Mystic Selling-Chronicles of a Karmic Salesperson

Talk is cheap....

2011-07-29T12:08:18Z

Karmic sales thought: "Action expresses priorities."

This quote was famously stated by Gandhi and is exquisite in its simplicity. Look to where you spend majority of your actions on any given day. That unfailingly is an expression of your priorities. From a sales context do you spend your time building quotes and proposals or do you spend your time building relationships. My own coach last week took me through a very interesting exercise in this context, asking me to detail where I spend my time and in what do I invest most of my activities on a daily basis. The crazy thing is the things I was doing wasnt even close to the things I considered my priorities.

Look to your actions as the expression of your true priorities. In critically looking at what you are doing you will be able to see clearly whats important to you.

Recognize your sales reps are people

2010-05-02T13:21:00Z

I spend a lot of time with sales people talking not only about sales activity and skills but attitude. It is easy to under estimate the impact of attitude, emotional maturity, etc on the success of individual sales people. We in management rarely look at the emotional state of our employees, their maturity, etc simply hoping that the individuals have the requisite maturity and we can focus on the skills and results. Worst case fire the individual if they don't work out, its a lot easier than dealing with the difficult issues. Many managers believe that even further its none of their business or responsibility. I would propose this is a very short sighted view of your obligations to your company and your employees. Managers are not require just to produce short term results but also to build the capacity of the organization. And if you are not looking at the whole picture you are not doing your job.

Yet we don't have time or the qualifications to be therapists, the struggle is in the quest to find the happy medium. I think the crux of the issue is to support the person who is doing the job. In recognizing and identifying strengths and weakness in the sales person do not fail to identify areas where attitude or even emotional baggage might impede the rep in being successful. I do not propose necessarily discussing these things directly with the individual as unless you have a great relationship with the person it may be misconstrued as meddling. Rather try to implement techniques that can help address the behavior in a work context, and inevitably those habits will appear in other parts of their lives. Perhaps an example would be illustrative:

There are many reps who have self confidence issues. This behavior can manifest itself in biting sarcasm, un-necessary aggression towards peers, hard pushy selling with customers, rude and belligerent behavior with support staff. The fact is that a very simple thing can have far reaching impacts both on sales, but also your internal business relationships. As a manager what are your options.

1. You can fire the individual- this is always an option. But it is expensive and has both immediate and long term costs.
2. A better option in my mind is to begin working on eliminating the manifestation of these issues in the office. Perhaps a first conversation would be a direct discussion with the individual on the unacceptable behaviors. Next would be implementation of a set of tasks that would short circuit the negative behavior before it becomes destructive.
-Ask the individual to send all email through you for 30 days. Itemize the areas where the person is exhibiting behavior that is unacceptable.
-Build escalation mechanisms so that items are handled early before it exceeds the individuals ability to respond positively, Then as the capacity of the individual increases reduce the items that get escalated.

All of these things are entirely dependent on a willingness of the individual to work with you to get better, and a level of self awareness. For individuals who are not worth working with, or are unwilling to work with you there really is only option one. Aristotle once is attributed as having said "We are what we repeatedly do. Excellence, then, is not an act, but a habit." In building repeatable processes that help support and mitigate individual weaknesses you build excellence in your organization in addition to being a good Karmic Manager. Which will result in less turn over, happier employees, and more sales.

Moment of Zen
“It is not the language but the speaker that we want to understand.” -Upanishad

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Back in the Saddle again

2010-04-25T19:40:00Z

To my fellow karmic sales people, my many apologies for not writing for the past few months. It is a non trivial task to come up with something interesting an actually worthwhile to say every week (even for a blow hard like me

I have been actively working on a related project to this blog with great intensity and that has dominated my time (which I will hopefully be able to share with you all soon). But I am back! This week I thought given that on the north american continent we are starting to feel spring fever in earnest, it might make sense to talk a little bit about spring cleaning in our pipelines.

Pipelines tend to accumulate opportunities that seemed great at the time they were entered but now have lost some of their lustre. Its a lot like that great piece of furniture you picked up at the flea market a few years ago with the best intentions of refinishing it and returning it to its past glory. Similarly over the course of the year or years opportunities get entered into the pipeline with great promise and then sit in a corner. So what does a karmic sales person do about these diamonds in the rough?

1. Dust them off
The first an most important thing to do, is pick up the phone and make sure that the contact info you have, and the information you have collected is still accurate. Call and requalify the opportunity, make sure that there is an opportunity. If there isnt, send it to the curb, if there is redouble your commitment to work it.

2. Determine how much work is needed
Build a plan to work the opportunity. Determine what needs to be done, execute on your sales process. Build tasks and reminders so that you can begin to move the prospect forward.

3. Decide when you are going to give up
Set the amount of calls, emails, etc that you are going to do to revive the opportunity. Set gates and date where you will cancel the opportunity if they arent met. If you are unable to get the prospect to a certain stage by a certain date, or if you cant get a hold of a particular person.

4. Do not fall victim to shiny object syndrome
Dont let the opportunity fall off of your radar, as new fresh deals come in. One of the things I have learned from working with some of the most successful sales people is that what seperates the 6 and 7 figure earners is their ability to never lose sight of their long term deals when a shiny object appears.

Pipeline management is the foundation of successful quota achievement. Perhaps its time for a spring cleaning in yours?

Moment of Zen
May we be fearless... from friends and enemies...from known and unknown ... from night and day...May all the directions be our allies.”-Atharva Vedas

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Objection handling is all about planning

2009-10-23T18:29:00Z

Objection handling is one of the key elements that separate the great sales people from the mediocre. For most sales people it is in the development of an argument in response to an objection the best sales people understand that there are many approaches. Before I go into the elements of architecting a successful response (or argument) against an objection let me describe the key characteristics of how an objection is formed:

1. Objection on fact: This is where a prospect disputes the facts as you have presented them and seeks out additional evidence of your position. For example: Our software is cheaper than our competitors.

2. Objection of inference: This is where a prospect does not dispute the facts as you have presented but disputes the inference you make from it. For example: Purchasing our software will result in a 20% increase in your sales.

When facing an objection of fact or inference sales people's natural disposition is to present supporting evidence to buttress the claim, for instance in the example above, "Here is a quote from one of our competitors that proves that we are cheaper." The challenge is that objections as we all well know have many claims that are implicit and explicit. Often in the handling of the explicit claim the implicit objections remain silent or unaddressed. The natural tendency to handle objections as they appear serially (ie. one after another) over the course of a sales cycle often disadvantages the sales person.

So what is a more successful method of dealing with objections? To begin the sales person must understand the complete set of objections coming from the customer and their logical basis. Objections like all arguments fall into three large categories: Serial, Convergent, and Parallel:

1. Serial Arguments.
These are arguments that follow the model A then B then C then D. Where all the variables A-D are individually and cumulatively required to support the objection. This model comes from the concept of the Serial Circuit (think old school Christmas lights) where if any point in the circuit failed the whole circuit failed. These kinds of objections are rare but if you are able to reduce your objection to this level by punching out any of the subordinate claims in the objection you can close the sale. For example:

Your software meets our needs and we love it, but it is too expensive (A), and out of our budget {B}. The most common way to tackle this objection is to provide a price concession. But as you can tell this objection has two parts (A) too expensive, {B} out of budget. (A) is a qualitative objection, ie. too expensive is subjective. The natural question is too expensive relative to what? By demonstrating with evidence that your product is not too expensive relative to similar competitors you are able to defeat the argument without necessarily subjecting yourself to the budget objection {B} and thus preserving the price. The other tact is to attack the budget objection which is quantitative. Their budget is a fixed number and as such you have two options: seek to build more value and get more budget, or reduce your price to match the budget. The common error reps make is try to address both objections simultaneously as opposed to attempting to attack the claim that has the weaker position. In doing so leave money on the table or undermine their own position.

Next week I will look at how to handle convergent and parallel objections.

Moment of Zen
"Life without goodness, good thoughts, good actions and good words is like the sky in the night without the moon or stars. It is like a wheel without a hub or spokes! No one can push a boulder away while standing on it; you cannot be free from anxiety while all the entrances through which it sneaks in are open.” -Atharva Vedas

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Is your brain working against you?

2009-10-02T13:56:00Z

Sales people, like many folks, rely heavily on the combination of their intellect, experience, analysis, and intuition to make decisions and advance sales. The karmic sales person is no different, except for the requirement of a level of self awareness. When you lose a deal, it is natural to blame the prospect, process, or some external variable. But are you lying to yourself? More often than not you will find that the reason the deal didn't happen, was not due to some failure in the external environment, but one within your internal one.

This does not mean second guess your strategies and decisions. It means that the karmic sales person needs to take the time to safeguard his/her decision making against falling victim to the failures of the intellect. What are these? Well there are many but a few key ones are as follows:

Over confidence
This is the classic failure where the salesperson in having closed many deals, believes they are infallible and as such can close any deal in any circumstance. How do you know when you are falling victim to this fallacy:
    -You bypass key elements of your process because "you already know" what the customer is going to say.
    -You ignore listening to or addressing minor objections because your believe you can deal with them later
    -You ignore key pieces of data that would lead you to believe this deal isn't going to work because you feel you can overcome them
    on force of personality

Sunk cost effect
This is when you have invested a large amount of time and resources into a deal, and feel the need to invest more to justify the initial investment. This is often exhibited in a late stage deal that may have stalled for any number of reasons. Sales people often spend an inordinate amount of time following up, building business cases, etc to try to get the customer to move forward.

Recency Effect
The view that the most recent experience in your sales career is representative of past events and a valid predictor of future events. A great example of this is when a rep closes a big deal without following a process, gets on a hot streak and decides that he doesn't need to prospect anymore, etc. The recent experience overwhelms the mountain of data that went before it and leads the sales person to believe that what is happening now is the new reality. When in fact it is perhaps just a blip on the radar.

Confirmation effect
This is when reps seek out information that confirms their initial impression of the value of an opportunity. I cant count the number of times a rep has gotten off of a call and told me this is going to be a huge deal and its a lock. In my opinion that view can cause many more problems later on for the rep and the customer. It is critically important not to form an opinion about an opportunity until you really understand what is going on (see my post on the babel fish). The confirmation effect is that the rep will seek out data that verifies this initial opinion often discounting or disregarding data that is contradictory.

There are many more of these effects where your brain will lead you astray. The goal is not to eliminate these effects, but as a karmic sales person to mitigate them in order to more effectively support your customers and your own success.

Moment of Zen
“The mind acts like an enemy for those who do not control it.”- Bhagavad Gita

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Look whose coming for dinner?

2009-09-24T23:18:00Z

It is interesting how sometimes sales people are their own worst enemy. Pricing is a classic example of this. Most sales people dont know how to structure a proposal in such a way that all the preliminary work done by the sales person is reflected within it. Pricing should never be given before you have seperated the prospects from the suspects. I have covered previously how sales people hear different things from the same conversation. It is critically important that you only provide pricing to those people ready to purchase. So having completed your sales process you are at the point where you need to provide the customer pricing for the solution that will solve their problems and at the same time is competitive with the marketplace and their budget.

There is no hard and fast way to do this, but there are a few landmines you should avoid at all costs:

1. Avoid ranges. Customers will only hear the bottom figure.

2. Make sure its reasonable, logical, and defendable. If you cant in good conscience defend the pricing you are providing, through level of effort, market conditions, complexity of solution, etc. Dont price it. Anyone who is following this blog knows that karma has an impact. If you want to build repeat customers, referrals, and ultimately consistent quota achievement. Dont fleece your customers, be fair and reasonable and you will win them for life.

3. Avoid itemization. Itemization of all the things you are doing often sparks more questions than answers. It also give the customer an opportunity to cut out things that they dont feel are critical (ie. you havent done as great a job of presenting the value).

4. Pricing without understanding budget. The last thing you want to do is either price too low or too high. If you dont understand the budget of the project there is no way you are going to be able to fairly structure or price the engagement. If the scope is too great for the budget, break up the project into multiple milestones. Get the customer on board, build confidence, and then the ongoing relationship will result in follow on business.

5. Presenting pricing to someone who cant sign the check. If the person you are talking to cant sign the check, dont discuss pricing wiith them. Absolutely discuss budget and scope, but never negotiate. If you dont you will get forced to negotiate serially, which will mean that you will accept deals that arent necessarily good for you or the customer.

Pricing like many elements of the sales profession is more art than science. After working so hard to get the customer to the table make sure you share the meal and no one leaves unhappy.

Moment of Zen
"If one has faith one has everything"- Swami Ramakrishna Paramahamsa

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Are you a willow or an oak?

2009-09-16T19:04:00Z

Sales is a career that is full of adversity (I would submit most of it unfairly). Whether it is customers inherent lack of trust in anything you say, your managements assumption that you are "screwing them over", technology, finance, market conditions, the list of things that limit or prevent a sales person from earning "their due" is almost endless. Many reps look for positions where organizations limit the "sales prevention" challenge. Either through a powerful VP sales, CEO that comes from a sales background, or sales centered organization (ie. other departments are service organizations for sales). This tactic brings with it, its own challenges. Often such organizations are shark tanks with the only metric being sales success and heaven help you if there is any blood in the water.

I believe that it doesn't make sense to put sales at the center of the organization (I am sure some sales people out there are doing a double take). In my humble opinion the customer needs to be at the center of the organization. The challenge with putting the customer at the center is, that not all agents of the organization are compensated to positively effect the customer, nor is it necessarily easy to make a direct connection to what all employees do to customer impacts. Most organizations seek some balance between the customer and other stakeholders. From a sales person's perspective this will often present internal challenges to completing the sale. How do sales people deal with this hybrid?

1. Identify what are the internal issues you are going to face to get your deal through. This list is really important as this is your play book for navigating and executing on the sale. For example get the parameter from finance to extend trade credit, the ball park estimate from professional services for installation, or customization.

2. Who are the people who are responsible for those areas that can approve your activities. Wine and dine them. Make sure you have lots of favors banked for when you need them.

3. Don't make commitments to customers that you cant keep. Ensure that you have all your ducks in a row internally before you commit to anything with a customer. Failure to do so could at best case result in egg on your face, worst case some serious liability and burned bridges.

4. Know who are the "subject matter experts" in each of the areas that involve your customers. Make sure you informally consult them before making a pitch to the decision makers in two. They will feel a lot more comfortable approving something out of the box if they have someone on their teams already saying that it is possible and not going to cause negative effects for the company.

5. Always smile! Anger, frustration, etc almost never help, and will not get your deal closed if the going gets tough. Being a bull dozer will earn you no friends and though you might get what you want this time, leaving people with a bad taste in their mouths is going to hurt you in the long run.

6. Be a willow not an oak. Understand that things are going to change through the course of the deal. Move with the winds of change, be creative and accommodating. If you stand too firm on any given area you might find your roots in the air and your deal out the window.

Sales is tough enough with all the external things that can scuttle a deal. Be sure you know and can manage the internal process that will ensure that you get the financial benefit of all the hard work that you have done with the customer. You leave it to chance at your peril.

Moment of Zen
"Ego is your enemy..."- Rig Vedas

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Sales like football is a game of inches!

2009-09-10T05:03:00Z

Sports analogies and sales go together like a great single malt and a Cuban cigar. So its not surprising that some of the key tenets to be successful at one would translate into lessons for the other. In honor of the start of the NFL season here is my view on how to be successful at winning deals Don Shula style (347 wins most of all NFL coaches).

1. Win the Time of Possession Battle - Throughout the course of a game, the opposing teams trade possession of the ball. The length of time that a team has possession of the ball is referred to as its time of possession. While no guarantee to victory, generally speaking the longer a team has the ball throughout the game, the better. It's kind of like "keep away" - if you don't have the ball, you can't score!

Sales Lesson: The possession battle in sales is about time that the prospect spends evaluating your product vs the competitors. The evaluation process for customers has a finite time limit. The greater amount of time spent evaluating and discussing your product features and pricing the less time they will have for competitors. More time for you equals stronger relationship, more comfort, less competitive options, and more sales.

2. Win the Turnover Battle - A turnover occurs when a team unwillingly gives up possession of the ball to its opponent, either through an interception (ball thrown forward and caught by an opposing player) or by a fumble (ball carrier loses possession of the ball that the opposing team recovers). Each time a team "turns the ball over" (turnover) to its opponent, it gives itself one less and its opponent one additional opportunity to score. One too many turnovers by a team can be costly; it can be the difference between winning and losing. A team can usually live with one or two turnovers in a game, but if it turns the ball over three or more times, it usually spells DISASTER.

Sales lesson: Turnovers in sales equal mistakes. These could be miscalculations on budget, not identifying who your champions are, what the key business needs are, etc. The lesson here is not to never make mistakes (though that would be great if it ever happened). But to ensure that you are disciplined to minimize these errors. The easiest way to do this is to have a defined regimented sales process that you implement religiously.

3. Convert on 3rd Downs - When a team has the ball, it is given a set of four downs (plays) to advance the ball at least 10 yards, or else it may have to give up possession of the ball to its opponent. 3rd down is probably the most critical down, because if it doesn't convert (advance the ball far enough after its 3rd down), it very likely on 4th down will have to give up possession of the ball by kicking it (punting) to its opponent.

Sales Lesson: Convert on the key stages in the prospects evaluation process. The challenge in sales unlike football is reps don't often know when they are on a third down and must convert. How do you figure out what down you are on? ASK! Most prospects have a process for evaluating purchases. Ask them what are the gates in the process and the criteria for passing on to the next step. If they don't have a process suggest one. Negotiate so that you are able to control how many downs you have and let your competitors guess where they are on the field.

4. Successfully rushing the ball against its opponent - In football, there are two types of plays that a team uses to advance the ball forward: Passing (throwing the ball forward) and Rushing (running with the ball from scrimmage) While ideally, a team would like to be successful at both, it is of particular importance that a team has success rushing the ball. One reason is, the more successful a team is at rushing, the longer it is able to keep the ball in its hands and out of its opponents To briefly explain, when a team rushes the ball, the game clock( used to time the action) continues to wind down, leaving less time for its opponent when it has possession; whereas passing the ball can stop the game clock if a pass thrown is incomplete (not caught). Another reason is, rushing the ball wears down the opposing team.

Sales Lesson: The rushing equivalent in sales is taking the time to understand the clients needs, what they see as their ideal solution, negotiating pricing, etc. In larger deals make sure that you take the time to understand these things before you make your pitch or proposal (the equivalent of a pass). Once the pricing is out there you have conceded to your competition for their move. The longer the customer is working with you the less they will have to work with the competition.

5. Successfully stop the opposing team from rushing - Just think opposite of what was just described in the previous point

Sales lesson: If you are competing against a skilled and effective competitor, recognize the game your playing and stop their rushing plays. The easiest way to do this is to win initiative, through a game changing maneuver (often a free trial, or access to some special resource can do this). The goal is to get off of the defensive as quickly as you can, and back into driving the ball forward.

All analogies aside, selling really isn't a game but it is a structured and strategic approach tied to meeting your prospects needs, and countering your competitors maneuvers. The karmic sales person is able to navigate both these solitudes and does not sacrifice the clients requirements for the best solution in their efforts to win the business.

Moment of Zen
"Success or achievement is not the final goal. It is the 'spirit' in which you act that puts the seal of beauty upon your life"- Swami Chinmayananda

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Ethical salesperson..an oxymoron?

2009-09-03T01:21:00Z

Over my career I have worked with many folks who if prompted on the likelihood of working with an ethical sales person, would likely rate it in the same class as "red 13" on the roulette wheel (ie. doesn't exist). Given that I have chosen this profession it is no surprise I would vehemently disagree, but I understand the sentiment. The challenge with ethics in a sales context is that things aren't black and white. The assumption is that full disclosure ultimately is the sales persons responsibility so that the prospect can fairly evaluate the business proposition and determine if it is going to make sense. In a perfect world I would agree. Yet buyers are no more ethical than salespeople. Manipulating and withholding information is considered perfectly acceptable. Presumably in a capitalistic society it is ok for the holder of resources to act unethically to preserve their resources from those who would seek to take them. Herein lies the rub. Prospects expect full disclosure through the sales process (in fact have no problem disparaging sales people if they don't get it) yet have a clear conscience when bold face lying to the sales person about many elements of the economic transaction (ex. budget, key reasons for looking, which competitors, etc) or not following through on commitments made through the sales process.

A more sophisticated test is required than simple honesty to determine if your sales person is ethical. In my humble opinion there is much that occurs through the sales process that brutal honesty is not helpful for (on both sides of the table). What is critical is that both parties are forthright in answering relevant questions factually. It is not helpful to ask something like "Is this the best price possible". First off your likelihood of hearing an answer that is honest is probably quite low, about the same probability as, you the customer ,answering the question honestly " Would you pay more for this than I quoted you?". Secondly its not relevant. What is relevant is whether you as a customer are getting the necessary value out of the economic transaction to justify the price.

Ethicality is a strange bird. Most folks identify it with full disclosure and brutal honesty. I think it is more accurately described as not withholding information that would prejudice the customer's ability to fairly evaluate the product or service. If I may be so bold I would also assert that the only prospects deserving of an ethical salesperson are those who act ethically through the sales process, ie do not withhold information from the sales person that would prevent the salesperson from fairly quoting his/her price. When both parties enter into the sales engagement with this philosophy in mind a partnership is formed that will inevitably result in both parties succeeding to a far greater extent than would be possible advarsarially.

Moment of Zen
"The only real failure in life, is to not be true to the best one knows."-Buddha

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Everyone is a sales guy!

2009-08-27T12:00:00Z

This week I had a very interesting discussion with a good friend of mine in Human Resources. We were talking about the skill set to be successful in the business environment and how individuals self perceptions can sometimes work against them. A case in point is the comment: "he is such a sales guy". I personally have heard this so many times I have lost count. I understand that the intent is to insult the target of the comment but in my humble opinion this is actually a great complement! Here is why:

1. Sales people are the infantry of the work force. Sent into messy situations, often with little support (ie. here is the phone book start dialing for dollars). In spite of this they persevere, often taking heavy losses and making sacrifices to ensure the missions success.

2. They are problem solvers extrodinaire- Often having to deal with issues that they don't know about, operating with limited visibility to scope and difficulty. Yet through a disciplined process and flawless execution succeed and bring the customer to the table and revenue to the business.

3. Collaborators and consensus builders- You will not be successful in sales if you are unable to build consensus and collaborate with the many support resources required to bring the sale to fruition. Salespeople have to be adept at understanding and balancing multiple interests and agenda, seeking middle ground, and collaborating with both internal and external groups.

4. Strategists and tactical mavericks- The best of our profession are able to view each opportunity as a battle. Not against the customer but against all the forces working against the partnership (internal and external). The successful sales person recognizes that the careful movement of pieces and the use of adept strategy and unmatched tactical maneuvers are key to overcoming objections, bypassing roadblocks, and securing consent.

This is a short list (I am sure there are many more) but key in my mind is that these are skills that, irrespective of your function in the organization, anyone would be proud to have attached to their name. In fact, I would propose, that to be successful in any function in the business world you would need to have developed skills in each of these areas. At the end of the day everyone is selling something-whether its a product, idea, yourself, promotion, etc. The skills of successful selling brings value to every organizational function and as such in my mind there is no higher compliment than being called a "salesperson".

Moment of Zen
"A man is made by his belief. As he believes so he is."-Bhagavad Gita

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Commissions and Pavlov's dog

2009-08-19T00:35:00Z

Ivan Petrovich Pavlov was a Russian physician who won the Nobel prize for Medicine in 1904. He is credited with first describing a psychological phenomena called Classical conditioning. Why is this relevant to you, the readers of this blog (other than being a completely useless piece of trivia that if brought up on a nice evening with the opposite sex, will definitely end the night for you at almost any party outside a university town)? Well Pavlov had a dog, and he observed that the dog would begin salivating before food was presented to it. He used various triggers to generate the response from the animal including bells, etc. None of which the animal could directly eat. Thus by ringing a bell he could get the dog to salivate, even though biologically there was no reason to do so as the animal had no access to food. End of history lesson.

Pavlov figured out something that we in the sales world intuitively understand that you can manipulate behaviors by tying a stimulus to a reward. This is fundamentally what a commission plan is intended to do. The challenge is as with Pavlov's dog there are certain fundamental principles that must be maintained in order for the reinforcement to be successful. It is here that many commission systems fall down. If the plan is either too complex, or not transparent (ie. the sales people don't trust that the reward is coming), or the rewards are inconsistent. You will fail to generate the behavior you want as business managers.

So what are the rules?

1. You must consistently reward the behavior you are looking for. Changing the plan, inconsistent application, adding new rules,etc will work against the behaviors you are looking to create. Exceptions, "special circumstances" etc all work against an effective commission plan as they show reps that its not simply about performance its also about successful lobbying. That is not to say never make exceptions but be sure you know why you are making them and communicate clearly to everyone those reasons.

2. Timing- The reward must be given within a close time period with the action. If you delay the reward to far from the behavior you are looking to reinforce, the sales people wont know which behavior you are rewarding. This is a classic mistake with many plans. In an attempt to protect against downside risk many organizations delay the reward. It is much more successful to give the reward and then punish negative behavior through claw backs (ie. negative reinforcement).

3. Transparency- Reps must know and understand the rules. Many organizations don't take the time to explain to reps how to max out the comp plan. This actually works against the results you are trying to achieve. If you are able to explain to sales people what are the behaviors that are going to be rewarded you are much more likely to get them in the form you are looking for. As opposed to some bastardized version that they come up with themselves.

In previous posts I have spoken about how to use multiple levers to manipulate results. The key is that in the creation of your plan be sure in the quest to achieve your business goals you don't violate these rules. Its always better to simplify the plan and get consistent results than have a more complex plan that is generating inconsistent results. Think like Pavlov and your results will be Nobel prize worthy!

Moment of Zen
"The secret of success behind all men of achievement, lies in the faculty of applying their intellect in all their activities, without being mislead by any surging emotions or feelings. The secret of success in life lies in keeping the head above the storms of the heart."-Swami Chinmayananda

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Cost of Sales- Should you worry about it?

2009-08-12T01:14:00Z

There are two camps on this question. Many sales VP's look at the compensation budget for sales people and try to build a model that will keep sales salaries within a range that is competitive with the marketplace but at the same time is not disproportionate with what they expect the job should earn. An opposing philosophy is to track cost of sales but not worry much about management of total dollars. Focus instead on contribution ratio to revenue. This is most easily described as total compensation for a rep should be x% of the total revenue that said rep brings to the organization. Thus if a rep brings one million dollars to the table his cost should be some fixed percentage (ie. base +commissions).

In my mind trying to manage cost of sales as a finite number is self defeating as karmic managers. It is clear that gross margin must be watched and you definitely dont want to pay significantly more than what is competitive in your space but these figures fail to take into account the relative nature of individual success to corporate success. The purpose of the compensation plan is to incent the sales people to exceed the targets placed before them. Managing cost of sales as a fixed figure will create diminishing returns as reps exceed their quotas in a couple of ways.

1. Management is forced to reset quota on a monthly/quarterly basis for reps that over perform. Effectively slapping them for doing exactly what they were asked to-namely exceed their number.

2. Institute compensation caps or windfall clauses where reps are capped at a maximum earning potential in the year. Probably the single most de-motivating thing sales management can do to sales people.

So how do you ensure that sales compensation is not grossly out of whack with what the industry is paying? The key factor is it is managements responsibility to do their homework. Understand the pipeline, what is possible for reps in aggregate to achieve in the period, what is a stretch target, and how is your salesforce segmented. It is sales management's responsibility to build a performance plan tied to compensation that strives to achieve a budgetary figure and is tightly tied to contribution ratio, This way if reps are blowing out your compensation budget you are assured that your revenue targets have correspondingly being blown away, which makes the difficult conversation with your CFO that much easier.

By focusing on the ratio of compensation to revenue as opposed to simply fixed dollars you will stay clear of some of the classic errors made by sales organizations that inevitably result in high turn over and under achievement.

Moment of Zen
All things appear and disappear because of the concurrence of causes and conditions. Nothing ever exists entirely alone; everything is in relation to everything else. -Buddha

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Compensation-Its about more than hitting the number!

2009-07-28T12:50:00Z

Previously I have looked at two important variables in designing a compensation plan for your sales reps, specifically the type of organization you are, and the business you are in. This week is about the longer term impacts of your compensation plan. Specifically how do you build a plan that is going to incent your sales reps to build your business while they line their pockets.

Most commission plans are focused in a fixed interval such as a month/quarter/year. The challenge is that momentum is built over multiple years and across multiple sales people. Yet it is difficult to get salespeople to think beyond their next paycheck let alone across multiple years of a business cycle. A common philosophy is: "Well if we are constantly closing sales then we will by nature of winning deals build momentum and let marketing worry about the rest." I disagree. I think that sales management needs to build a consistent and disciplined focus on territory/market building and through that effort will come predictable forecasting, consistent achievement of targets, and higher ASP's, irrespective of the individual sales person working the territory.

How do you do this? Well most simply by understanding what are the metrics that are going to result in long term territory growth. In my experience a couple of interesting examples are:

1. % of penetration in target market by segment
This is the number of customers of the available prospect base that are using your product. This can be defined in many ways. One example might be if you have a territory manager for White plains, NY, and are selling IT services to accounting firms with revenues over $1M annually, what %of available firms are using your services in any capacity. The secret is to set a target rate and a % growth rate. As you can see this is a long term target that is directly in the hands of the salesperson.

2. % repeat business in active customers
This metric is about strengthening current client relationships. A territory manager might have a target of 5% of current clients need to purchase something. This is about keeping your client base fresh and actively engaged with you.

I am sure there are many more that are tied to specific business models. As you can see these kinds of metrics rewarded with a bonus structure or a % accelerator on commissions incent the sales rep to build the momentum of the business. The key is when using these kinds of concepts is, the compensation plan must accelerate as the sales rep does more and more of what management requires. This will create momentum in the sales force to push harder towards both the quota targets and the territory metrics, resulting in short and long term business success.

Moment of Zen

"Nothing is equivalent to knowledge"-Vedas

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Alignment- more than something your tires should care about

2009-07-22T12:58:00Z

Previously I discussed how organizational structure impacts the philosophy that drives sales compensation. Another major variable is the type of business you are in. What this really means is the alignment of shareholder/owner goals to the goals of sales people and sales management. Let me use an example to illustrate. If the owners primary goal is revenue growth, the compensation plan should be structured towards top line revenue growth, and this should trump any sub goals such as cost of sales, gross margin, etc. Many business owners believe you can create incentive programs that pull multiple levers. In my experience while this is possible it is extremely difficult. Sales people like water seek the path of least resistance and it is nearly impossible to close every possible loop hole to make sure all your levers are working properly. As an owner or sales manager identify what the primary lever you want to use is and then use it to move the sales organization.

What levers should you consider? Well it depends on what business you are in, and what stage of business you are in (start up, growth, maturity, decline). Organizations in a start up or growth phase should really be focused on revenue growth, and as such the compensation plan should be tied to top line revenue. Some organizations might want to add a secondary lever for gross margin so they can quickly identify good customers from bad as to not bankrupt the business in this fast moving stage. How would this look? The industry standard for software is 6-8% commission for every dollar sold.

>80% of quota    4%
80%-99%          5%
100%-125%        8%
126%+                  10%

A structure like this heavily motivates reps to get to 80%, because if they arent there, they are taking a disproportionate hit on commissions. The accelerators post 100% encourage reps to over achieve. The question of gross margin can be addressed in a couple of ways:

1. You can structure approval levels where reps can only sell deals that achieve X gross margin before pushing it up the flag pole. Or if you don't want to expose the gross margin set dollar or percentage discount points. An example would be reps have flexibility of up to 20% off of list, managers can move to 35% of list, <35% requires executive approval. This will guarantee that management is making the call on lower margin deals and you wont have reps having a fire sale to hit quota.

2. You can set a commission modifier based on GM (or price point) and tie it to the months revenue. An example might be (again industry specific):
Average sales price of rep
>50% of target ASP    -2% eligible commission rate
51%-75%                     -1%
76%-100%                    no modifier
101%-125%                +2%
126%+                           +4%

The great thing about this structure is that you are going to push reps to sell not only at quota but sell for the highest price possible. As a rep at 126% of quota and selling at 126% of target asp would be looking at 14% commission on a dollar sold. Too rich? Well it comes back to alignment-the organization is making at the top level 9x what the rep makes. As long as your goals are aligned with the compensation plan, giving reps the ability to make big dough will ultimately result in over achieving reps at big gross margin.

Next week input variables-how do you build your compensation plan such that reps build your business long term as opposed to a month at a time.

Moment of Zen

"A dog is not considered a good dog because he is a good barker. A man is not considered a good man because he is a good talker." -Buddha

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

To commission or not that is the question?

2009-07-14T23:15:00Z

Last post I talked about the variables that need to be considered in the development of a sales compensation plan. The structure of your sales organization was the first of those variables. Why do you have to consider the structure of your sales organization when developing your comp plan? Well the compensation plan is the primary lever to change behavior. How your organization is structured will determine what behaviors are important to you.

1. Salaried sales people- Many manager scoff at the idea of a sales organization predominately staffed by salaried sales people. Yet for many organizations this is the perfect model. Why would you consider having your compensation mostly in salary?
a) You have a very long sales cycle (measured in years) where multiple reps might be involved in the selling process. Good examples of this are defense industries, or selling large ticket items like aircraft. It is tough to measure and reward such sales on a commission basis as there are many people involved in the sale, the sale may take a long time to complete and ultimately bill and collect on, and the contract size might be so large that it would blow out the sales compensation budget requiring earning caps etc.

b) You have a brand new product in a new market that has not been tested. In this case you don't know what you don't know, and sales people's function is reconnaissance. They might be able to take down a few deals in the process of their intelligence gathering but their primary focus is to educate the organization on the market, understand where the land mines are, and build the case for greater investment or expansion.

2. 100% commission sales people- This is the classic you eat what you kill view of the world. On a first glance this seems like the ideal model for sales compensation. But a look under the hood often reveals a lemon. 100% commission sales people are concerned about their paycheck not your company's revenue. This means that they will make decisions that make them money first, often at the expense of your company or your customers. They are also predominately self managed. Try to get them to do anything that doesn't pass the test of making them money and they wont-justifiably. If you aren't interested in investing in them why should they invest in you? Often sales people will take these positions because they don't have any alternative, and as soon as they find an alternative they will jump ship. 100% commission positions are really best suited for folks who want to run their own business. If your organization is structured this way you want to ensure that your sales reps are viewing their relationship with you as their own business and you align your goals with theirs.

3. Some sort of hybrid of the above- This is where most sales organizations sit. The ratio's may vary but most sales organizations include some salary and some commission. The million dollar question is what is the right ratio.

The secret of the right ratio is in what percentage of the job function of sales in your organization sits in either of the two above camps. Are you in a market leader in a mature market with a long sales cycle and high dollar value products? In this case perhaps you want to have a 70/30 split with 70% of compensation tied to salary and MBO(management by objectives). The MBO's should be the key input variables in your business as discussed in an earlier post. 30% might be tied to commissions on deals closed on an annual quota. For an organization with a new product in an existing market, in a price leadership position the break down might be more 50/50. Where as an organization in a market leadership position with a price leadership position might be 30/70.

The key in understanding this variable is to understand what are the behaviors that characterize your market/product, and what do you want your sales people to be compensated for doing. Understanding this will get you started on how you need to build your commission plan. Next week variable two- the structure of your revenue model/business model's impact on your sales compensation plan.

Moment of zen
"The world is indeed a mixture of truth and make believe. Discard the make believe and take the truth"-Shri Ramakrishna Paramahamsa

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

In search of the perfect carrot

2009-07-07T23:41:00Z

Summer doll-drums, when vacations call with their siren songs, and sales managers/VP's nightmares of commission plan negotiations begin to manifest. For many it is during the summer that strategic plans begin to form. Commission plans are a key part of achieving revenue targets. Yet the development and execution on sales compensation plans remains a mysterious art. This post is going to be one of a few discussing compensation.

So as a karmic manager we believe in foreseeable consequence. In the case of comp plans this is best characterized as, " If you pay for it...then it will get done". I have spoken in previous posts about Key performance indicators, quota achievement is likely one of these. Unfortunately the commission plan is often built as though it were the only indicator. There are many factors you need to consider when building a compensation plan:

1. What is the break down of how you compensate your reps? Is it 50/50 salary/commission, 100% salary, 100% commission, etc. How you break down the total compensation of your reps will greatly determine what kind of commission plan you build.

2. What is the nature of your business. Are you a software company that commissions on the basis of shipped units, or a value added reseller whose business is highly dependent on margin? This factor is yet another to consider before you build your plan.

3. What are the input variables that you know impact your sales process? How are you going to compensate reps for doing the things that you know will make them successful, and discourage territory skimming.

4. What is your acceptable cost of sales. Do you have enough dollars in the pool? What happens at 80% achievement or 160% achievement?

5. How much complexity will your reps accept. Obviously if you are trying to move a bunch of levers at once, your plan is going to be more complex than the simple marching order " Go sell!". Complexity is not a bad thing unless in its execution your reps lose transparency. If your reps cant figure out what they are making in a few quick calculations on their handy dandy calculator your commission plan is probably failing in some capacity. Lack of transparency will result in a distrust of the numbers and ultimately turn over.

6. What is the ROI that you expect for a sales person. This is closely tied to quota calculation and needless to say determination of quota is inseparable from commission plans.

In understanding these factors you will be able to build a couple of commission plan alternatives for refinement. Ideally jointly with the development of the comp plan is the quota negotiation. Next week- Understanding the breakdown of your sales compensation and what it will mean for your commission plan.

Moment of zen
"We are what our thoughts have made us;so take care about what you think. Words are secondary, Thoughts live;they travel far"-Swami Vivekananda

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Everyone needs a vacation!

2009-06-24T14:44:00Z

So faithful karmic warriors. I have decided to take a well earned two week vacation so dont dispair. I am preparing a discussion on sales compensation for my next post on July 7th, which should spark some discusion I hope. See you in two weeks!

Shown the door...now what?

2009-06-17T01:48:00Z

Even the best sales person is going to get shown the door at least once in his or her career. Whether involuntarily due to a reorganization, downsizing, etc or voluntarily because it was time for a change. The question arises-now what? If you are reading this blog its probably because you love sales and as a result are not considering leaving the profession, yet in this economy things are tough. Great companies have the pick of the litter, and sales jobs that you would want are tough to find.

The karmic sales person embraces this reality. The upside is that we understand foreseeable consequence and the fact that the great habits we developed as salespeople are going to put us ahead of the pack in the job search. So where to begin? Start with what you know will work- a plan. Identify who are your best prospects for employment. Pick companies that you want to work for not positions or job titles. Then execute:

1. Get a foot in the door. Tools like linkedin are great for this. You can send an invite or get a contact to refer you.
2. Don't ask for a job. Provide value first. Put together an interesting piece on the firm, competition, etc. Get the contact to read your work first. Ask for a chance to speak by phone or preferably in person to discuss.
3. Gain an understanding of the climate in the firm. Are they in a hiring freeze? Are they able to hire consultants? Be flexible remember your goal is to get into the company of your dreams. Your skills will compel them to offer you the job of your dreams.
4. Try to branch out and get farther in the firm, build your network. Try to get your contacts to identify groups that are struggling under a heavy workload, or whose numbers are down. These are prime sources for you. Remember you haven't asked for a job yet.
5. Once you have identified your highest probability options present a 90 day action plan on what you would do should they have a job available. Express your passion for the firm and that you are ready to go the extra mile.

I bet you will have your pick of offers. Is this hard...yes. It is definitely easier to just fire off resumes to job postings. No one said the karmic path was easy. One thing is for sure even if you don't get an offer, you will leave your prospects with a view of your skill set and professionalism that will leave them anxious to work with you again.

Moment of Zen
"Each man carries his destiny in his own hands" -Sri Satya Sai Baba

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Culture-Does it give your business wings?

2009-06-10T19:27:00Z

In life, I have found that there are things that I struggle to define but I know it when I see it. These concepts are often abstract and subjective and as such difficult to reach a common understanding around. Culture, specifically organizational culture, is a great example of one of these concepts.

Organizational culture is touted by management consultants the world over as one of the primary factors that impact corporate success or failure (as evidenced by organizations such as Google or Enron). Yet how do you define your culture in a way that is meaningful to your employees, is actionable(ie. new recruits can learn), and generates positive impacts. On the negative side how can you adapt your culture to mitigate negatives and accentuate positives.

What is culture? In my mind it is in its broadest sense is cultivated behavior; that is the totality of a person's learned, accumulated experience which is socially transmitted, or more briefly, behavior through social learning. Culture is symbolic communication through a group's skills, knowledge, attitudes, values, and motives. It is a collective programming of the mind that distinguishes the members of one group or category of people from another. Culture consists of what is professed, acted on, and perceived by members of the group. In the corporate context it takes many forms. Recently I was reading an article about Zappos, whose culture is defined by customer service.

This organization takes it far beyond any other that I have seen (check out this article http://www.nurvinteractive.com/?p=58).

As a karmic business person culture represents a powerful opportunity for creating foreseeable consequences in your organization. For example if you were looking to build a culture of Operational effectiveness you might do the following:

1. Instill KPI's around operational effectiveness along with rewards
2. Begin a process of social learning where groups talk about how they achieved operational efficiencies in their organizations and the benefits they got from them.
3. Build organizational structures that empower every employee to make immediate decisions that reinforce the culture of effectiveness and efficiency, at the micro and macro level.
4. Set up leadership positions and career paths around the skills, knowledge, attitude, and values of the culture.

If this sounds familiar-it should. This is exactly what GE did when they implemented six sigma. The karmic manager knows that culture isn't accidental it is the result of a considered process. Leaders need to be purposeful about the building of culture based on corporate direction. The foreseeable consequence of this activity is a culture that sustains the organization and lifts it to new heights.

Moment of Zen
“May we be fearless... from friends and enemies...from known and unknown ... from night and day...May all the directions be our allies.”-Atharva Vedas (hindu scripture)

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!

Size matters! Is your pipeline big enough?

2009-06-03T01:02:00Z

I am often asked the question by sales people and business owners, how big a pipeline do I need to meet my goals. My response is typically well what are your goals, and is there a way we can extrapolate a reasonable estimate of the pipeline required to get there. I often talk about the karmic method being the synthesis of empirical methods applied to a sales process with accumulated experience. To that end lets apply these principles to this question.

The size of your pipeline is going to depend on a bunch of variables (typically the same variables involved in many other sales calculations):

1. Total revenue you want to achieve in the period.

2. Average sales price.

3. Close ratio- Ratio of opportunities won to total opportunities in the pipeline. You will need to back out how many raw opportunities you will need to have in the pipeline.

Based on these variables you can calculate your ideal pipeline size:

Revenue target/ASP= # of deals you need

# deals needed/ Close ratio= pipeline size required

So an example calculation for a software product would look like:

Total Annual revenue target= $1,000,000
ASP= $50,000
Close ratio= 15%

There for you would need 50 deals to hit your target. You would need 334 deals in your pipeline to hit a target of $1,000,000 with an ASP of $50,000 and close ratio of 15% of the raw leads. Needless to say the percentage close rate will be different at various stages of your sales process, so you can further sensitize this calculation by calculating the deals required at each stage based on the close percentage of that stage. The interesting thing about this method is that you can then evaluate the accuracy of your calculation by looking at previous years results (provided you have the data) and using regression analysis(Microsoft excel will do this for you) determine the co-efficient of each of these variables for your business.

You can then adjust your revenue target based on the time you have (ie. 3-6 months) or by the average sales price. For example go for a few large deals or many small deals depending on the market. All of this assumes you have data set to call upon.

If you don't, then begin building one. Take your revenue target and set a multiple for your pipeline that is difficult but achievable. You can then start tracking against your multiple as you gain data. At least this will give you a starting point while you build a dataset. The key to karmic selling is to apply critical reasoning to seemingly "art like" processes to ensure foreseeable consequences. The determination of pipeline size provides a defendable road map for sales people to follow that will ensure both sales people and the company hit their monetary goals.

Moment of Zen
"Introspect daily, detect diligently, negate ruthlessly"- Swami Chinmayananda

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!