Category Archives: Revenue Risk Management

A Little Quid Pro Quo Never Hurt Anyone

Visualize the ending of a great sales appointment. You asked the right questions, and made some excellent, hard-hitting points. As you’re wrapping up, your prospective customer escorts you to the lobby, and says, “I really like your company’s offering.” Then, just as you’re ready to head out the revolving door, he slips in a question – one that he knows you want to hear – “can you give us a proposal and price quote?”

Press pause.

You already said S-word – sure – didn’t you? I’ve done it. We’ve all done it. We dig ourselves in a little deeper by autonomically adding, “When do you need it?” Then off we go. We diligently prepare and send a proposal by the date promised, and not one moment later.

And then . . . silence. As one VP of sales told me, “if you send pricing to a customer without any strings attached to it, your proposal is naked!” Good metaphor. Not an ounce of leverage. Nada. Zip. Want to arm wrestle?

Here’s my advice: don’t do it. DON’T DO IT! Instead, think quid pro quo.

I’ll explain how.

Step #1. After getting the pricing request, don’t answer right away. Instead, imagine your boss, spouse, or significant other swiftly kicking your left shin, hard. You should wince, though not visibly. Maintain a pensive, thoughtful expression for a second or two.

Step #2. In sub-second time, ask and answer for yourself the following questions:

1. Is my time valuable?
2. Is my expertise worth something?
3. Have I earned the right to make a reciprocal request?

If any of the answers are no, skip Step #3 below, and send the proposal. I wish you well. But I’m not bullish on your chances for winning.

Step #3. You answered yes to all the questions in Step #2. Great! Now use this statement, or one similar: “I can put this together, but it will require time on my part, and I must get [department 1], [department 2], and [name of executive] involved. Can I count on you to organize a meeting with [name of prospect contact 1, contact 2, etc.] to discuss the proposal on [specific date]?

You have made a perfectly reasonable request. One that your prospect can accept. One that he should accept. If he doesn’t, his message is loud and clear: “I win. You lose.” Don’t rationalize it away by saying, “well, they’re just so busy this time of year.” If your prospect is sincere about considering your proposal, he or she will make time to meet with you—before the proposal is in hand. Otherwise, advance at your own peril. And don’t whine if you don’t hear back by next week, next month, or maybe, ever.

But, in your zeal to be responsive, agreeable, customer-centric, helpful or whatever, suppose you respond reflexively, as I have, with the s-word. It’s still not too late for quid pro quo leverage. When you have completed your proposal, send an e-mail similar to the following:

“Hi [prospect name]: I’ve completed the pricing and project proposal for [prospect company name]. If you give me a date and time you can discuss it, I’ll mark my calendar, and will reply with the proposal attached.”

If your prospect is serious, you’ll get the date. If he or she responds by asking, “can you just send the proposal?” call me, and I’ll step you through what to do next. I guarantee we won’t need a long conversation.

Requiring quid pro quo doesn’t mitigate every risk that your company’s proposal won’t be given a fair evaluation, but it sure improves the odds.

Revenue Risk Management Part 2: How a Risk Audit Can Help You Achieve Your Sales Goal

By now, you know your revenue target for 2014. Let’s cut to the chase: will you make it?

If you’re feeling uncertain, you’re not alone. Risks are swirling everywhere, some known, some not. When revenue risks are identified, they’re often labeled pipeline or funnel problems, and shunted off to Sales and Marketing, where they can be managed.

In truth, once revenue risks reach the high-energy, caffeinated world of business development, they’re often handled differently from other risks. Instead of getting managed, revenue risks are just re-distributed. Sales executives accomplish this feat by embedding them into quotas and productivity targets. Then, those are plopped onto the waiting shoulders of the sales and marketing team members. “Risk flows downhill,” to paraphrase a more popular adage.

When actual revenue doesn’t meet goal, management ratchets up the numerical targets for lead generation, “customer touches,” outbound sales calls, and booked appointments. This tactic works until it doesn’t. The many causes for failure can be consolidated into a single term: burn out – a state reached when an employee experiences an epiphany like, “Gee. I could work just as hard somewhere else for way more coin.”

For many companies, dealing with revenue risk channels bucket-loads of corporate spending into bleeding-edge marketing automation, new sales methodologies, and myriad other short-term projects that contain the words social, collaborative, and content. The benefits of all this spending has always been a little mysterious. “Where’s the ROI?”, people love to ask.

When there’s vague understanding of risk, the outcome is a hodge-podge of loosely-joined marketing assets, promotional campaigns, customer data, and software applications.  “We’ve got social media pretty much covered!”, some executives tell me. Sorry, but without comprehensive revenue risk management, a company’s online presence appears more like a biz-dev Maginot line.

More marketing leads won’t help achieve goal if the sales staff is not competent in getting a first meeting with a prospective client. Investing in marketing automation is useless when there’s dysfunctional sales leadership. Honing a lucrative sales compensation plan doesn’t matter if the company can’t get a quality product out the door. Award-winning loyalty programs and creative marketing content won’t excite any COO if customers can’t pay their invoices. And fancy webinars won’t convert prospects if current customers hate the company’s service.

You can see the evidence of disjointed risk management in the revenue results for almost any organization. The fallacy is in not viewing revenue risk as a strategic business challenge, one that involves every department—not just sales and marketing. A revenue risk audit enables risk management by exposing all risks that are consequential in disrupting sales. It’s a planning tool for deciding which projects to undertake and determining how to invest in them. At the end of the audit, you can expect to have a clearer view of the risk potholes you’re likely to encounter, along with knowing which ones are cavernous. Here are some tips:

1. Include the whole company. Don’t limit the audit to sales and marketing.
2. Don’t confuse risk management with risk avoidance. They are not the same.
3. Embed risk analysis into all of your operational planning. In addition, use it for sales coaching and account reviews.
4. Expect that some risks will be common across departments. Not all risks fit neatly into a single category.
5. Link every significant risk to one or more specific internal controls.

For audit and planning purposes, revenue risks can be separated into categories. (Note: though I have used Sales throughout the many of the audit questions, they apply equally to marketing and other business development functions.)

Internal risks

Strategic risk.
1. Has the sales strategy in place been proven successful at the company, or elsewhere?
2. Are customer needs and buying habits known?
3. Are customer needs and buying habits volatile?
4. Do the company’s revenue generation channels (direct/indirect/online/bricks-and-mortar) enable strategic and tactical flexibility?
5. Does the company’s management clearly understand the steps its customers use in making buying decisions?
6. Does marketing and sales management monitor future industry trends?
7. Does the company maintain a multi-layer sales organization (e.g. territory/district/region)?
8. Do sales compensation policies conflict with any of the company’s strategic objectives?

Marketing alignment risk.
1. Do the company’s brands have a positive reputation?
2. Does the company’s pricing strategy support its cash flow requirements?
3. Are the company’s social media assets fully integrated into its marketing automation and sales systems?
4. Do Marketing and Sales operate using the same business definitions and taxonomies?
5. Do the company’s marketing automation tools use a single data repository, shared by all departments?
6. Do the marketing and sales teams view each other as mutually valuable and supportive?
7. Are the company’s goals for marketing sales congruent with each other?

Sales enablement risk.
1. Does management use proven, effective techniques for ensuring consistent, positive customer experiences?
2. Are there adequate administrative support resources for marketing and sales?
3. Are effective Customer Relationship Management (CRM) and Sales Force Automation (SFA) tools in place and being used?
4. Has the company successfully deployed tools to measure and manage marketing and sales productivity?
5. Has the company demonstrated repeated competency in executing effective marketing campaigns?
6. Does the sales team have adequate knowledge to hold face-to-face conversations with prospects and customers?
7. Do sales team members have adequate situational awareness for every opportunity?
8. Do sales team members use consistent, effective communications that buyers consider valuable?

Sales-force effectiveness risk.
1. Has sales leadership been proven capable?
2. Do they inspire confidence?
3. Do they instill a positive, challenging culture that includes encouraging intelligent risk taking?
4. Do they have demonstrated skills for effective coaching and mentoring?
5. Are sales team members self-motivated?
6. Are sales team members passionate about what they are selling?
7. Are sales team members strictly money-motivated?
8. Does the sales organization use a repeatable process that matches how customers buy?
9. Does the sales team have a formal process for knowledge capture, knowledge sharing, and organizational learning?

Information risk.
1. Is the data used for CRM/SFA, and other marketing automation, accurate and timely?
2. Can data be captured efficiently?
3. Is there significant latency between the time data is collected to the time information is made available to staff?
4. Do different departments within the company use the separate, non-integrated customer data repositories?
5. Have the causes of all past IT security breaches been mitigated?
6. Are IT security procedures in place to ensure that information is not available to unauthorized persons?
7. Does the company maintain privacy standards for customer information?
8. Does the company have strong governance over IT security?

Talent risk.
1. Does the company know which competencies customers value in its employees?
2. Does the company use hiring practices to cull which candidates are likeliest to have those competencies?
3. Is the company unable to fill positions due to shortages in the talent pool?
4. Does the company offer employees flexible work arrangements?
5. Could the company sustain the loss of key personnel without operational interruption?
6. Does the company have an ongoing program for professional development for all customer-facing staff?
7. Does the company experience higher-than-average turnover customer-facing staff?
8. Has the company recently experienced turnover in senior management?
9. Does the company’s compensation plan enable employee income at or above market rates?

Product risk.
1. Are the company’s products easy to counterfeit?
2. Are the company’s products unprotected by patents and trademarks?
3. Is the company’s product line segmented into different pricing tiers?
4. Does the company have a reputation high-quality, reliable products?
5. Does the company’s competitive advantage rely on rapid product innovation?
6. Are the company’s product life cycles shortening?
7. Is it easy for customers to find substitutes for the company’s products?
8. Are there low switching costs?
9. Are the company’s products subject to sudden changes in demand?
10. Does the company maintain an adequate innovation pipeline for new product development?

Operational risk.
1. Is the company’s supply chain subject to frequent disruptions?
2. Does the company experience frequent product quality or delivery issues?
3. Does the company consistently meet its order fulfillment targets?
4. Does the company have significant excess, obsolete, or slow-moving inventory?
5. Does the company have old, unsupportable production equipment or IT infrastructure?
6. Do the company’s profits and operating costs compare favorably with industry averages?
7. Does the company conform to industry best-practices for project management?
8. Does the company have a high number of unresolved customer complaints?
9. Are the company’s customers dependent on customer support in order to use the company’s products or services?

Legal risk.
1. Are the company’s intellectual properties protected with enforceable contracts?
2. Does the company regularly review sales proposals and customer contracts for liability risk?
3. Does the company enforce violations of its sales agreements?
4. Does the company experience frequent legal disputes with customers or employees?
5. Are the company’s products and intellectual property protected in every country where it operates?
6. Does the company maintain and provide written guidelines for its social media policies?
7. Are the company’s sales and business development practices compliant with the Foreign Corrupt Practices Act?

Ethical risk.
1. Do senior corporate leaders consistently model ethical behavior?
2. Does the company have a reputation for unethical sales practices?
3. Is the company transparent to its stakeholders about its sales strategies and tactics?
4. Does the company have guidelines for Corporate Social Responsibility?
5. Are employees offered high financial incentives for meeting revenue goals?
6. Does the company have strong internal audit controls?
7. Does the company exercise tight internal governance over business practices, particularly in marketing, sales, and procurement?

Financial risk.
1. Does the company have adequate financial capacity for its risk exposure?
2. Does the company have adequate cash flow to provide on-time payment for suppliers and employees?
3. Does the company have sufficient liquidity to sustain its operations?
4. Does the company consider cash flow needs when making project decisions?
5. Does the company have adequate controls over cash receipts and disbursements?
6. Does Sales provide Accounting with forecasts that are valuable for planning purposes?
7. Do customers consistently pay invoices within the specified terms?

Internal/External (Mixed) risks

Customer risk.
1. Does the company have diversified base of clients?
2. Do the company’s channel partners offer access to valuable markets that are difficult for the direct sales channel to enter?
3. Do the company’s customers face high technological or cost hurdles when switching suppliers?
4. Does the company have deep, highly collaborative ties and connections in customer accounts?
5. Does the company have higher-than-average customer churn?
6. Do customers perceive the company’s products as highly differentiated from other offerings?
7. Has the company recently experienced high attrition in its customer base?
8. Has the company recently lost one or more large customers?

Supplier risk.
1. Are the company’s sources of supply consistent and reliable?
2. Do the company’s suppliers adhere to standards for Corporate Social Responsibility?
3. Are the company’s suppliers engaged in labor or environmental practices that are banned in the developed world?
4. Does the company have a diversified base of suppliers for key components?
5. Do the company’s suppliers have a history of providing high-quality, reliable materials?
6. Are the prices of the company’s supplies or raw materials stable?
7. Does the company source critical components from countries that are undergoing trade sanctions?

External risks:

Economic risk.
1. Are the company’s operations significantly impacted by general economic conditions?
2. Are the company’s sales dependent on low interest rates and the easy availability of investment capital?
3. Does the company depend on revenue from areas of the world that are experiencing economic instability?
4. Do the company’s trading partners operate in countries that have volatile exchange rates?
5. Are the company’s customers prone to radical changes in demand based on general economic conditions?

Competitive risk.
1. Does the company operate in a highly competitive environment?
2. Are the company’s competitors considered the innovation leaders in the market?
3. Can the business development team articulate and explain the company’s competitive advantage?
4. Are competitors able to offer similar products at consistently lower prices?
5. Do competitors offer superior products?
6. Do competitors have superior financial strength or other significant advantages?
7. Does the company lack insights into competitors’ strategies, products, or pricing?
8. Does the company operate in an industry with low or few barriers to entry?
9. Are substitute products threatening the company’s core products and services?
10. Is the company unusually vulnerable to foreign competition?

Regulatory and compliance risk.
1. Does the company have significant government contracts?
2. Is the company currently under investigation for non-compliance?
3. Is the company subject to pending governmental regulation that could significantly change its daily operations?
4. Does the company fail to comply with regulatory requirements, including OSHA?
5. Does the company’s internal governance monitor regulatory compliance?

Political and social risk.
1. Is the company vulnerable to changes in demand based on political or social conditions?
2. Does the company or its management have a poor public image or receive negative publicity?
3. Does the company have significant operations in foreign countries that are experiencing social unrest?
4. Is employee safety, work/life balance, and social welfare unimportant to the company?

Industry risk.
1. Does the company sell its products in an industry that is declining, unstable, or distressed?
2. Does the company sell its products in an industry that is prone to business cycles?
3. Does the company sell its products into an industry with a poor public image?

This list is not intended to be exhaustive. There are additional questions that need to be asked. And not every category of questions will matter equally for every company. Some best practices to follow for your company’s audit:

  • Focus the purpose of the audit on planning and control.
  • Structure questions to yield a “yes” or “no” answer.
  • Be objective. Don’t inject bias or vendettas into the audit.
  • Perform risk audits regularly to expose trends.
  • Prioritize the risks that should be managed.
  • Track business development costs carefully to understand how effectively risks are covered.

Know your risks, make your number. As the saying goes, if it were easy, everyone could do it.

For Part I of this series, How Menacing Is Your RAR – Revenue at Risk?, click here.

Author’s note: Most bloggers encounter writer’s block, and many of us have adopted techniques to avoid the problem. For many years, my dog, Fido, has faithfully and kindly provided me a gentle diversion to clear my mind when I’ve become entangled with too many thoughts, ideas, words, and sentences. By giving Fido a hug, a pat on the head, or a prolonged scratch behind his ears, I have been able to overcome many confounding moments when the words I wrote didn’t match what I wanted to say. Since I began posting blogs in 2007, this is the first one I have completed without him, and I dedicate it to honor his memory.

Washington Redskins: Venerable Brand Or Racist Slur?

Originally published 02/07/13

There’s a major clash going on in Washington, DC. One that involves race politics, freedom of speech, and free enterprise. It pits the rights of one group of people against the rights of another.

Just another day in Congress? Could be, but this one’s different. It’s a marketing, branding, and trademark issue. As I am writing this, the Smithsonian Institution is hosting a symposium, Racist Stereotypes and Cultural Appropriation in American Sports. The problem involves how Native Americans are depicted in our society, and the matter has been festering for many years. This discussion is long overdue.

According to The Washington Post, “of the 3,000 Indian team names and mascots once used by sports teams at the professional, college and school levels, more than two-thirds have been scrapped.” I just learned this today! What’s the next domino to fall? The Washington Redskins? The Cleveland Indians? The Atlanta Braves? No doubt those venerable brand names, along with some others, will be included somewhere on a PowerPoint slide, and shown at today’s meeting.

You don’t need indigenous American ancestors to empathize with those who find the caricatures and stereotypes personally demeaning. When my son got his Indians jersey for Little League, I cringed because I find the cartoon logo disgusting. But I let him wear it because he would have been the only kid whose uniform didn’t match the rest of the team. Funny how that works. “Be the change you wish to see in the world,” Gandhi said. He probably didn’t consider that at times, idealism can be quite inconvenient.

I admit that as fans and consumers we’re complicit in perpetuating racism by supporting teams and brands that are inarguably offensive to others. So why not kick the can up the road, by asking team owners to do the right thing? That might not be totally fair, but it is logical. After all, businesses re-brand all the time, and people keep buying their products. The Washington Bullets became the Wizards as a response to growing gun violence. Datsun became Nissan for reasons I have yet to understand. Philip Morris became Altria. Continental Airlines became subsumed into United. And who knows what will happen now with Dell. Brands change. Businesses endure. Life goes on.

To a sports brand marketer, the potential projects from this controversy must resemble gold bricks dropping from the sky. Employment for life creating new logos, websites, promotions, loyalty programs, fan memorabilia, and marketing collateral. “We’ll be rich!” Sheez, if you can’t kill an offensive brand name because it’s the right and ethical thing to do, then heck, do it for the money! What are you waiting for? You should be clamoring for change! Do it! Do it! Do it! Do it! Do it!

Oh. I think I wandered into the flip-side of this controversy, and just slammed into the wall. It is about the money. According to Forbes Magazine, the Washington Redskins are the second most valuable franchise in the NFL, valued at approximately $1.467 billion, after the Dallas Cowboys. Who wants to threaten that? That’s really what this debate is about, isn’t it? Talk about what keeps Daniel Snyder up at night! Losing in the playoffs and Griffin’s knee injury were bad enough. But losing The Brand?

Never mind that certain mascots are racially insulting. Or that some brands perpetuate horrible stereotypes. Or that the Atlanta Braves franchise profits from sales of foam tomahawks. “It’s not intended to be offensive. It’s just part of the fan experience,” I hear people say. Even though I don’t like yes–but’s, I’ll say it here: yes, but . . . you’re forgetting that profiting from such stereotyping is just wrong.

What-eh-ver! We still haven’t talked about tradition—or rather, Tradition! I can’t speak for other cities, but many Washingtonians would sooner change the name of our nation’s capital from Washington to Squeaky than change the name of our football team. RGIII wouldn’t look right with a different logo on his uniform. The song, Hail to the Redskins, wouldn’t sound right played any other way. I still get all goose bumpy when I hear it. And what about reminiscing about the good old burgundy and gold? George Allen! Joe Gibbs! Sonny Jurgensen! The Hogs! “. . . Remember that? Oh, that was before the 2014 season when the team changed its name to . . .” Aaarrrrgh! I don’t care what they do! I’m still not getting rid of my license plate frame!

As Victor Hugo said, “There is nothing more powerful than an idea whose time has come.” That time is now.

“On My Honor, As a Salesperson . . .”: Why Sales Ethics Matter

Which business risk represents the greatest threat to shareholder value?

a) Natural disasters

b) Terrorism

c) Product defects

d) Piracy and patent infringement

e) Lack of ethical boundaries

If you selected anything but the last choice, think again. The massive collapse of market capitalization at Tyco, Worldcom, and Enron underscores the grave dangers posed to shareholder value when employees lack an ethical compass. The cumulative decline in market capitalization resulting from fraud at these three companies was $136 billion, according to Public Citizen’s Congress Watch. If you followed these stories, you know that the scandals originated in the executive suite and required an corrupt ecosystem of compliant people to execute.

But what about ethical problems that originate elsewhere? What happens when ethical violations spiral from what are euphemistically called “aggressive sales practices?” In 1998, ethical violations at Prudential Insurance became so pervasive that the company’s management eventually estimated its liability from the pending class-action lawsuit at $2 billion. Among the voluminous courtroom testimony from the case was this nugget: “Your judgment gets clouded out in the field when you are pressured to sell, sell, sell.” Very often, senior business development executives tell me, “that couldn’t happen here.” Unfortunately, no company is immune.

Could ethical problems affect your company? How might your company’s reputation or your personal reputation be affected? How real are the ethical risks you face, and what, if anything, should you do about them? These are questions that managers at one company I worked with should have asked—but didn’t. As a result, the indiscretions of a person I’ll call Travis Doe cost MegaCorp (not the company’s real name) more than $1 million.

Travis Doe was a reseller account manager for MegaCorp. He was affable and gregarious, and his compensation plan enabled him to earn a comfortable six-figure package. But Travis had a revenue scheme that would make his day-job earnings pale in comparison, and it paid him very well—before he was caught. When the dust began to settle a year later, the total estimated cost to MegaCorp was more than $1 million. That’s before adding the 40 percent revenue loss of the diverted direct sales. What about the greater cost of diminished employee morale and broken customer trust?

The loss was buried in the income statement of MegaCorp’s financial report, away from the eyes of investors. No mainstream publication or trade journal carried the story. What was Travis’s scheme? I’ll get to that in a moment.

Any discussion of ethics involves drawing boundaries. But drawing boundaries for sales ethics is much easier said than done:

  • “I’ll sell an early version of my software that isn’t fully tested, but I won’t sell anything that I know doesn’t work.”
  • “I won’t bring up the fact that I’m missing a key feature, but I won’t lie about its absence.”
  • “At the end of the quarter, I will commit resources I don’t control so I can win the sale, but I won’t promise my prospective customer anything I know cannot be delivered.”
  • I won’t overcharge anyone, but I won’t sell at the lowest possible price, either.”
  • I’ll look out for my client’s best interests but only if doing so doesn’t jeopardize my business.”

As author David Quammen writes in Wild Thoughts From Wild Places (Scribner, 1998), “Not every crisp line represents a triumph of ethical clarity.” What causes this obfuscation? Individual ethical interpretations are a function of a person’s current emotions, situation, values, experience, logic and personality. What do blurry interpretive boundaries mean for sales? They mean that ethical practices and behaviors are difficult to define.

Travis’s plan

Travis executed his plan by setting up a bogus reseller account. When prospective clients sent requests for quotes, Travis intercepted them and sent the requests to his bogus company, instead of sending them to a legitimate reseller. Because the bogus reseller purchased from MegaCorp at a 40 percent discount, Travis made a tidy personal profit on every order his bogus company processed. Only when an order administrator on the West Coast spotted a benign part number anomaly did Travis’s ruse begin to unravel. She phoned the “reseller” with a question, and the person who answered stated that “our vice president, Travis Doe, will contact you tomorrow with an answer.” The order administrator blew the whistle. An embarrassed MegaCorp quietly fired him about a week later.

Travis’s laptop contained evidence that exposed how far the ripples from the scam had traveled. There were copies of letters and proposals bearing the name, “Travis Doe, Vice President,” on fake letterhead. Under the guise of a legitimate reseller, Travis had created price lists, spreadsheets that tracked the status of quotes, customer lists, marketing material and more.

Surprised colleagues (and some not-so-surprised) came forward to describe how Travis had pressured them to send orders to his bogus reseller rather than place them directly with their employer. Betrayed customers who had unwittingly placed orders with the reseller loudly expressed their woes because Travis’s company had no capabilities to support them. Legitimate resellers were especially irate because they had been deprived of valuable orders.

No one else was terminated, but except for the alert order administrator, Travis’s indiscretion created no winners. Where were the boundaries of ethical responsibility? MegaCorp utterly failed by not having adequate controls to prevent Travis’s scheme. If Travis’s immediate boss knew about his dishonesty, why didn’t he stop him? If he didn’t know, why not? You know it’s a bad day at the office when any answer you provide isn’t a good one.

Ethical risk presents vexing challenges for organizations because ethical standards must first be defined, then documented, communicated and followed. In addition, the subjectivity of what constitutes good ethics, and resulting interpretive challenges, defy standard-setting. Senior managers should not avoid this problem. Instead, they should embrace it by creating an environment for open, candid discussion about ethical challenges that will encourage salespeople, and those who support their efforts, to identify issues and confront them before they spiral out of control.

Establishing an ethical culture requires strong leadership, and strong governance; expectations for ethical behavior must be visible and consistent throughout the enterprise. Risks are highest when three conditions coexist:

1. High financial incentives for dishonesty

2. Lax audit controls

3. Non-integrated processes

When these exist simultaneously in an organization, a shrill alarm should sound in the boardroom or executive suite indicating that conditions are ripe for fraud and exploitation. Ethical lapses can irreparably undermine the best business plans, corporate reputations, and brand building. There are too many opportunistic Travises in the world, and too much value at risk, to ignore the alert.

Six Ways Companies Promote Sales Failure

Every now and then, a senior executive describes a funky selling practice at his or her company. One that prompts me to ask, “. . . and how’s that working for you?”

If you prefer to avoid the pain that someone else has experienced, I present to you six practices that earned a top spot on my list titled, We Have Met The Enemy And It Is Us.

#1. Create commission incentives that reward the wrong results.

This winner comes from a software company that used a declining commission reward for increased revenue levels. Stick with me, because I am not making this up.

Here’s the schedule from the company plan:

Up to $60 K revenue = 6% commission
$60 K to $100 K = 4% commission
$100 K + = 3% commission

By now, you’ve done the math and realize that closing a $50K deal will net a salesperson $200 more income than he would make from a $70K deal. I can hear a salesperson saying to a customer, “I know you plan to spend $70,000, but Christmas is coming up—can you make it $50,000?”

When I asked the company’s VP of Sales about this absurdity, she remarked “Our view is that it takes a village to close larger-sized deals. We pay less commission to reflect that.” Translation: A CXO at her company doesn’t want salespeople driving a newer Lexus than he drives.

Solution: If meeting quarterly revenue objectives is important to your business strategy, buy the salesperson a Lexus as soon as he’s earned it–and park if for him! Whatever your strategy, build your sales incentives around achieving it.

#2. Provide no-value “special offers” for prospective clients
This company offered purchase incentives that were plainly hollow. The company compounded their own misery by insisting their sales force push the incentive to every prospect every month—even though the monthly deadlines didn’t conform to the prospect’s buying pattern. Prospects resisted, and the more astute salespeople covertly abandoned the promotion. The company committed what author Tony Parinello calls a “reload.” Shoot yourself in the foot, reload, then shoot yourself in the other foot.

Solution: Listen to your customer and to your sales force. If customers aren’t buying the promotion, there’s a reason for it.

#3. Measure and manage unproductive sales activities.
By holding steadfast to the view that sales is a “numbers game,” this company rated salespeople on how many prospecting calls they made and how many software demonstrations they provided to them. Since efficiency wasn’t part of the measurement, it’s worth pausing a moment to think about what behavior they encouraged—and got—from their sales team: indiscriminate prospecting. Jennifer’s numbers looked great because she averaged 70 calls a day last month. Steve was a bum because he averaged 38. Steve’s revenue is 3% lower. But who is working smarter?

Solution: Measure and manage efficiency. Ask yourself whether you want to reward more activity, or better activity.

#4. Maintain a long, painful, agonizing exit strategy for under-performing salespeople
Under the guise of a “Performance Improvement Plan,” this company mandated underperforming sales people hold monthly meetings with a manager so they could receive instruction on how to improve. Absent from this remedial program was any attempt to mine insight from the salesperson’s point of view. The Plan didn’t require a manager to even learn about any difficulties the salesperson might be experiencing. And there was a lot of it—the company churned almost 30% of its sales force every year. When I asked a sales manager if any sales person ever was saved after being on The Plan, which averaged four months, the answer was, “Well . . . no.”

Solution: If your company has no resources to elevate the performance of the bottom of your sales staff, make the exit short and sweet. Also, remember that you can learn as much from your under performing reps as they can learn from you. Ask yourself “what was missed in the hiring process? Did we provide the right sales support? How can we avoid making similar mistakes again.”

#5. Uncouple your new account capture team from your installed account team
This company took “silo” to a new dysfunctional height because management felt that New Account reps would become complacent if they received an annuity for renewals. When a software subscriber failed to renew, the account was considered “lapsed,” which meant that after four months, it reverted to a “new account” status for sales credit purposes. The result? This company’s new account sales team craved “lapsed” accounts, because they were easier to sell to than cold call leads. In fact, members of the New Accounts team continually trolled subscriber activity for such “low hanging sales fruit.” You can be sure that no New Account salesperson ever called Inside Sales to share information.

Solution: Encourage your sales force to sell to valuable customers, not just to many customers. Employee complacency is a risk that’s not limited to salespeople. When salespeople can reap rewards for establishing long-term relationships, they will not only seek better prospects, they will remain valuable to them long after they have signed on as customers.

#6 Build rapport-breaking statements right into your sales scripts.
This company found a way make prospect alienation repeatable and scalable. When asked for a reference, telemarketers were scripted to advise a prospect that they were obligated to protect their client’s time, and they couldn’t provide reference information.

Solution: Take your sales scripts on a trial run before you distribute them to your national sales team. Most important, ask yourself “how will our communication be perceived?” If the answer is “poorly,” revise the script.

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