Category Archives: Revenue Risk Management

When I Say “Cheat,” You Say “How Much?” Why Salespeople Are Easy to Exploit

Wednesday, 26 October 2016 16:58
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“Your judgment gets clouded out in the field when you are pressured to sell, sell, sell.”

Wells Fargo, 2016? Actually, no. Dial back about twenty-two years – to 1994. This came from Prudential Insurance sales rep John Vetter, about a scam that began in the 1980’s. A scam that victimized nearly eleven million Prudential customers.

Customers suffer when pressure is baked into the sales culture. Carol and Keith Nicholson were loyal Prudential Insurance customers at the time Keith was diagnosed with Leukemia. “Carol had been known to say that she trusted her Prudential agent like she trusted her pastor. He was going to play a vital role in smoothing a very uncertain future. Therefore, when her agent suggested that she and her husband take out a new life insurance policy on Keith at no additional cost, the couple agreed, no questions asked. They just signed the forms, believing they had brought even more certainty to the unpredictable future,” according to a business school discussion about the case prepared by Hunn, Shenkir, and Walker of the University of Virginia’s McIntire School of Commerce.

The Nicholson’s were wrong. When Keith died, Carol discovered that the $103,000 Prudential life insurance policy they traded in was worth only $22,000. “The Nicholson’s agent had taken advantage of the couple’s trust by borrowing against their old policy in order to get them to purchase a new and more expensive policy.” [Hunn, Shenkir, and Walker]

By 1998, Prudential estimated its liability in the US from related class action lawsuits at $2 billion. States with large populations of retirees were especially hit hard, and investigations into the company’s practices ensued. “Prudential trained its agents to mislead, misrepresent and defraud policyholders,” according to a 1997 internal report from the Florida attorney general’s office.

Pressure, incentives, training, pressure. Repeat. That’s how eleven million Prudential customers got scammed. The same way Wells Fargo opened two million credit card accounts without customer consent. The same way Valeant/Philidor tricked health benefits providers into overpaying millions of dollars for prescription drugs. And the same way Dun & Bradstreet Credibility Corporation used alarming, but groundless, sales pitches to frighten small business owners into subscribing to their service.

You’d think after a while, the actors in these corporate debacles – boards, executives, shareholders, and employees – would figure things out, making such sordid patterns fizzle into obscurity.

But no. Today’s CXO’s, engorged on bonuses from share price appreciation, and financially fattened from meeting short-term revenue and profit targets, often gut internal governance to keep their gravy trains rolling. They emasculate audit enforcement and crush dissension. It’s all in a day’s work. Practical advice for the first-time job seeker: bolt from any hiring manager who says, “We run an aggressive sales organization here.”

It’s revolting to see sales strategies and tactics used for malevolent objectives, and to learn the consequences that victims endure. Executives can salivate over clever strategies for sales enablement, but anyone who fails to consider the possibility of harm to employees and customers needs to remove his or her head from the sand.

Not every revenue scandal involves the sales force. Enron’s meltdown first flourished in the CFO’s office, implemented through creative manipulation of debits and credits. VW’s emissions-cheating scheme was prosecuted through its engineering department. Turing Pharmaceuticals controversial price gouging was the brainchild of its profit-obsessed CEO, Martin Shkreli.

But all too frequently, you’ll find the sales organization close to the heart of an ethical storm. The linchpin in the mechanism for repeatable, scalable deceit. The reason, in five easily-tweetable words: Salespeople are easy to exploit.

1. The sales team holds a unique position of trust with a company’s customers. And all scams rely on the ability to exploit trust.

2. Salespeople provide a convenient smokescreen for unethical managers. Too tempting to ignore. At Wells Fargo, the sales force took the fall for not upholding corporate values, when in fact, they were executing them.

3. Commission- and incentive-based pay plans enable management to control behavior like a puppeteer manipulating a marionette. Such plans predominate in sales organizations, and many salespeople depend on their income-at-risk to make ends meet. That makes them particularly vulnerable to making ethical compromises.

4. Organizations traditionally control salespeople as individuals, despite the popular rhetoric about playing as a team. It’s embedded in the culture. Companies champion sales individuality: individual contributors, individual quotas, “What’s-in-it-for-me? (WIFM),” and personal motivation. Through internal sales contests, companies often play salespeople against each other, limiting their individual and collective power to resist management abuse.

5. Many times, salespeople don’t understand their personal risk situations. In deterministic you-will-make-your-number sales cultures, salespeople – particularly those new to the role – fail to confront the uncertainties they face. Instead, lacking background and experience, they acquiesce to management’s performance demands, no matter how unrealistic.

6. Thanks to automation, many sales roles have become de-skilled. And will become more so. That makes salespeople easy to replace, and easy to threaten.

Think of sales as the revenue-risk shock absorber for a company. Industries can become more competitive. Market demand can wax and wane. State-of-the-art products can unexpectedly decline, or become “disrupted.” Senior executives can constantly tinker with planning and strategy, and achieve rock-star fame through TED talks about their “lessons learned.” But one thing remains durable, as surely as the sun rises and sets: revenue expectations for salespeople never recede or decline. Do companies exploit that by endlessly funneling risk onto its sales force? I think so.

Salespeople who have worked even a short time are inured to working harder to maintain their standard of living. Companies like Wells Fargo and others have learned exactly how easy it is to manipulate their salespeople to achieve that prosaic goal.

Disclaimers: A Slick Way to Kind of Tell the Truth

Monday, 15 August 2016 17:47
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In 2013, Pakistan’s Tribune newspaper reported that a Pakistani family can spend the equivalent of $9,600 to provide a marriage dowry for a daughter – a fortune in a country where the average annual per capita income is $1,200. Sons, on the other hand, occupy the catbird seat. For them, no dowry payments, just an expectation that they care for parents into old age. “We always knew we wanted a boy! . . .”

“In Pakistan, India, and China, son preference is perpetuated by both men and women,” said Dr. Anita Raj, director at the Center on Gender Equity and a health professor at the Division of Global Public Health, Department of Medicine at the University of California, in San Diego, quoted in a report from the International Business Times. “Data from the region [indicates] that about one in four women would prefer to have more sons than daughters.”

In places where the birth of a female child creates outcomes far more dire than what color to paint the nursery, the verb prefer shrouds the draconian choices parents face. And it obscures how vulnerable they are to commercial exploitation. Wherever you find desperate consumers, you find purveyors of snake oil, gleefully willing to take their money – and more.

One vendor, Indian yoga guru Baba Ramdev, developed a nutritional supplement he named Divya Putrajeevak. Putrajeevak, a Sanskrit word meaning “son’s life,” provides a distinct marketing advantage – no need to guess why. You can buy it on Amazon. “A unique herbal product, Putrajeevak seed is beneficial for female reproductive health. Dosage: Make a fine powder of both Putrajeevak seed (Beek), take an hour before breakfast & dinner,” Amazon’s product description helpfully informs us.

But just below it, the first review hints at a dark story. “This product is for health of female reproductive organs. Nothing more. Some people confuse it as for conceiving boy child but it’s due to the naming in Sanskrit,” this customer writes, adding, “This is a reputed herb in Ayurveda. Use as directed. I have used it personally. But please refrain from using after conception. This herb is for before conception.” I scroll to the next review: “This is 100% quackery. Please don’t buy any of the items Baba Ramdev is selling! He doesn’t have any scientific basis to make all these claims.”

The claims this writer refers to were made in India, where the pitch to sell ‘Divya Putrajeevak Seed’ unrepentantly includes the promise of conceiving male offspring. According to an article in eninews24online.com, “The medicine also created a uproar in Rajya Sabha [India’s Council of States] . . . after Indian Member of Parliment KC Tyagi flashed a packet labelled ‘Putrajeewak Beej’ (son-bearing seeds).” Ugh. First of all . . . please don’t call this product medicine!

To save space, I’ll dispense with a biological explanation for how gender gets determined in humans. You can read about it here. Suffice to say, I couldn’t find any credible research offering proof that eating, drinking, or smoking Divya Putrajeevak seed means diddly squat toward producing the all-important boy-bearing XY chromosome.

Right here, you might be thinking, “Sounds like this product needs a disclaimer.” You are right. Following this brouhaha in India, a spokesperson for the company that sells Divya Putrajeevak seed announced that the product packaging will disclaim exactly what the product name implies.

“It is for women, and has no relation with sex determination.”

Problem- solved! Now, in South Asia, destitute consumers and others at the brink of financial disaster can buy “son-bearing seeds,” but without the misapprehension that the product will help them conceive a male child. Please let me know if this doesn’t make sense.

Here in the US of A, we have plenty of our own mishegoss. For example, in 2015, law firms spent $128 million on 365,000 ads like this: “This is a legal alert for the users of Xarelto. Lawyers are reviewing claims that the blood-thinning drug can cause severe bleeding or hemorrhaging, stroke or even death. You may have a case . . .”

If you use Xarelto, could this ad make you a tad skittish? In a survey conducted by the US Chamber Institute for Legal Reform, “25% of patients said they would stop taking their medication immediately if they saw an advertisement regarding litigation over the drug,” Lisa A. Rickard wrote in an August, 2016 Washington Post article, How Lawyers Scare People Out of Taking Meds.

According to Rickard, the chamber organization’s president, “Ads like these often include extensive descriptions of serious adverse reactions with little context about how common these side effects are. They routinely mimic public-service announcements, claiming to be a ‘medical alert’ or an ‘FDA warning.’ Most don’t disclose that the ad is for lawyers until the final few seconds. One researcher sampled these promotions and found that only 39% warned viewers to consult a doctor before stopping a drug (emphasis, mine). Many that did ran that advisory in very small print.”

“Lawyers argue that these ads are an important part of the work they do fighting for people injured by faulty drugs or devices . . . lawsuits offer victims opportunities for justice,” Rickard wrote. But without regulations, these alarmist ads create their own “public health risk” – the term Albert Einstein College of Medicine cardiologist Evan Levine used to describe the problem. I’m with him.

Since 1962, The US Food and Drug Administration has had “complete oversight over prescription drug advertisements,” Rickard wrote. “Similar regulations could be developed for legal ads . . . lawyer medical ads should remind viewers to consult their doctors before they stop taking their medications. Another option: The ads could include some kind of disclaimer noting that only a small percentage of people may have had an adverse reaction to a specific drug. All claims should be backed by science, and not exaggerate risks.”

When I read that passage, I did a double-take, because I assumed that such sensible disclaimers were already mandatory. Nein! So, don’t buy the popular bombast that politicians regularly hurl about “cutting regulation and rolling back bureaucratic red tape.” To me, this example demonstrates that without Government Nannies, humans would be nearly extinct.

Companies use disclaimers to avoid allegations of mendacity, or when regulators force them to. Disclaimers are disavowals, a simple shorthand for communicating, “We flamboyantly distort facts so you will see things the way we want you to see them. In case that causes a problem, here’s a half-hearted smattering of contradictory information.”

Some disclaimers are so common that we barely pay attention. “Your mileage might vary . . .” . . . “Certain restrictions apply . . .” “Enlarged to show detail.” Others are ironically funny. In a January, 2015, Wall Street Journal article, Advertising Hyperbole Is Best Found in the Disclaimer, Shirley Wang wrote, “On the big trucks featuring three giant cups of [Dannon’s] Oikos brand Greek Yogurt in Times Square recently, there was a message repeated in several places: ‘not representative of product.’ IKEA stresses on several-foot-high signs that hang from the rafters of some stores that the mammoth picture of its beef hot dog is ‘not actual size.’ And online ads for Dermitage, a skin product that touts ‘less wrinkles in only minutes,’ have shown half the face of a woman with smooth skin and the other half with serious wrinkles, noting that it was ‘simulated imagery.’ No, they don’t think you are an idiot.”

“How weight-loss companies fake those before-and-after photos. Pictures are airbrushed, borrowed and stolen,” the UK’s Daily Mail reported. No kidding! Another prime opportunity for a well-crafted disclaimer. The one that the diet regimen Paleo Plan uses, “never disregard professional medical advice or delay in seeking it because of something you have read on this website,” could not be more encompassing. Good to know.

In September, 2014, the US Federal Trade Commission (FTC) took up the honesty cause through Operation Full Disclosure , a program designed to prevent companies from misleading consumers. The project began with the FTC contacting 60 companies, including 20 of the 100 largest US advertisers. Among the distortions that the agency wanted to thwart:

• ads that quoted the price of a product or service, but did not adequately disclose the conditions for obtaining that price

• ads that failed to disclose automatic billing

• ads that claimed a product capability or that an accessory was included, but did not adequately disclose the prerequisite to own or buy an additional product or service

• ads that claimed a uniqueness or superior feature for a product in a certain category, but did not adequately disclose how narrowly the advertiser defined the category

• ads that promoted a “risk-free” or “worry free” trial period, but did not adequately disclose that consumers would need to pay for initial and/or return shipping

• ads that made absolute or otherwise broad statements and had inadequate disclosures explaining exceptions or limitations

• ads for weight-loss solutions featuring testimonials claiming outlier results that did not adequately disclose the weight loss that consumers generally could expect to achieve

• ads that did not adequately disclose issues related to the safety or legality of a product or service

• ads that included a demonstration that was materially altered, but did not adequately disclose the alteration

and finally,

• ads that made false claims that the advertisers attempted to cure with contradictory disclosures, which are not sufficient to prevent ads from being deceptive

That factual distortions exist in marketing should surprise no one. But the transgressions the FTC has targeted are particularly corrosive – even dangerous. “The FTC’s longstanding guidance to companies is that disclosures in their ads should be close to the claims to which they relate – not hidden or buried in unrelated details – and they should appear in a font that is easy to read and in a shade that stands out against the background. Disclosures for television ads should be on the screen long enough to be noticed, read, and understood, and other elements in the ads should not obscure or distract from the disclosures.” It’s hard to argue that the FTC’s recommendations are bad.

The FTC has also developed guidelines for digital media: “If a disclosure is needed to prevent an online ad claim from being deceptive or unfair, it must be clear and conspicuous. Under the new guidance, this means advertisers should ensure that the disclosure is clear and conspicuous on all devices and platforms that consumers may use to view the ad. The new guidance also explains that if an advertisement without a disclosure would be deceptive or unfair, or would otherwise violate a Commission rule, and the disclosure cannot be made clearly and conspicuously on a device or platform, then that device or platform should not be used.”

Disclaimers have a useful purpose, but they seem an awkward way to backpedal toward the truth. A tacit admission of deception. “Please be aware that what you likely heard me say is not necessarily accurate or correct.” Companies want to be thought of as “truthful and honest.” They see profound purpose in “educating customers.” Sales managers pride themselves on having reps who are “trusted advisors.” Disclaimers, in effect, tell customers that what they have been told, shown, or made to believe isn’t exactly as it seems.

As Wall Street Journal columnist Holman W. Jenkins described it in a recent column about Donald Trump, (Trump Runs Against Both Parties, August 10, 2016), “When you tell the public untruths, in Mr. Trump’s understanding of business, that’s marketing.”

Disclaimers, to the rescue!

Selling: Six Audacious Companies to Watch

Monday, 01 August 2016 15:46
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“The future ain’t what it used to be,” Yogi Berra once remarked. A perfect advertising tagline for the nascent companies profiled in this article. For them, there’s no staying the course because there’s no course to stay. Their executives can’t use tried and true marketing tactics, and they can’t depend on what’s worked before. Their most basic sales assumptions could spark contentious debate, and the outlook for success is unclear. To survive, these companies must innovate marketing and sales strategies as they progress.

If there were a Mission: Impossible movie about selling, these executives would hear, “Your mission, should you choose to accept it, is to make quota without guidance from past performance indicators, industry best practices and benchmarks, or sales playbooks. As always, should you or any of your biz-dev team get fired or laid off, the VC’s will disavow any knowledge of your actions. Your company might self-destruct within four planning periods. Good luck!”

Memphis Meats

Opportunity: “Beef cattle production requires an energy input to protein output ratio of 54:1,” according to researchers at Cornell University. I suppose if I wanted to extend this perverse sustainability model, I’d drive to my local Wendy’s in a Lamborghini Aventador Roadster (12 MPG combined city/highway) and buy a Quad Baconator. No need to shut off the engine while I’m inside eating. I want that A/C blowing cold when I get back to my car!

“More than half the U.S. grain and nearly 40 percent of world grain is being fed to livestock rather than being consumed directly by humans,” Cornell’s Professor David Pimentel said back in 1997. “Although grain production is increasing in total, the per capita supply has been decreasing for more than a decade. Clearly, there is reason for concern in the future.”

Here is where Memphis Meats smells opportunity. Instead of raising and slaughtering livestock, Memphis Meats creates food off the animal, by “growing real meat in small quantities using cells from cows, pigs, and chickens,” according to the company’s website. And unlike raising livestock for slaughter, the company claims it gets one calorie of “output” from just three calories of “input.” No “Concentrated-Animal-Feeding-Operations” fraught with pathogens, feces, and antibiotics. Think “clean meat” – the utopia that Upton Sinclair might have envisioned when he wrote The Jungle.

Audacious sales challenges: “First, consumers will have to be educated as the ‘ick’ factor will be tough barrier to overcome. And one study has suggested that lab-produced meat may actually require more energy than farmed meat, so those statistics need to be sorted,” Leon Kaye wrote in a 2016 article, Memphis Meats Bets Lab-grown Meat Can Disrupt the Global Food Supply.

Great quote from the website: “With our home-base in the San Francisco Bay Area, but strong roots in Memphis, Tennessee, we’re using the innovative spirit of Silicon Valley coupled with the rich culinary traditions of the American south to provide better meat for the entire world.” – Now that’s a cosmopolitan meatball!

My advice – no extra charge! “What has to come first is truth” regarding the benefits that come from the company’s products, Eric Stangarone of Foodthinking.co, told me in an interview for this article. “The moment consumers believe the company is pushing nutritional snake oil,” he said, “they will be turned off.”

Peloton Cycles

Opportunity: A peleton is the main group of riders in a cycling race, the company’s website explains. That definition hints at Peleton’s big sales pitch: Athletes can improve results and increase performance when others are actively involved in the workout. Call it Exercise 2.0 – what you get when your bike has an IP address, and you can experience the camaraderie of friends pedaling in place at the exact same time you’re pedaling in place. There’s more. Peleton’s videos show moms and dads working out in gorgeous homes, conspicuously free from clutter, gnats and mosquitoes, oppressive humidity, mud and dirt, and the omnipresent stench that accompanies Pilates class with eighty or more sweating humans packed in a small room. Exercise, comfortably. A grand idea! Not a bratty kid or gym stalker in sight to disrupt a workout. With Peleton, once the kids are tucked in bed, dad can seize 30 minutes of quality time to work out with his cycling buddy three time zones away.

Audacious Sales Challenges: Price. And the ephemeral nature of The Best Exercise Intentions. Peleton cycling machines sell for nearly $2,000, plus $39/month for a subscription to video rides. And you must commit to one year of them. The company gives skittish buyers a prominent reassurance, Financing available, near the ‘add to cart’ button. Not surprisingly, the company’s showrooms are ensconced in some of America’s best neighborhoods, including Corte Madera CA, East Hampton NY, Manhasset NY, Newport Beach CA, Short Hills NJ, White Plains NY, and Tyson Corner VA. That says a lot about the company’s target buyer.

Great quote from website: “Ride now, pay later.” – No kidding!

My advice – no extra charge! Grow the community first – and fast! Consider offering customers a social media experience, but without having to buy the bike right away. As it stands now, Peleton is a premium exercise bike, with benefits. Namely, real-time access to friends and rock star coaches using the same apparatus.

Local Motors

Opportunity: “I want to start a Company that will re-invent semi-recent cars to embody the design esthetic of the cars of the 50s and 60s,” User marcuslaun posted on the Local Motors website in June, 2016. Marcuslaun doesn’t work for a car company – yet. But Local Motors takes his aspiration seriously, and they have developed a platform to help him produce a hydrogen-powered, snap-together simile of a 1954 Corvette – if that’s what he wants to do.

Local Motors is a technology company that designs, builds, and sells vehicles by combining global co-creation with local micro-manufacturing. It’s hard to describe what LocalMotors does without slipping in tech jargon, like Direct Digital Manufacturing, or DDM. If you don’t have time to bone up on the details, you should know that “DDM uses 3D computer-aided design files to drive the computer-controlled fabrication of parts,” according to Larry Schuette and Peter Singer (Direct Digital Manufacturing: The Industrial Game-Changer You’ve Never Heard Of, Armed Forces Journal, October 10, 2011). In June, 2016, Local Motors introduced Olli, the first self-driving vehicle to integrate the advanced cognitive computing capabilities of IBM Watson.

“At Local Motors, we are hell-bent on revolutionizing manufacturing,” said John B. Rogers, Jr., CEO and co-founder of Local Motors. “Car manufacturers have been stamping parts the same way for more than 100 years. We now have the technology to make the process and products better and faster by linking the online to the offline through DDM. This process will create better and safer products, and we are doing exactly that.”

Short time to market, low manufacturing overhead, and open-source design – three proprietary advantages that could leave larger manufacturers in the dust.

Audacious Sales Challenges: Capitalization to fund R&D, expanding university partnerships, and developing brand equity.

Great quote from website: “We are Local Motors. And the world is full of companies nothing like us.” – Wow. Most websites don’t get that existential.

My advice – no extra charge! Champion the Maker Movement. There are millions of people brimming with ideas and engineering talent who don’t work for the world’s car companies.

Modumetal

Opportunity: “Since the Bronze Age,” the company’s website tells us, “advances in metals technology have involved two things: modifying chemistry and modifying microstructure. In thousands of years, that hasn’t changed, until now . . . Modumetal is creating a revolutionary new class of nanolaminated materials that will change design and manufacturing forever by dramatically improving the structural, corrosion and high temperature performance of coatings, bulk materials and parts.” Translation: Modumetal’s technology makes it possible to grow metal using electricity – not heat – as the primary input. And those materials can have highly specialized characteristics compared to traditional metals.

While I’m not one to shriek “disruption!” before the fact, Modumetal’s innovation portends profound changes for the industry, including where metal can be manufactured, the sizes of production runs, and the serviceable life of parts deployed in the field.

Audacious Sales Challenges: Protection of Intellectual Property (for Modumetal, there’s no such thing as over-protecting engineering information); scaling production.

Great quote from website: “The company’s manufacturing process for nanolaminated metals – think metallic plywood with really thin layers – is also a breakthrough, able to deliver materials at a cost that is competitive with conventional alloys.” – That’s a shining example for how to make a complex technology approachable!

My advice – no extra charge! There are many opportunities for Modumetal to provide value and benefits, and it’s easy for Sales to get distracted. Especially now, stick to developing customers in the most profitable segments.

Pembient

Opportunity: In 2015, 1,215 rhinos were poached in South Africa alone. In 2007, that number was just thirteen. The reason is the precious horn, which is “more valuable by weight than gold, diamonds or cocaine,” said William Ripple, an Oregon State University professor of ecology, who published a study. The current value: $60,000 per pound. Demand from Asia has contributed to the scarcity. “In a survey in Hanoi and Ho Chi Minh City in 2013, 37.5% of respondents said that rhino horn can help treat cancer,” according to The Economist (A Dilemma of Horns, August 8, 2015). For rhinos, the threat of extinction accompanies this explosive market demand. In addition, the poaching method is particularly cruel, involving tranquilizing the rhinos before the horns are harvested. Most of the animals die from blood loss or suffocation.

Pembient aims to replace the illegal wildlife trade, a $20B black market, and the company has tackled the problem from the supply side. “Next year it will begin selling synthetic rhino horn for $7,000 a kilo. This will undercut the market for the real stuff, says CEO Matthew Markus. Others, though, fear that advertising synthetics may boost sales of real horn,” according to The Economist. In 2015, Pembient was one of eleven companies admitted to the inaugural class of IndieBio, a San Francisco-based biotech accelerator (IndieBio also funds Memphis Meats, profiled earlier in this article).

Audacious Sales Challenges: Making sure the basic pricing assumptions play out in the market; convincing buyers that the fake product is better than the real thing (studying the history of faux fur might help).

Great quote from website: “Subscribe for updates on our progress.” – Clearly, Pembient does not anticipate that success will happen overnight.

My advice – no extra charge! I don’t sense that consumers of rhino horn are particularly concerned about conservation or animal cruelty. Success will come from positioning synthetic products as more potent. Is it ethical to pitch a product’s unproven benefits? No, but in this case, it seems so much better than the alternative . . .

Sensoria

Opportunity: “Get an extensive set of data from every run. The mobile app monitors your foot landing, contact time on the ground and cadence, and tracks other familiar parameters. Connect the app with heart rate monitors (HRMs) that communicates through Bluetooth Smart to also monitor your heart rate. Get detailed visualization of your activities right on the smartphone after your run,” Sensoria’s website tells me.

OK – I get it. Sensoria is for fitness enthusiasts and others who like their personal data big.

Audacious Sales Challenges: Convincing customers to trade in their prosaic shorts, socks, and wicking t-shirts and go electronic. Also, persuading consumers that the rechargeable ankle bracelets, left and right socks (it’s true!), and Bluetooth sensor monitoring haven’t sucked the simple joys out of running and walking, and made these activities into a self-indulgent data-mining extravaganza.

Great quote from website: “Each sock features magnetic contact points below the cuff so you can easily connect your anklet to activate the textile sensors.” – What? Wait a minute – I just wanted to go out for a jog . . .

My advice – no extra charge! Focus the sales effort on a) people who have medical concerns where activity monitoring is essential, and b) fitness enthusiasts who love gadgets. If I were selling this product, I’d stop every person I see wearing an Apple watch and running shoes, and encourage them to try Sensoria’s products.

“You can’t overlook the lack Jack/
of any other highway to ride/
It’s got no signs or dividing lines/
and very few rules to guide.”

– Words by Robert Hunter from the song, New Speedway Boogie.

We thrive on extrapolating the future from the past, and finding well-marked pathways to revenue success. But I most admire organizations that accept the challenge of blazing new trails, even when the effort seems borderline impossible. I wish all of these companies well. Stay tuned!

Should Inmates Run the Biz-Dev Asylum? The Case for Stronger Sales Governance

Friday, 01 July 2016 16:35
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“I don’t care how you make your number, as long as you make it,” my district sales manager told me many years ago. Nobody accomplished a Big Hairy Audacious Goal while stressing over boundaries. I know how the West was won.

But my manager should have cared. Achieving a revenue target entangles many different behaviors. Some are laudable, like agility, tenacity, assertiveness, customer focus, and good personal hygiene. But others can be manipulative, unethical, or illegal. When conditions are ripe, bad behaviors spawn and fester. Occasionally, they are exposed, like a colony of voracious termites found under a fallen tree trunk that just rolled from its dark, earthy foundation. In June, 2016, Volkswagen agreed to pay $14.7 billion to settle claims resulting from its sales deceit. A mondo penalty for not caring how a number is made.

Volkswagen’s dishonesty was propagated through modern software technology, using flowcharts, decision boxes, algorithms, code, and computer chips. But other techniques for juicing the top line have existed since the invention of accounting records. As Karen Berman and Joe Knight wrote in their book, Financial Intelligence, “Revenue recognition is a common arena for financial fraud . . . the most common source of accounting fraud has been and probably always will be in that top line: Sales.” Channel stuffing and bill-and-hold. These crafty techniques have vaulted thousands of sales reps and managers into bonus-land. You won’t learn about them on Etsy.

I can’t fault my boss for being laissez faire. His attitude reflected that of his boss, his boss’s boss, and every boss all the way to the C-Suite, where information technology converts biz-dev complexity into integers. A process that cleanly extracts ethical messiness and other biz-dev slop, leaving executives room to “focus on the numbers.” Message to sales force: as long as revenue meets expectation, what happens in Sales can stay in Sales. “If I told you all that went down It would burn off both your ears.” No thanks. I’ll stick to analyzing my spreadsheets.

Corporate boards, beware. “The responsibility of the board to prevent scandals is more important than the responsibility to clean up the mess once it has emerged. Here most boards are still at the starting gate,” wrote Kirk O. Hanson in a 2014 article, Five Ethical Responsibilities of Corporate Boards.

It’s a global problem. In June, 2016, IndianExpress reported that “poor customer service practices of [Indian] banks have come under fire from the Reserve Bank of India (RBI). Despite the banking regulator putting in place Codes of Conduct and Charter of Customer Rights, the RBI has found that banks observed the code ‘more in breach than in practice,’ raising the possibility of a regulatory intervention.”

“We have taken cognizance of the fact that there has been mis-selling in third party products. We are going to take it very seriously. The banks should review how it is being done and be very careful that 75-year-old people should not be sold wrong products simply because salesmen require bonuses or compensation. It is something that we will undertake careful review of and if necessary take action wherever warranted,” said RBI Governor Raghuram Rajan in June, 2016. He could not have expressed this ugly reality in a more genteel way.

His statement points to an even darker story. Too often, companies don’t bother to govern the internal machinery that drives their revenue, leaving it up to the inmates to run the asylum. “You made goal this quarter. Keep doing what you’re doing.” Sales and selling has traditionally been a black box to the rest of a corporation, and many senior executives prefer to remain unknowing about what happens within the guts of its raucous machinery, and what goes on outside, where prospects are “engaged” deals are “closed.”

Ethical principles frequently clash with demands for quota attainment, and in the absence of governance, it’s not always clear or predictable which actions and outcomes will prevail. One thing is certain: when others don’t examine the black box’s innards, the likelihood of harming employees, customers, suppliers and shareholders increases substantially. As Mr. Rajan knows, bad sales ethics break customer trust, poison a company’s brand, undermine shareholder value, and corrode economies. Sounds like a governance problem to me.

What is governance? Corporate governance provides “the structure for determining organizational objectives and monitoring performance to ensure that objectives are attained,” according to the Organization for Economic Cooperation and Development’s 1999 publication, OECD Principles for Corporate Governance. “The OECD emphasized that ‘there is no single model of good corporate governance,’ but it noted that in many countries corporate governance is vested in a supervisory board that is responsible for protecting the rights of shareholders and other stakeholders (employees, customers, creditors, and so on). The board, in turn, works with a senior management team to implement governance principles that ensure the effectiveness of organizational processes,” wrote Peter Weill and Jeanne Ross in their book, IT Governance. Their ideas apply equally to governing sales.

A 2008 CapGemini Survey shared that “all sales executives stated that Sales Governance will become more important in the future. In addition, 86% of the Sales Executives anticipate their group management to put more focus on questions related to Sales Governance the coming three years.” The study covered 42 companies in Norway, Sweden, and Finland, and defines sales governance as “the method used by management to drive the sales organization towards effectiveness and high performance and to promote a desired sales behavior.” The study’s authors represent sales performance in context – specifically, in relation to influence from competitors, customers, organizational culture, corporate strategy. So far, so good.

The study explains that “Sales Management is the core element of the Sales Governance Framework. It entails both a strategic and an operational level. At the strategic level of Sales Management, the sales strategy is aligned with the corporate strategy and short¬-term and long¬-term business objectives are defined. At the operational level, the activity plan is implemented and managed as required. Cross-functional co¬operation is a pre-requisite for achieving internal strategy alignment and operational efficiency. . . Sales Governance enables best practice identification and implementation, and ensures an adequate sales behavior.”

Given CapGemini’s inclusion of a method used by management in its definition of governance, there’s little surprise that “Sales Executives saw driving sales productivity and reducing non¬-value adding time” among the major benefits achieved from undertaking the program. Unfortunately, promoting adequate sales behavior (whatever that means) and driving sales productivity do nothing to protect companies and their customers from unethical and illegal activity, or its consequences. In fact, they might exacerbate the problems. When juxtaposed to the OECD’s governance standard of protecting the rights of shareholders, employees, customers, and creditors, I call CapGemini Governance-lite.

Although CapGemini addresses one important component of corporate risk, sales readiness, its governance model falls pathetically short for deeper risks. Using this model, the unethical practices in 2015 of GM, VW, Takata, Peanut Corporation of America, Wells Fargo, Medtronic, and many others would not have been thwarted. Sales organizations can be highly productive and efficient while institutionalizing seamy practices. “The dashboards look peachy! Keep doing what you’re doing . . .”

The case for board-level involvement in sales governance. Today, selling abuses make international headlines, and the case for board involvement in sales governance could not be stronger. “Boards must think about risk and strategy,” said Erica Salmon Byrne, Executive Vice President, Governance and Compliance of the Ethisphere Institute, in a webinar titled, Enabling Ethical Leadership: Equipping Your Board to Govern Companies with Integrity.

Ethisphere, which conducts an honoree program for the World’s Most Ethical Companies (WMECs), reported that 90% of its 2016 corporate honorees offer employees its board or a board committee as a conduit for reporting misconduct or raising concerns. “Boards are increasingly interested in measuring and cultivating an ethical corporate culture; 86% of WMECs update the Board on such efforts . . . Not only do WMECs more frequently evaluate their [Ethics and Compliance] programs (61% of honorees conduct annual reviews vs. 27% of non-honorees who annually review), but honorees tend to evaluate their program very broadly,” Ethisphere said in its 2015 report.

The duty of board-level sales governance. The line between board oversight for sales governance and management’s responsibilities can be thin and fuzzy. Board-level sales governance addresses strategic risks extending beyond salesforce productivity and efficiency. Primarily,

1. To ensure sales goals are balanced, and support corporate strategy

2. To ensure business development policies and practices are consistently legal, ethical and fair

3. To protect the customer’s best interests

4. To ensure effective mechanisms exist for identifying and reporting activities or events that threaten the above

Hanson’s Five Ethical Responsibilities of Corporate Boards provides useful guidelines for what boards must know or examine. He wrote:

1. Knowing the health of the company’s ethical culture. Most boards or their audit committees hear pro forma reports on ethics violations and lists of calls to their hotlines. Few know anything about the culture in which these violations arise. Do these behaviors reflect widespread acceptance of improper behavior — or a few bad apples?

2. Evaluating the ethics of the business strategy. Business models and strategies are being junked and reformulated everywhere in our modern economy. New sources of revenue are being sought; radical transformations of manufacturing and delivery systems are being implemented. Sadly, some boards are swept along by management proposals to change the nature of the business without asking critical ethics questions about the strategies.

Most boards have learned to ask whether the company is ready to monitor a China-based supply chain to insure worker safety. But few boards have discussed the ethics of tax inversions, big data mining strategies, or staffing strategies which make family life difficult.

3. Monitoring the real ethics risks in the organization. Every organization manages financial risks, and boards pay close attention to the level of that risk. Few senior managements and even fewer boards evaluate the ethical risk of entering new markets, extending the supply chain to new regions, or putting extreme performance pressure on a sales force that is prone to shortcuts . . . Boards are charged with oversight over the adequacy of this ethics risk assessment.

4. Monitoring the ethical behavior of the leadership team. No decisions are more complex than hiring and firing top executives. It is tough enough to find a prospect who has the skills needed to execute the company’s strategy for the next five years.

5. Verifying that the elements of the ethics and compliance system are strong. The Federal Sentencing Guidelines list seven to 10 elements of an ‘adequate’ ethics and compliance management system.

For sales governance, Boards should have access to, and regularly review the following:

• Sales Code of Conduct
• Corporate compliance and ethics policies
• Ethics training program or curriculum
• Misconduct reporting system
• The investigation process

In addition, boards should ensure that employees who report misconduct understand their legal rights, and have appropriate protection. Few people will want to report misconduct when companies exert draconian penalties on those who have voiced concerns.

“Make your number any way you can!” Right now, millions of sales reps operate under this heavy, boundary-free instruction. How will they behave? Which strategies and tactics will they use on their prospects and customers? What outcomes will occur? Corporate boards should care, and get involved.

The Hundredth Monkey Effect – Or, Why I’m a Skeptic

Tuesday, 07 June 2016 14:48
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Several years ago, I discovered a curious statistic: “ninety percent of all salespeople never bother to ask for the business.”

If it were true, I thought, I had the key for fixing almost every sales productivity problem. I’d simply embed an admonishment into my sales training sessions. Something like, “If you take away one thing from today, it’s ask for business! Voila! Problem solved!

The instant I read the stat, I began checking job boards, expecting to see gobs of help-wanted postings from companies seeking closers. Nothing. I looked elsewhere, seeking start-ups exploiting this massive void. Zero. I perused listings of independent reps, searching for “heavy hitters” whose primary skill was moving a skittish buyer from the threshold of ‘I accept,’ into the transactional end-zone. Zilch, too. Something was amiss.

Like dandelion seeds driven helter-skelter in the wind, the 90 percent assertion quickly spread. I found it cropping up everywhere. Mentioned in conversations, bulleted in PowerPoint slides, and pounded home emphatically during sales keynotes. I surmised that this factoid had taken root because it seemed so plausible. “Yeah, I’ve worked with timid salespeople. I just had no idea it was that many. Wow.” Perhaps through its ubiquity, nobody questioned the assertion, or how it might have been derived.

Eventually, I learned that the statistic was a fabrication – created by Lee Iacocca as a catchy synthesis for why companies don’t win orders. Many took his quip literally. I understand why. Society has a ravenous appetite for statistical fact. But with that hunger comes a suspension of skepticism. A dangerous foible, because statistics impart gravitas and trust, even when the numbers are rancid. Enter the purveyors of informational snake oil, armed with an awesome arsenal of social media tools. A person who wants to goad others into a desired action only needs an online presence, a clever imagination, and the ability to construct a good sentence. Here’s a useful template:

[Panic-inducing adjective], research shows that [specific percentage] of [generalized noun] never [vague outcome that most people want really, really badly].

By filling in some words, a la Mad Libs, one can construct a basic persuasive statement: “Amazingly, research shows that 38% of B2B salespeople never achieve a second meeting with a client.” Or, “Astonishingly, research shows that over 84% of entry-level marketing staff never get promoted into a senior management position.”

My goal isn’t to malign research. It’s to illustrate how easy it is to concoct credible-sounding statements to make something sound bad, or seem insufficient. Without appropriate skepticism, assertions of fact that are patently false or illogical can flourish, corroding our understandings, and undermining our decisions.

People learn skepticism in childhood. My earliest memory was an Aesop’s fable, The Wolf in Sheep’s Clothing. The message was clear: things aren’t always what they seem. Discover the truth, or suffer the consequences.

But what is a skeptic? “A person who questions the validity of a particular claim by calling for evidence to prove or disprove it,” wrote Michael Shermer, author of Why People Believe Weird Things, and founder of the website, Skeptic.com. Shermer writes that healthy skepticism means balanced thinking. “The key to skepticism is to navigate the treacherous straits between ‘know nothing’ skepticism and ‘anything goes’ credulity by continuously and vigorously applying the methods of science. Modern skepticism is embodied in the scientific method, which involves gathering data to test natural explanations for natural phenomena. A claim becomes factual when it is confirmed to such an extent that it would be reasonable to offer temporary agreement.”

My skepticism antennae seldom stray from high alert. Almost daily, I find something that causes me to ask, “really?” Many readers will find this example familiar: “Fully 60 to 70 percent of content churned out by b-to-b marketing departments today sits unused,” according to a Sirius Decisions survey. Using Google Search for this exact quote, I found almost 3,000 references. A sampling of the titles:

13 Stunning Stats about Content Marketing
Wanna Get Your Content Manager Fired?
Content Marketing Is Still Failing to Drive Sales

“When you’re telling a story, it’s natural to pick the most vivid and persuasive detail,” Jordan Ellenberg, author of How not to be Wrong, wrote in an article titled, The Tricks of Lying with Data. “But providing the impressive number without conceding the existence of the unimpressive ones is a kind of numerical malpractice.” Clearly, Jordan never held a job in B2B sales, or as a trade association lobbyist. But he nailed an uncomfortable truth: few professionals in those fields can attest to achieving success without having engaged in such computational artifice.

If the content churned out by marketing departments is defined as communication to attract, acquire, and engage a defined target audience or market, with the objective of driving profitable customer action, that material could be a . . . Tweet, blog, YouTube video, podcast, website, web page, landing page, telemarketing script, brochure, advertisement, pop-up ad, white paper, trade journal article, spec sheet, spreadsheet, ROI calculator, corporate profile, Facebook post, LinkedIn share, competitive analysis, success story, snapchat, email, text message, and more . . . That’s a lot of content creation – or, should I say, innovation, which normally has a pretty high failure rate. Hmmm. Now that 60 – 70% finding seems less stunning, and more down to earth.

And we still haven’t peeled back the remainder of the statistical onion! What about the definition of used? When the stat is bandied about, nobody clarifies the threshold. One view, or share? Ten or more? Thousands? These questions remain unanswered amidst the breathless hype about unused content. So if you’re a CMO, which would be a more reassuring indicator – 90 percent of your marketing content getting used perfunctorily? Or 30 percent of your department’s production getting widely shared and distributed across multiple industries? To me, the latter sounds just peachy.

Other examples: The Sirius Decisions finding that “67% of the buyer’s journey is now done digitally.” And a related finding from CEB, “57% of the purchase decision is complete before a customer even calls a supplier.” Each one merits similar scrutiny, in particular because the terms are slathered with semantic fuzz. Which activities define a buyer’s journey? What distinguishes a buyer’s journey from a procurement or project implementation? Which steps comprise a purchase decision? These meanings vary not only between companies, but within them.

Hundredth Monkey Effect. At least Sirius Decisions attempts a clarification. “The 67 percent statistic in no way says that no one talks to a salesperson before getting halfway through the buying cycle, but this is how some have interpreted it.” Sounds like the famous Hundredth Monkey Effect – a situation when someone misrepresents or misinterprets a study, story, or finding, and the error becomes promulgated.

The Hundredth Monkey story was recounted in a forward that Lyall Watson wrote for a 1975 book, Rhythms of Vision, by Lawrence Blair. In his forward, Watson references research on a colony of macaque monkeys in Japan. The two scientists who conducted the research had observed that young monkeys in the troop learned how to wash sweet potatoes, and that the washing behavior spread to other young monkeys through the practice of observation and repetition. Hardly a breakthrough discovery at the time.

But Watson warped the scientists’ original interpretation by concluding that “the researchers observed that once a critical number of monkeys was reached, i.e., the hundredth monkey, this previously learned behavior instantly spread across the water to monkeys on nearby islands,” according to Wikipedia. Strange as this “spontaneous generation” of learning sounds, others latched onto Watson’s version, and from there, it spread. “Author Ken Keyes, Jr. titled his book about the effects of nuclear war The Hundredth Monkey. The book presented the hundredth monkey effect story as an inspirational parable, applying it to human society and the effecting of positive change.”

So, a research finding about how macaque monkeys use observation and repetition in learning to wash sweet potatoes mutated into erroneous statements and extrapolations. A phenomenon well-known in marketing research and other social sciences. *

Another popular finding leads decision makers down the wrong highway. “A whopping 45.4 percent of salespeople miss their quota.” (There’s that template, again!) The problem here is not necessarily that the statistic has flaws, but that the interpretations can be very misguided. Mostly, people assert a litany of salesperson shortcomings, or tactical breakdowns. Or, they over-simplify, as in proclaiming insight into its “Number-One cause.” Few cite a different basis for the problem – one that is equally likely, and similarly deleterious: horrible planning. Even fewer dissect it. Easier to run down the If-we-just-had-better-salespeople pathway, and it ruffles fewer C-Suite feathers.

As Jordan Ellenberg wrote, “In the era of data journalism, truth is not enough. We need [writers] who can check not only a number’s value but also its meaning. Unless we ensure that, we’re going to be reading a lot of data-driven stories that are true in every particular – but still wrong.”

* Note: It was not until 1985, when Elaine Myers published an article, The Hundredth Monkey Revisited, that Watson’s interpretation was debunked.

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