving people constructive feedback, providing them with individualized development plans and then working closely with them to present role opportunities more fitting to their talent set.
  • 22. 23 Chally then developed selection tools for all sales roles to assess and screen for new role profile competencies. They discussed with Cardinal Health NPS how to change the way they brought salespeople on board in order to better meet the needs of the market. Chally developed first and second “behavior-based” inter- views. Behavior-based interviews assess candidate competencies by targeting specific behaviors demonstrated in the past. The notion that “past behavior is the best predictor of future behavior” is at the core of the behavior-based interviews. Once candidates pass through the first and second interviews, finalists take the online Chally assessment. This assessment, which targets the same competencies covered in the interview, injects additional and objective candidate data into the selection process. While the Chally tools assist in making better selection deci- sions, they are also useful in the on-boarding of new hires. All new hires receive their assessment results and coaching within the first 90 days on the job. A successful launch required that Cardinal Health NPS train its sales directors on the new tools, processes and skills sets. A three-day live session was organized to ensure a successful “go live.” • Day 1 – Role profiles, Talent Audit results, coaching tools, and new hiring materials were introduced to the sales directors. • Day 2 - Coaching and development skills were learned using AchieveGlobal’s Professional Sales Coaching workshop. This one-day session gave sales directors the skills and confidence to deliver assessment results to their team members and plan for their development. • Day 3 - Interviewing and selection techniques were learned with an internal Cardinal Health program. Selection tools developed by Chally were woven into the course. Cardinal Health NPS reports numerous benefits since implementing these orga- nizational and hiring changes. For instance, sales directors report more agree- ment on which candidates should move forward. This has resulted in a para- digm shift: Hiring preference now is given to candidates exhibiting required competencies versus experience in the nuclear pharmacy industry. For existing sales personnel, the transformation has yielded emphasis on feedback, use of development plans, and coaching – including sales director “ride-alongs” – to improve performance. Finally, this process spurred the cre- ation of better aligned sales incentive plans. The results from the new hires that went through the new assessment versus the old process were significant, with an increase in first-year performance is well over 15% above the firm’s previous performance metrics. Summary: • Cardinal Health NPS wanted to increase customer satisfaction and retention. • Chally performed job analysis to identify required skills and competencies. • Chally used a Talent Audit to compare existing personnel to those requirements. • NPS redeployed its sales team and sales training to create better alignment. • NPS experienced a 15% improvement its agreed-upon sales metrics.
  • 23. 24 CASE STUDY: “ACME” TELECOMMUNICATIONS “Acme” is a division of a multi-national telecommunications com- pany that provides mobile and broadband Internet services to over 200 million customers worldwide. Headquartered in Europe, with offices worldwide, the company is a major player in European and African consumer telecommunications markets and a growing provider in Asia. The company wanted to extend its reach into the highly competitive U.S. market, but was faced with price and margin erosion in the U.S. telecom market due to a number of well-established, highly recognizable competitors. However, while the company’s leadership set aggressive goals for its U.S.-based sales force, its representatives had not been successful in reaching these sales targets. This lack of success led the company to examine the effectiveness of its sales organization and its staffing needs. Specifically, four questions emerged: • Were the current structure and positions adequate, or did they need to be retooled? • Were more specialized sales positions needed? • What skills, abilities, and competencies were required to succeed in each position? • Did the company have the right talent in each role to allow it to reach its goals? The conclusion of this evaluation and analysis was that the company’s sales organization staff and structure were inadequate to meet the challenge of penetrating this highly competitive new market. In order to fix this problem, “Acme” hired Axiom Consulting Partners to oversee the company’s sales transformation process and engaged Chally Group World- wide to provide predictive assessment and talent analytics for 14 different sales positions in the retooled sales organization. Chally worked with both Axiom and the client to understand “Acme’s” talent needs, and evaluated the requirements for success in each sales position in terms of the U.S. telecom market environment. Chally then created profiles that delineated the competencies, characteristics and skills needed to be a top per- former in each of the 14 positions using data collected from the client. These profiles would serve as an ongoing guide to help the client’s human resources and management personnel make optimal hiring decisions. Once profiles were created for each sales position, Chally then employed the Talent Audit methodology to assess the customer’s existing employee base.
  • 24. 25 The Audit was conducted as an online assessment that accomplished the following: • Identified the habits, traits, competencies, skills, aptitudes and attitudes of all employees • Compared the strengths of individual employees against the needs of the company to determine if – and where – they intersect • Identified which existing employees have the competencies, skills, and characteristics necessary to succeed in specific sales roles • Identified individuals with the talent, skill sets, and abilities needed to move upward within the company With the profile information for each of the 14 sales positions and the Talent Audit findings, “Acme” was able to predict the types of individuals that would be successful in each sales role. This allowed them to redeploy existing person- nel to fill needed positions and to hire additional talent with competencies and skills best suited for each role. As a result of this process, “Acme” was able to: • Align its human resources in a more effective, strategic manner • Improve hiring processes to ensure that only qualified and proven talent was hired for sales positions • Retain employees with knowledge of company, helping to eliminate turnover and training costs • Increase productivity among existing employees and new hires As a result, “Acme” is achieving and exceeding its sales targets and has im- proved its market share in the U.S., while simultaneously contributing to overall corporate revenues. Summary: • “Acme” wanted to enter the highly competitive U.S. telecommunications market. • The company lacked the skilled salespeople required to do this. • The company redefined its sales personnel requirement and conducted a Talent Audit. • The Audit revealed where changes were required in hiring and deployment. • The result was a substantial increase in market share and corporate revenues.
  • 25. 26 Conclusion While TQSalesM is clearly both a powerful and practical methodology, it may several years before it becomes the same kind of standard for sales management that the “Moneyball” concept has become the standard for sports team management. Many sales managers and professionals are resistant to the idea that sales management should be based upon science rather than upon “the art of selling.” Furthermore, many companies aren’t yet at the point of technological sophistication required to use the methodology effectively. However, the authors of this book believe that the TQSalesM methodology represent a model to which sales organizations should aspire and that they will accrue significant benefits if they incorporate these concepts into their hiring and staffing deployments. The next special report in this series will discuss how sales technology has evolved, when and why it’s succeeded (and failed), along with an analysis of trends and predictions of how sales technology will continue to have an impact on sales performance and management in the future.
  • 26. 27 Howard P. Stevens Howard Stevens is Chairman of Chally Group Worldwide. Mr. Stevens specializes in leadership development, succession planning, customer and market analysis, and sales benchmarking. He is the creator of the original sales product lifecycle classifications and designed the major 5-year longitudinal study of leadership develop- ment for the U.S. Department of Defense and NASA. A licensed clinical psychologist, he is also known for his research and programs to develop a professional sales curriculum at the university level. With diversified interests, he is the author of several books on sales and management including Achieve Sales Excellence, The Quadrant Solution (published in multiple languages) and Selling the Wheel. He has written many articles and is a frequent speaker and radio and televi- sion guest. His World Class sales benchmarks program has been presented over 500 times across 30 countries for corporations, trade asso- ciations, government agencies, and universities. He has been a guest on CNN, Bloomberg USA, National Public Radio, Radio Free America, and other business-based programs. Mr. Stevens also taught “World Class Sales” benchmarks at the Columbia University Graduate School of Business and other universities, and serves on the Sales Advisory Board for Ohio University and the Foun- dation Board of Wright State University. Geoffrey James Geoffrey James writes the world’s most popular sales-oriented blog, “Sales Source on Inc.com.” Previously named “Sales Machine” and hosted on CBS, Geoffrey’s blog won awards from both the Society of American Business Editors and Writers and the American Society of Business Publication Editors. Unlike other sales blogs, Sales Source on Inc.com is 100% independent. Geoffrey doesn’t do sales training and he doesn’t do sales consulting. That frees him to present his readers with the very best ideas from the very best sales experts and executives. To get updates, sign up for his news- letter or the @Sales_Source Twitter feed. In addition, Geoffrey has published hundreds of articles in dozens of national magazines, includ- ing Men’s Health, Wired, Brandweek, Technology Marketing, and Selling Power magazine. About Chally A global leadership and sales potential and performance measurement firm, Chally Group Worldwide utilizes our industry leading research, predictive analytics and advisory services to ensure our clients have the vital information to minimize risk associated with making critical talent management decisions relating to selection, alignment, development and succession planning. With over 38 years of experience, Chally provides tools in more than 24 languages across 49 countries.
  • 27. © Copyright Chally Group Worldwide 3123 Research Blvd Dayton, OH 45420 937.259.1200 800.254.5995 www.chally.com Please Recycle

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