Category Archives: Business Development Ethics

Is Sales Necessary – Or Necessarily Evil?

Originally published 02/18/08

Salespeople fight a “guilty until proven innocent” reputation when working with customers. I know, because as a salesperson I’ve battled it for over 20 years. The customer reaction isn’t surprising. Sales people are on the customer-relationship front line, and they absorb the brunt of buyer vitriol. In fact, a survey that DDI International recently conducted with 2,705 corporate buyers worldwide, “2007-2008 Global Sales Perceptions Report,” documented the problem with painful clarity. The report reveals how salespeople are perceived, and over 47% of US survey respondents indicated that they “would not be proud to be called a salesperson.” According to the report, “the most common description across all countries was that Sales is ‘a necessary evil.”

Given the billions of dollars that are spent annually on sales effectiveness training and CRM systems, this sentiment is an indictment on the sales profession, and it says we’re failing at our efforts to improve our face-to-face experiences with our customers. Not all is bad, however. Tremendous opportunities exist for enterprises that strategically change how their sales forces engage with customers.

Why do buyers have antipathy for sales people?

To answer this question, it’s necessary to look beyond salespeople themselves and to the culture and systems under which salespeople have worked for several generations. First, ever since sales became a distinct entity in commercial enterprises, the tactical objectives of the sales force have been dictated by corporate revenue goals. A closely-watched metric by investment analysts, revenue goals are developed in the board room, and trickle down to the individual sales representative through a sometimes-perverse and inherently flawed calculus, the end-point of which is called a quota. This all-important number represents the salesperson’s revenue commitment to the organization, and it carries ponderous weight. With revenue as the focal point of sales-performance discussions, quota over-achievement often means significant financial rewards; under-achievement compromises a salesperson’s ever-tenuous job stability.

As any quota-carrying salesperson or sales manager can attest, the assignment of sales quotas frequently involve rancorous negotiations. Some quotas are completely arbitrary, based on the direction fairy dust blows when it is thrown up in the air. Others are based on conditions that are outside of the salesperson’s control—market and economic forecasts, product and pricing forecasts, assumptions, and growth factors.

Quotas are half the story. The other half is how revenue is credited against sales quotas. This exercise often results in a smoke-and-mirrors game that is as much political as it is the application of accounting debits and credits. The result is an unwieldy multi-page document, sometimes called a Commission Plan, which can require a lawyer’s expertise to decipher for all the ambiguity. Such complexity prompted one Vice President of Sales at a company I worked for to envision a commission plan that could fit on one side of a business card—a noble goal he never implemented.

So every day under this basic system of illogical quota calculation and revenue accrual, legions of salespeople engage with millions of customers worldwide. Lost in all the shouting and confusion are the answers to these questions: “What is valuable to the people and organizations that use our products?” And the corollary question, “How will our salespeople behave given the financial “ecosystem” we have created?” No wonder so many buyers decry their sales experiences. Any moniker purporting “customer-centricity” only serves to put lipstick on this big, ugly pig.

Second, many organizations have not applied thought to the question, “what value must sales contribute to our organization in order for us to meet our strategic objectives?” Yet, companies invest in recruiting, hiring, managing, training, and compensating their sales forces in spite of such vagueness, and without a coherent way to measure efficacy.

When I ask my clients what value their sales force must provide to their organization, the immediate answer I often hear is “revenue.” “OK,” I say, “but if there are no profits associated with the revenue, is that valuable?” My clients respond “Of course not, we must make a profit.” Taking this idea further, I ask “If you make a profit, but your customers aren’t satisfied with your product and wouldn’t recommend your company—is that valuable?” And the inevitable answer: “No, of course not.” Finally, I ask “What if your organization achieved profitable revenue targets, and had satisfied clients, but didn’t gain any market insight for future strategy—would that be valuable?” The answer: “No, our planners and strategists depend on our sales force to provide valuable feedback from the field!” Then the light bulb turns on: the sales force must deliver value beyond top-line revenue! Unfortunately, we’re stuck in a cycle of value-chain discord until organizations stop demanding multiple outcomes from their sales force, but understand only one dimension—revenue.

Happily, some organizations have taken important steps to break free from the revenue-at-all-cost myopia. One company I work with penalizes a salesperson if a customer has purchased its software, but does not use the capabilities the software provides. Why has the vendor taken this position when nearly all of its competitors are focused on pushing new licenses and version upgrades? Because their senior management recognizes that nothing puts a company’s logo into a customer’s budget-cutting crosshairs faster than a known wasted IT investment. Other examples abound in which organizations have taken a progressive stance on rewarding salespeople for activities that are valuable to the organization beyond revenue generation. Such changes are important because they serve as steps to mitigate the discord described in the DDI survey.

But if we can’t change the economic system, how can we find a better way for sellers and buyers interact?

Probably the more fundamental question is “do we need to find a better way?” Are you content with the status quo? The DDI survey clearly says buyers are not. Your answer likely depends on whether you view sales as necessary—or necessarily evil.

Does Your Company Differentiate By Offering Good Products With Virtue?

Originally published 04/23/08

If you want to become wealthy, “create good products with virtue.” The man who made that recommendation, Ted Leonsis, should know. As co-founder of America Online, he has repeatedly used that idea to build a financial empire.

But today’s world is so full of non-virtuous products and customer experiences that there are websites, blogs, and government agencies dedicated to sharing information about the perpetrators. Given that, could simply creating good products with virtue provide a major differentiator for a high-performance brand?

As Mr. Leonsis observes, with the unparalleled amount of customer sentiment available to producers today, “there is no reason to have bad products or services.” If only it were so easy. Companies spend many billions of dollars in pursuit silver bullets in the name of Sustainable Differentiation—often with little results to show for the effort. So whenever I uncover a “good product with virtue,” it seems awesomely different.

Do we chronically have examples of non-virtuous products because managers and investors don’t care about having virtuous ones? Because companies don’t know how to produce good products? Because many really smart people simply talk too much? What makes a product “good and virtuous” in the first place? And how can an enterprise exploit such differentiation through its sales and operational strategies?

An example provides help toward answering these questions. I thought back—before Web 2.0, viral marketing, email, data warehouses, even before Internet itself—and remembered how a grocery retailer, Giant Food Corporation of Maryland—deployed “good and virtuous” as a formidable competitive weapon for over thirty years. What differentiated the company? Consistent delivery of quality, value, and service to every customer. More than mere words, these differentiators created complex operational challenges in a demanding, highly competitive business serving a wide demographic.

One highly-effective resource the company used was a Consumer Board, a low-technology tool that was radical and controversial during the early ‘80’s, when I served as a board member for two years. As remarkable as it was at the time for a retailer to provide consumers a voice, I learned what was more significant was how Giant delivered its “good and virtuous” differentiation, gaining the largest share of the grocery market in the Washington DC area in the process.

Four important tactics stand out most in my mind:

1. Bring the consumer’s voice to the executive suite. Before any of its rivals did so, Giant not only recognized the primacy of the consumer, but organized its management and operations accordingly. The Giant consumer executive at the time, Odonna Mathews, had the authority to enact recommendations that the board made. Other boards simply provided information to a corporate representative who lacked decision-making authority.
2. Direct senior management involvement with consumers. Izzy Cohen, the Giant CEO at the time, regularly attended our meetings.
3. Tight focus on the needs of individuals and communities. In creating “good and virtuous” differentiation, Giant understood that short-term profits were worth exchanging for customer loyalty. One prominent example was the Consumer Board’s recommendation for Giant to offer tabloid- and candy-free checkout lines, which the chain implemented well before the rest of the industry.
4. Independence between quality initiatives and store-level financial performance measurements. For example, if an ailing freezer needed replacement, the store’s manager wasn’t penalized with the cost of the equipment. Giant’s expenses toward quality differentiation never impacted a store’s profitability. Internal conflicts were eliminated.

The esteem that Giant Food held in the communities it served cannot be overstated. The most compelling story occurred during the riots in Washington, DC following the assassination of Martin Luther King Jr. When hundreds of other businesses were destroyed or damaged, community activists protected the Giant Food stores, all of which survived unscathed. That relationship and commitment could not have been achieved without creating “good products with virtue.” The financial rewards speak for themselves.

PLEASE Buy From Me! The New Ann Taylor Shopping Experience

Originally published 09/10/08

Get ready for a new low in customer experience, brought to you by Ann Taylor and their new Ann Taylor Labor Allocation System, or ATLAS.

Reported in today’s Wall Street Journal “Retailers Reprogram Workers in Efficiency Push,” the article states “because the system awards more-productive salespeople with favorable hours, it gives employees an incentive to persuade shoppers to buy things.”

Among the article’s more chilling quotes, consider this one from Scott Knaul, Ann Taylor’s Director of Store Operations: “Giving the system a nickname, Atlas, was important because it gave personality to the system, so (employees) hate the system and not us.” Enamored with the insight ATLAS has helped Ann Taylor glean, Mr. Knaul said “If we know that it takes five minutes to work with a client when they walk in the store, we won’t go over five minutes.” (Mr. Knaul, if you’re reading this, please share which business thought leaders have inspired you lately.)

One Ann Taylor saleswoman shared her concerns. “The new system, Ms. Houser says, doesn’t reward her style of selling. It no longer pays to spend time developing relationships with shoppers who might not buy anything on a particular visit, she says. ‘My client (contact) book is fatter than anybody else’s in the store,’ she says. ‘Does that mean I will get a bigger raise next time? No. Not if my (average sales) numbers don’t reflect that.’”

Carl Steidtmann, Chief Economist at Deloitte, said “Because few retail workers belong to unions, it is easier for employers to ‘move people around.’” Hmmm. How do you spell “exploitation?”

I began to wonder who would really want to work under the ATLAS microscope. To help Ann Taylor find the best candidates, I formulated this brief employment questionnaire, along with the desirable responses below.

1) Oh no! Your Aunt Etta fell and she’s in the hospital with a broken hip. She needs you to help her complete her Medicare forms. But it’s the end of the month, and your store manager says if you miss any time, you’ll risk being demoted. Which of the following BEST describes the action you would take?
a) Come in to the store and focus on making my sales number. I’ll help Aunt Etta later.
b) Help Aunt Etta and see if I can persuade my manager not to demote me.
c) I’d have to think about it.

2) In sales, ethics
a) includes doing what is right for the customer
b) can probably be found in the dictionary somewhere
c) not sure why I would need to know this

3) You’re behind in achieving your weekly sales number. You have a customer who wants a dress and some accessories, but she only has $150 to spend. She likes a dress that’s on sale. You should
a) find out the credit limit on her Visa and steer her toward more expensive merchandise.
b) help her find a suitable combination, even if it means she spends less than $150.
c) tell her that your recommendations are motivated by making your weekly sales quota.

4) Two women enter the store at the same time. One is unkempt and has a fussy toddler in tow. The other one is by herself, holding a Nordstrom shopping bag and a Kate Spade purse. To meet your expected productivity goals, how many seconds should it take you to greet the woman holding the Nordstrom bag?
a) 1 second
b) 30 seconds
c) about a minute
d) don’t know. Shouldn’t she have time to browse?

5) Essay question: I’m all for feeling secure about my job, but employees need to understand that employers have the right to ________________, and __________________ . (use additional pages, if needed)

Correct answers: 1-A; 2-C; 3-A; 4-A

ATLAS is a euphemism for Employee Manipulation. Its use portends some eyebrow-raising sales behaviors. As far as productivity gains for Ann Taylor, a note of caution: be careful what you wish for, you might get it!

Can Sales Productivity, Ethics, and Shareholder Value Coexist?

“As practiced today, capitalism too often becomes a race to the bottom. In low-growth economies, a focus on earnings-per-share (EPS) is leading to more unemployment and deepening inequality,” Mark Benioff of Salesforce.com wrote in The Huffington Post last week.

That’s a far different message from what I learned as an undergraduate, where I was indoctrinated with the ideal that what was good for investors was good for customers, employees, and the world. Ahhhh. Simplicity!

But as an account executive at a publicly-held company, the investor credo, revenue-uber-alle, translated into a slightly different message for the sales force:

“I don’t care how you make your sales number, as long as you make it!”

That was my sales manager’s guidance on how to achieve quota. Plenty of wander-room on that pathway.

My manager made assumptions that the sales team had the knowledge, motivation, and integrity to deliver the required results. He didn’t have the time or interest to micromanage anyone. At my company at the time, many salespeople got fat, dumb, and happy under such laissez-faire management. Ultimately, sales suffered in the face of unrelenting competitive pressure, shareholder demands, and product commoditization.

Policies changed. Not only did management measure results, they began to scrutinize sales activities as well. Thousands of other sales organizations facing the same forces created measurement spotlights under which few could hide.

Today, business needs and technology have converged, causing the productivity-management pendulum to swing even further toward Total Management Control. Are purveyors and users of sales productivity software tools telling us that salespeople are too stupid to figure out how to be productive? Are their managers too lame to manage? Pete Reilly, a senior vice president at RedPrairie, developer of the Ann Taylor retail labor productivity system ATLAS (see my blog, Please Buy From Me! The New Ann Taylor Shopping Experience) said “the [ATLAS] system will allow you to push [productivity initiatives] too far, but at the end of the day, it is based on business principals and how I treat my employees. That is really up to the retailer.” His statement reveals his ambivalence. But it’s clear that financial success depends on how businesses deploy productivity tools, and no one should assume that they understand what they are doing.

The most insidious dangers aren’t created by productivity rules based on flawed assumptions or incorrect information. They’re created when managers detach from the gut-wrenching ethical and personal conflicts imposed on the employees who are measured and managed. Scott Knaul, former director of store operations for Ann Taylor, revealed his own reasoning when he was quoted in the Wall Street Journal (Retailers Reprogram Workers in Efficiency Push, September 10, 2008) saying, “giving the [productivity] system a nickname, Atlas, was important because it gave a personality to the system so [employees] would hate the system and not us.” Yes, that creeped me out, too.

What Mr. Knaul might be alluding to are torn emotions caused by Ann Taylor’s institutionalized sales conflicts of interest—all in the name of productivity. To mention a few possibilities: “If I’m honest with my customer, I could lose this order, and possibly my job.” “How do I spend time with my ailing parent and satisfy the minimum number of hours I must work to keep my time slot?” “As a single parent, how do I plan my weekly food purchases knowing my work schedule can be cut or changed at a moment’s notice?” These poignant struggles are frequently the other side of productivity-improvement equations, unmentioned when numbers are bandied about at the quarterly management retreat.

If laissez-faire management contributes to complacency, and overbearing rules are tantamount to wielding a stick without offering any carrot, what works? For insight, I consulted a sales leader, Mark LaFleur, former VP of Worldwide Sales software developer GroupLogic. He tole me, “Understanding what causes sales to happen and managing metrics is critical to success, but sometimes it’s easy to get so caught up in metrics that you lose sight of the big picture . . . Effectively managing your team’s performance requires a balance between hard metrics and business instinct. I have found that there is no substitute for frequent, intensive one-on-one meetings with reps and sales managers, where you hold them accountable for understanding and articulating all aspects of their business and how they are tracking toward their revenue goals. Metrics are only one component of that discussion, and the key there is to develop practical metrics that really do lead to sales, communicate them clearly, and then hire disciplined sales people that are smart enough to understand their importance.”

It’s hard to find a starker contrast to the metrics-driven mindset at Ann Taylor. Still, it’s troubling to think about the future clash between productivity improvement, business value, and work-life balance. Effective managers recognize both the power and limitations of productivity measures, and that we have the opportunity today to build shareholder value without exploiting the people who help deliver the value we produce for our customers.

Can Johnny Raise Money? How Public Schools Exploit Social Networks

Originally published 11/21/08

Reading, writing, ‘rithmetic, and raising money. For public education, building the latter competency has never been more important. Schools want your money and they are pushing harder than ever to get it. If you haven’t already felt the heat, you will soon.

This month, a strange envelope arrived in our postal mailbox at home. It looked like a bill, but different, because the envelope had three windows instead of the usual one, and because our name and address was scrawled in freehand. On closer inspection, I saw the handwritten name of our nephew above the printed name of his elementary school in Florida. (My wife and I live in Virginia.) I bit the curiosity bait and opened the letter.

It begins with a handwritten salutation: “Dear Aunt Barbara and Uncle Andy,” followed by preprinted text saying, “We’re hoping to raise much-needed funds through the sales of magazine subscriptions—either new ones or renewals!” At the bottom: our four-year-old nephew’s name—written in adult cursive. How’s that for bravado? And just the week before, we received a similarly-packaged solicitation from our niece (not related to our nephew) asking us to buy magazine subscriptions to benefit her school in California!

Both letters contained several pieces of collateral, and a convenient postcard to send to our school-aged loved one informing him or her of our donation to the school. The postcard was thoughtfully pre-printed with the salutation “Dear,” a message, and amazingly, a closing sentiment, “Love,” followed by a blank line for me to fill in my name. (This technique of fundraising enables all parties to be equally perfunctory!)

Even stranger is what’s not included. The communication didn’t provide any information about how the proceeds will be used, or how our relatives will benefit. (Great American Opportunities, the marketing company that sent one of the solicitations, doesn’t provide an address or corporate website to learn more.) There isn’t a website listed for the school, or even a picture of the school (or of any school, for that matter!) to make a visual connection.

All of which leaves me feeling weirdly hollow about my role in a value chain that encompasses magazine publishers, marketing promotion companies, school districts, nieces and nephews—and finally, me. Here’s why:

1. Schools are part of the fabric of local communities. I support close family ties, but those bonds don’t mean I feel compelled to fund my niece and nephew’s schools. That’s the fiscal responsibility of their neighbors, and local government and businesses.
2. The marketing junctions don’t work. Family members making product pitches on behalf of big media companies ostensibly in support of vague school programs seems an odd and convoluted arrangement.
3. The charity request is utterly insincere.
4. The economics are flawed. One letter touts that “Forty percent of every dollar goes to our school.” Assuming the claim is valid, wouldn’t my niece or nephew’s school be twice as well off if I contributed 80% directly, and saved the remaining 20% percent myself? Clearly, media companies are the primary beneficiaries of this marketing program.

The low-overhead appeal of this fundraising tactic is undeniable. Schools compete for the diminishing number of volunteer hours of time-strapped parents. So they ask parents to tap address books and dash off thirty or so letters to relatives and acquaintances, and voila! Money for the school! And no one even had to get off the sofa!

But what’s sacrificed in the process? For starters, sixty percent of every dollar spent. In addition, local communities are circumvented and kids lose the valuable experience of learning face-to-face sales—an important skill no matter what field they enter. Finally—as I can personally attest—away goes the goodwill of otherwise affectionate relatives who now get hit up for donations anytime and anywhere.

Maybe I’m wistful for a kinder, less harried time. When I was in elementary school, a fundraising drive meant hopping on my bike to get every neighbor on Oak Leaf Lane to buy one or more boxes of peanut brittle. That was before “working mom” became a mainstream term, before No Child Left Behind, before federal and state school budget cuts, before child predators, and yes, before big marketing companies salivated over how social networks and heartstrings promotions can stem declining sales for products like magazines in the age of the Internet.

Whether or not such promotions are successful, they’re degrading. If schools need to raise money, they might be better served to hire marketing specialists that understand the nuances of fundraising. In the meantime, my advice: don’t overlook appealing to local community. The most valuable social networks are just a bike ride away.

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