Tag Archives: sales_compensation

Wells Fargo Disinfects Its Sales Culture. Will Other Companies Follow?

I’ve never taught corporate strategy to second graders, but I sometimes think about how to approach the challenge. I’d begin by representing a company as hodgepodge of contraptions. Maybe, a school bus with feathered wings on top, a boat anchor dragging behind, and wheels of various sizes and materials randomly positioned underneath. “Pretend this is a company. How far do you think it could go? Would it sink or crash? Can it reach Profit Land before everyone jumps off?”

Or, maybe I’d just give the kids a dark, real-world example. Say, Wells Fargo, circa 2016. “The top executives are bullies who believe rules don’t apply to them. They scare the sales staff on purpose, and they tell them to lie to customers – all so the stock price will go up! That way, the executives can get paid lots and lots and LOTS of money!”

I envision an eruption of giggles and laughter. “That’s dumb! And it would NEVER be sustainable, silly!” Every corporate board needs at least one seven-year-old to call out the obvious.

Wells Fargo wants to change that narrative. In the wake of their recent scandal, the company replaced its senior management, and announced its intention to disinfect its infamous sales culture. That effort began in January through a new compensation plan for employees, and success measurements that reflect customer value delivered. Wells Fargo employees will say goodbye to “stretch” goals, low base pay, individual bonuses for entry-level sales employees, and onerous demands to open new customer accounts. They will say hello to higher base salaries, less variable pay, and team incentives. Yes, you read that correctly: team incentives. No more divide and conquer as a daily tactic for employee intimidation. And, probably less employee intimidation, too.

You won’t find “salesy” behavior here! Under the new management regime, Wells Fargo will monitor growth in the number of customers who rely on the bank as their primary financial institution. And branches will be measured on customer retention. Meet the new Wells Fargo, where consumer bankers, loan officers, and financial planners cooperate, collaborate, and support one another. Go team, go!

Wells Fargo’s new plan “will focus on customer service, customer usage and growth in primary balances,” Emily Glazer wrote in a Wall Street Journal article, Wells Fargo to Roll Out New Compensation Plan to Replace Sales Goals . These new objectives are light years from what they were less than one year ago, when the company’s goals included having every customer hold eight accounts, even if it meant browbeating the sales team to open accounts surreptitiously. And by browbeating, I mean threatening to ruin careers for noncompliance, then conspicuously enforcing the threat.

Such reforms are instrumental for building an ethical culture, improving customer experiences, and keeping customers happier, longer. By forgoing an aggressive sales environment with harsh punitive measures, Wells Fargo can also close the chasms between their written Corporate Vision and Values, what their employees do in the field, and how management recognizes and rewards their efforts. Can is the operative word. It won’t happen automatically, and it won’t occur overnight, but I predict for Wells Fargo, the outcome will be greater revenue, profits, and higher investor returns over more quarters. And for the same reasons, Wells Fargo’s customers will feel good walking into a branch and talking to a banker who now is far more likely to have benign intentions. That’s huge, and it doesn’t happen on its own.

These changes seem so pragmatic and sensible that I’m surprised they are not more widely adopted. But in the sales world, they compare to a diamond in the rough. Similar initiatives are rare, so whenever you discover one, savor it by examining it closely. One of my clients, a global cloud software developer, deviated from a widespread industry practice that provides reps commissions on seats sold. Instead, my client’s plan compensates reps not for seats sold, but for usage. They go even further. Their plan penalizes reps for dormant seats. The reason? Nothing puts a vendor in a financial buyer’s crosshairs more than writing checks for stuff that nobody uses. “I see we’re paying Squishysoft $400,000 every month for supply chain software that only 10 of our employees log into daily. They told us we’d save money by going to the cloud!” No vendor wants that conversation taking place in the buyer’s offices. My client was shrewd in recognizing the risk lurking in an attractive revenue stream, and they mitigated it through their pay plan.

Some might dismiss Wells Fargo’s new sales strategy as an obvious choice to restore customer and employee trust. No doubt that’s a motivator. But I think their kinder, customer-centered selling approach is an astute competitive maneuver, and long overdue in revenue strategy.

Why does Wells Fargo today appear at the vanguard for a sales model that should be commonplace? I don’t know. But I have a theory that specific forces impede companies from jettisoning practices that consistently antagonize and alienate customers and employees:

1. Demands on CXO’s to grow shareholder value. For the investment community, stock price and potential revenue growth are connected. Unfortunately, many senior executives operate under the misguided notion that growing shareholder value is not only their primary responsibility, but an obligation. In turn, their demands for short-term revenue growth seeps into selling strategy, undermining the delivery of longer, more sustainable value to customers.

2. Sales managers today are unable to adapt to evolving needs, because they began their careers in “revenue-driven” organizations. Customer loyalty, customer retention, and user satisfaction have emerged as value drivers for vendors. But sales managers are slow to change their expectations, along with their coaching and mentoring.

3. Many outside the sales profession stereotype salespeople as “thriving on pressure.” As we learned from Wells Fargo, they can also be sickened by it. Accountants, lawyers, and logisticians don’t thrive on pressure any more than salespeople do. But for salespeople, the stereotype leads to dysfunctional pay policies and incentives.

4. Hiring managers still believe money-motivation as integral to selling success, and strategies are built around that assumption. Further, firms that provide psychographic testing for sales candidates perpetuate obsolete traits deemed essential to a “sales personality.” But these were formulated at a time when “individual contributor” was a synonym for “salesperson.” That doesn’t cut it today. Yesterday’s competencies won’t fill tomorrow’s sales needs.

5. In many organizations, sales operates as a stand-alone entity, with procedures, goals, targets, and objectives that are disconnected from other parts of the organization. By contrast, Wells Fargo has developed a model built on collaboration and goal congruity between departments.

Wells Fargo’s new sales culture is a risky move, but if successful, it will be a powerful competitive differentiator. Much can go wrong. Will a company with a heritage of individual revenue production make a successful conversion to competing as a team? Will the new customer retention measurement backfire? For example, what will happen when a customer wants to close an account because he’s combining assets with his fiancé’s at another institution? Will he encounter a gauntlet of red and gold-clad bankers hellbent on preventing that from happening? By now, Wells Fargo’s management knows about Comcast’s retention debacle. Will they commit the same error? The answer depends on how tightly Wells Fargo adheres to its Vision and Values, the incentives it provides to its sales force for meeting goals, and the penalties it metes out for failing.

I applaud Wells Fargo’s board for addressing a daunting selling challenge, and for setting a worthwhile example that others should follow. For many, the concept of paying team bonuses and rewarding reps for outcomes tangential to direct revenue production might seem as heretic as NASCAR including fuel economy and safe driving as additional criteria for who wins a race. But promoting positive customer outcomes and fostering ethical practices requires companies to change the strategies underpinning their business development activities. And that means reforming sales pay and incentives.

If you need advice starting out, ask a second grader: “When a person buys something they should feel good. And they should always be happy that they did, because that will mean the person did a good job deciding, and the person who sold them something did a good job, too!”

Thanks, kid. You have a great future in business development. I know you’ll go far.

Teach Your Sales Force Well: Learning from Pay for Performance

As Americans breathlessly awaited release of the Wells Report concerning the New England Patriots football deflation scandal, another one was unfolding. A scandal that didn’t feature star athletes and lascivious double entendres, but one that was more heinous. USA Today reported that “the city of Los Angeles filed a civil lawsuit [May 5th, 2015] against Wells Fargo, alleging that the bank has been looking the other way as its sales people take advantage of customers, including Mexican immigrants, by opening accounts and issuing credit cards without their permission.”

Those aggressive, money-hungry salespeople! They have no scruples!

So easy to point fingers. But if you’re looking for a root cause, search upstream. In the direction of power breakfasts, bespoke suits, and C-Suite MBA’s. There, on the shiny boardroom table, you will find the smoking gun. The alleged chicanery originates from the Wells Fargo business model, aided and abetted by the sales culture and the sales rep pay plan.

According to a press release from LA City Attorney, Mike Feuer, “. . . Wells Fargo’s business model imposed unrealistic sales quotas that, among other things, have driven employees to engage in unlawful activity including opening fee-generating customer accounts and adding unwanted secondary accounts to primary accounts without permission. These practices allegedly have led to significant hardship and financial loss to consumers, including having money withdrawn from customer’s authorized accounts to pay for fees assessed by Wells Fargo on unauthorized accounts and derogatory notes on credit reports when unauthorized fees went unpaid, causing some customers to purchase identity theft protection. Furthermore, the complaint alleges that Wells Fargo failed to properly inform customers of misuse of their personal information and failed to refund unauthorized fees.”

The inspirational chant, sell, sell, sell! just took on an appallingly noxious odor. “The result is that Wells Fargo has generated a virtual fee-generating machine, through which its customers are harmed, its employees take the blame, and Wells Fargo reaps the profit,” according to the lawsuit. A wearily-familiar story line: executives at a monolithic corporation become enriched at the expense of customers and employees. Theft, on an efficient assembly line where the workers have white collars. Rube Goldberg, if he were alive today, would have struggled to draw an amusing caricature.

Wells Fargo blamed the bad tactics on a few rogue employees, and claimed the offenders were fired or disciplined. But a former Wells Fargo rep, Rita Murillo, tells a different story: “We were constantly told we would end up working for McDonald’s . . . If we did not make the sales quotas, we had to stay for what felt like after-school detention, or report to a call session on Saturdays.” Ms. Murillo, a Florida branch manager, resigned from the company.

For just a moment, set aside hype from companies espousing their keen commitment to doing the right things for their customers. Ms. Murillo’s comments paint a seamier, often unnoticed picture. We’re reminded that employers can use performance pay plans to enforce practices that are anything but customer-centric. Arm wrenching communication, delivered via the paycheck. For example, “Above all, we expect you to make your number!” Go ahead – try to find nine words that inject more risk into the customer experience, with the possible exception of please hold, your call is very important to us.

Take a manic focus on revenue or market-share growth, add a hefty portion of variable comp into the sales pay-package, and the result compares to tossing battery acid on customer relationships. Back in 2013, Scott Reckard, reporter for the Los Angeles Times, wrote a prescient article, Wells Fargo’s Pressure Cooker Sales Culture Comes at a Cost. “To meet quotas, [Wells Fargo] employees have opened unneeded accounts for customers, ordered credit cards without customers’ permission and forged client signatures on paperwork. Some employees begged family members to open ghost accounts.” Show me repeated sales misbehavior, and I’ll show you a pay plan that influenced and rewarded it.

On the flip side of the Wells Fargo case is Best Buy, which in 1989, famously unleashed a novel pay plan for its sales staff that helped crush archrival Circuit City. Acting on research that revealed consumer distaste for high pressure sales techniques, Best Buy eliminated revenue-based commissions. The Wall Street Journal reported in 2009 (Best Buy Confronts Newer Nemesis) that Best Buy CEO-designate Brian Dunn “opposed [Best Buy’s] 1989 decision to do away with commissioned sales in favor of salaried staff, which was widely opposed by sales workers who feared losing income. He now concedes it was the most important shift in company history, lowering worker costs, and changing the core model of electronics retailing. Best Buy expanded across the US, and Circuit City eventually followed by eliminating sales commissions.”

Two retail companies with two points of view for motivating, managing, and paying the sales force. And the disparity in outcomes could not be any starker: one company suffering an indelible stain on its reputation and brand, the other vanquishing a formidable competitor and achieving strategic success.

Sales compensation rarely makes it to annals of business history, but it has provided powerful muscle for executing strategy. One reason that many companies routinely tinker with sales rep pay plans. “85% of companies will change their sales compensation plan this year,” wrote Andris Zoltners, a pioneer in sales force analytics, in a Harvard Business Review article, Getting Beyond Show Me the Money (April, 2015). “Though it’s only one driver, changing a compensation plan is relatively easy, and it can get quick results. It’s also an area where there’s always room for improvement – it’s hard to get right. When you create a plan, it’s almost impossible not to overpay some people and underpay others.” The rep at your former company who never worked very hard, but was consistently crowned “top producer?” Overpaid. You don’t need to mention any names.

Most sales workers today are paid for performance, with revenue attainment nearly ubiquitous in calculating compensation. Some reps receive full commission, others receive a blend of salary plus commission. Put another way, for the majority of salespeople, a component of income is at risk. In sales organizations, the practice has endured for three reasons: 1) output from salespeople is easy to tally, 2) many sales reps work with scant supervision, and variable pay gives managers control over results, and 3) the sales profession attracts people who have a greater tolerance for risk compared to other fields. So, despite Best Buy’s successful groundbreaking pay strategy, pay-for-performance remains solidly anchored in selling.

As Cornell Professor Rob Bloomfield explains in an eBook, What Counts and What Gets Counted – Seeing Organizations through an Accountant’s Eyes, there are four purposes for providing performance-based pay to salespeople and other workers:

1) Motivation. Effective pay-for-performance programs are designed to provide incentives for working harder and working smarter.

2) Communication. The activities and outcomes that are paid for determine where the employee’s effort goes.

3) Risk sharing. When outcomes are not guaranteed, companies can afford to pay when the desired result has been achieved.

4) Screening. Pay structures determine who will apply for a position. A risk-averse individual would not likely consider a position with a high proportion of variable pay.

Done right, pay-for-performance aligns the interests of the employer and employee. But Professor Bloomfield describes the limitations and pitfalls. Performance pay is a simplification of reality, and employers must “decide how much distortion is allowable,” he says. Achieving a revenue goal doesn’t necessarily comport with working harder, working smarter, or even being honest, and ethical. And it doesn’t dependably translate to high customer satisfaction or customer loyalty. Bloomfield cautions that no pay-for-performance system is perfect, and that employers must “choose their poison:” low motivation, high pay, or costly reporting. Improving or optimizing one element sacrifices the others.

Risks lurking in pay-for-performance

1. Misunderstanding the controllability principal. Many of the problems associated with pay-for-performance result from tying employee pay to risks they cannot control. This problem is particularly acute in business development. Salespeople do not influence many significant conditions for quota attainment: product quality, pricing, delivery schedules, economic conditions, information quality, hiring practices. There’s a long, long list. Yet, year after year, millions of reps are asked to “commit to a number.” In 2013, 58% of sales reps achieved quota, according to CSO Insights.

2. Misalignment of incentive intensity. Incentive pay should be proportionate to the control that salespeople have over outcomes. In other words, the greater the risks salespeople assume, the greater the pay reward for achieving desired results. The converse is also true, as Andris Zoltners describes: “In many product categories, if you sell something one year, there’s a high probability you’ll make residual sales the next year without any effort. If a salesperson is paid a commission or bonus for free sales, we call that a ‘hidden salary’,’ since it’s an incentive paid for something that’s nearly automatic.”

3. Unintended consequences. Also known as The Cobra Effect. Companies want to establish and maintain high-value customer relationships. But very often, they measure and reward other outcomes, particularly those that improve short-term results. Presumably, Wells Fargo did not originally intend to exploit and deceive its customers, but their pay system created those results. Ideally, companies should strive for harmony between wanted results, and what employees are paid to achieve.

4. Moral hazard. Imperfect measurements create opacity where the employer cannot distinguish whether a positive outcome results from hard work, skill, luck, or fraud. Whether it’s Wells Fargo, the Atlanta Public Schools, or other organizations, incentive pay also motivates employees to distort measurements – especially when incentive intensity is high (see #2 above).

5. Bad assumptions, including:

• Paying an employee motivates him or her to care about an outcome. In fact, extrinsic rewards such as pay-for-performance can be demotivating. One example comes from an effort to improve reading skills in which school children were offered a Pizza Hut voucher for every book read. The incentive backfired, creating “fat kids who hate to read.”

• Measuring effort improves performance. The person who works 80 hours a week might not serve her clients any better than one works 50 hours a week. An apropos example comes from a Seinfeld episode, in which George Costanza devises a scheme to get a promotion by leaving his car in the parking lot at Yankee Stadium, where he works. He receives the promotion because his boss thinks he is getting to work earlier and staying later than his co-workers, but his plan fails when his incompetency is exposed.

6. Flawed proxies. “Does what gets counted count?” asks Professor Bloomfield. For example, in education, grade point average (GPA) serves as a proxy for subject mastery and knowledge retention. There are gobs of examples in customer service and business development. Those mistaken causal links between output (e.g. number of service calls handled) and outcome (e.g. customer satisfaction scores). Or in sales, prospecting calls made (output), and quota attainment (outcome). “If you’re not measuring it, you’re not managing it!” So, companies start measuring away, forgetting that, in many instances, the data they collect has weak, or non-existent, connection to what matters.

“I don’t care how you make your number, as long as you make it.” Verbatim, from my District Sales Manager in the mid-‘90’s. His straightforward statement belies the difficult conundrum many companies face when paying salespeople on performance. When you can’t easily measure how hard or smart people are working, you must calculate pay on outcomes such as revenue achievement. That confusion costs companies through higher commission payouts, and in sales force churn when income doesn’t pan out as expected.

Pay-for-performance provides a carrot and a stick. The Wells Fargo lawsuit illustrates just how dysfunctional sales behavior becomes when executives are misinformed or misguided on how to use the tools, and when corporate governance has fallen asleep at the controls, or chooses to look the other way. Two questions must continually be asked and answered: how will pay-for-performance programs work for achieving strategy, and how will employees and customers respond?

This article is part of my monthly column, Navigating Revenue Uncertainty, on CustomerThink. To read the original article, please click here.

Hold the Trust: A Trusted Advisor Who Earns a Commission Is Just an Advisor

Originally published 03/18/09

“We want our salespeople to work as trusted advisors to our clients.”

The VP of sales who shared that idea has a noble vision, and he’s not alone. Building customer trust is inseparably connected to building shareholder value. Not surprisingly, there’s great interest: searching the phrase “how to build customer trust” returned 3,890 results on Google. But the VP has a conflict: his sales team is “coin operated,” vernacular for “they earn commissions based on revenue.” Could that undermine the platform of trust that’s core to his strategy? After all, his customers don’t know his company’s sales commission plan, and it’s no secret that clients don’t always benefit.

In the US, commission-based arrangements for sales forces come in many flavors and varieties. And they’re widespread, according to Barry Trailer of CSO Insights. His company’s research found that of companies responding to their 2008 sales compensation survey, 98% included variable pay as part of their compensation plans. I know from personal experience that a commission-earning salesperson walks a fine line as a Trusted Advisor, and there’s an ethical morass on either side.

Variable pay by itself doesn’t destroy trust, but the opacity that commonly accompanies it does. The headlines we’ve read about AIG and Madoff remind us why. In The New York Times, Frank Rich wrote “The question in the aftermath of the Madoff calamity is this: why do we keep ignoring what we learn from the black boxes being retrieved from crash after crash in our economic meltdown? The lesson couldn’t be more elemental. If there’s a mysterious financial model producing miraculous returns, odds are it’s a sham—whether it’s an outright fraud . . . or nominally legal, as is the case with the Wall Street Giants that have fallen this year.” And Republican Richard Shelby of the Senate Banking Committee, quoted in The Wall Street Journal (March 17), said of AIG’s widely-condemned bonus payments “There’s been no accountability, no transparency to speak of. . . Whatever we’ve gotten, we’ve had to extract it piece by piece, little by little. There’s too much secrecy.”

Agreed. Secrecy stinks. But Madoff committed deception. AIG . . . didn’t. And in what way do these issues relate to an Account Executive who sells professional IT services to companies in the Midwest? Fair question. There is a connection. Customers think salespeople have something to hide—and that’s a trust breaker. In a March 2, 2009 issue, InformationWeek reported the results from their survey of 345 technology professionals. The participants were asked “if you could get vendors to start doing one thing, what would it be?” Thirty-four percent of the respondents indicated “being up front about how their products do and don’t meet customer requirements.” That was more than twice the percentage for any other response.

In our technology-rich world, it’s humbling to think that good old fashioned honesty exists at the top of the list of customer wants. If only we could easily give our customers what they’re begging for. But for a salesperson with money on the line, “being up front” presents a wide ethical strike zone. And companies use variable pay to influence a myriad of actions, which include the ethical decisions the sales force makes. (Specific ethical dilemmas salespeople face are discussed in an earlier CustomerThink article, “On My Honor As a Salesperson: Why Sales Ethics Matter”) Similarly, in my selling past, there were many background situations I didn’t disclose, but they influenced the advice I offered. For brevity, I’ll list just four:

Service plan revenue generated 8% commissions

Selling direct to customers credited 40% more revenue toward achieving my sales quota over a sale through a channel partner

There was a quarterly bonus of $10,000 for achieving the quarterly revenue goal

Competitive displacements earned higher commission than installed account sales

In March, I decided to investigate this issue in more depth, and through LinkedIn I asked salespeople “Do you think prospective customers should know how much their salesperson might make in commissions and/or bonuses from their purchase transaction?” Although the number of responses received wasn’t large, they supported the idea that for salespeople, such transparency was not needed—with one notable product exception: sales of financial securities. A few nuanced views discussed the importance of disclosing to a customer how much a broker might make selling Security A versus Security B. But why draw a boundary around financial services? Shouldn’t customers of other products and services demand equal levels of transparency from their sales advisors?

Some companies believe so, and in the name of increasing shareholder value, they have adopted a progressive view for creating sales trust and transparency—and been rewarded for the effort. The Wall Street Journal reported on March 16th (Best Buy Confronts Newer Nemesis) that Best Buy CEO-designate Brian Dunn “opposed (Best Buy’s) 1989 decision to do away with commissioned sales in favor of salaried staff, which was widely opposed by sales workers who feared losing income. He now concedes it was the most important shift in company history, lowering worker costs, and changing the core model of electronics retailing. Best Buy expanded across the US, and Circuit City eventually followed by eliminating sales commissions.” To the victor go the spoils. Analysts believe Best Buy will capture half the business of now-defunct archrival Circuit City.

There’s more to that story than just sales commissions, but it’s worth pondering how—for a business as complex and dynamic as electronics retailing—elimination of sales commissions was granted such honored recognition. As one who eschewed buying from high-pressure Circuit City salespeople, I know the decision had as much to do with improving customer experiences as with lowering labor costs. According to Mr. Dunn, “we want our stores to morph into a series of experiences . . . to do that, you need to go where the rubber meets the road, the sales floor.” For Best Buy, eliminating sales commissions makes it easier to foster the transparency required for creating valuable customer relationships.

Outside of electronics retailing, improving customer experiences doesn’t mean eliminating variable pay, but it does mean looking at sales compensation differently. Are the right outcomes rewarded? Does rewarding revenue achievement alone work at cross purposes for maintaining excellence in customer experiences and building loyalty? Does increased transparency matter to customers? When it comes to trust, what changes would be most valued? If transparency is increased, what additional changes would cascade throughout the sales organization? Would those changes be positive for building shareholder value?

Best Buy, which now has a new major competitor in Wal-Mart, has the right perspective on trust, transparency and customer experience. I hope others will follow its example.

Failure – Breakfast of Sales Champions?

“Disney is working on an RFID wristband system it plans to launch this year at its theme parks. Called MagicBands, it will let guests pay for goods, check in at rides to map their day’s activity and even send data to characters in the park—so that Snow White or Mickey Mouse can address a child personally.”

By a show of hands, how many think Disney’s innovation will move beyond pilot, and provide positive financial returns?

Some of you say yes, but I have doubts. The programming task alone seems so daunting. I see a global team of software engineers trying to make Mickey’s elocution flawless, so he can pronounce names like Aaradh and Emilija without mangling the sounds. Someone has to sweat the details. Imagine hundreds of toddlers just inside Disney’s welcoming gates, inconsolable because Mickey or Snow White got digitally tongue-tied. “It’s OK, Sweetie. They’re just using buggy software.” Oh, the humanity!

Hitting revenue targets depends on the success of some pretty risky endeavors. I can hear the RFID salesperson right now. “An IT-enabled Mickey who never forgets a name? Sure, we can do that. How many wristbands do you expect to use in the first year?” Best not to put this one in the win column, at least not just yet. Eighty percent of new innovation projects fail. Sixty-eight percent of IT projects fail. Seventy-five percent of consumer packaged goods and retail products fail to earn even $7.5 million during their first year. Let’s face it: every day, sales professionals sell into an abyss that’s wide and deep.

And likely to become deeper. According to a recent article in The Wall Street Journal, “Companies large and small are trying to coax staff into taking more chances in hopes that they’ll generate ideas and breakthroughs that lead to new business. Some, like Extended Stay America, are giving workers permission to make mistakes while others are playing down talk of profits or proclaiming the virtues of failure” (Memo to Staff: Take More Risks, March 13, 2013).

Employees have become loathe to accept the risk of failure—a byproduct of a difficult economy. Their employers recognize this, but they also know that without innovation and change business strategies cannot succeed. Change of any type brings new possibilities for failure. To ensure that when employees are faced with the choice “innovate or die” they don’t select the latter, companies are prodding staff to take more risks by not penalizing them for failing.

Makes sense. But, hang in there with me, because here’s where things become weird. The very part of a company tasked with facilitating change—the sales organization—whose “change agents” face great risk and uncertainty every day, can’t tolerate failure. “If a rep doesn’t make quota, we don’t keep him around,” one District Sales Manager recently told me. “One would ideally see the median quota attainment at or slightly above 100 percent,” J. Mark Davis wrote in an article, Managing Sales Compensation in an Uncertain Economy.

The incongruities portend even more rancor between customers and salespeople. Customers are adopting a more nuanced and accepting view of failure, while sales executives are steadfast in remaining largely, if not completely, failure-intolerant. Salespeople will go nuts when projects don’t go into full production, or when they fall into the stasis of no decision. Who can blame them? Their very jobs could hinge on an opportunity coming to fruition, which means not only closing, but delivering fully on the anticipated revenue. That gravity extends to their district and regional quotas, and beyond. When a key opportunity or two tanks, the ripples are felt all the way to the CFO’s office. Meanwhile, customers will become ever more blasé. “Sorry about your quota, but, well, this is the reason we maintain a portfolio of projects.”

Increased buyer acceptance of project failure will have an inevitable impact on sales results, and revenue will become more inconsistent. Companies can manage that risk in other ways, for example, by building larger opportunity pipelines. But simply pummeling the sales force won’t create immunity to anything, except happiness. The job of selling includes failing—much as we might want to prevent its occurrence. That alone will bring buyers and sellers into closer alignment.