The Sales Law Of Conservation

A year or so ago I was at a meeting of NETSEA (New England Technology Sales Executives Association).  The topic was on B2B sales optimization – a key topic in this time of uncertainty.  At one point the conversation turned to an old and true topic — managing the mix of great, merely good, and lame sales reps that you find in most sales organizations. What was stunning to me was that this group of sales managers were rehashing a conversation that has been had over and over again.  It comes down to a fairly simple proposition.

A very few reps will thoroughly thrash the rest of the team on a performance basis.  In a smaller team it may be one rep – always 200% to 400% of quota, year-in/year-out.  You don’t “manage” these gems.  You get them whatever resources they need, when they ask, and you make sure that they get paid.  You ensure that they get the recognition of the CEO and that they get lots of face time with the other leaders in the organization as needed.  You only reign them in if they become disruptive to the organization and negatively impact the performance of others on the team.  Otherwise, you cultivate them and give them the run they need to get the job done.

The solid performers — 90% to 150% of quota consistently — you manage (I won’t go into detail).   The laggards are always there – never getting much beyond 70-80% of quota (or worse).  No matter how well you recruit, somebody has to be at the bottom.  They just lack the necessary sense to put the focus and effort in the right place.  A big mistake many sales managers make is to put a lot of effort into moving the laggards into the middle.  It can be done with some of these people, but the effort is usually pretty high for what is generally a small reward.

One person commented that when they fire an under-performing rep they often give the pipeline to the stars to qualify and close.  I believe this is a mistake.  Not that the stars shouldn’t get the opportunities — it’s just that most of the pipeline of your worst performers is trash.  You don’t want your stars having to waste time re-qualifying deals.   You don’t give the pipeline to your stars – you give them the biggest viable opportunities that really can be closed.   You, or a telesales rep or some other resource needs to weed out the junk first.  And don’t give your middle team the crappy pipeline either.  That’s a quick way to defocus them and help them to miss their quota.

I’ll give you an example.  One of the best reps I ever worked with was that good because he was brutal about where he spent his time.   There were deals with a greater than 0% probability – even greater than 50% – that he outright ignored.  Instead, he focused on the biggest deals with 70% or better (in his mind) close probabilities.  Fewer deals in his pipeline, but bigger on average than all the other reps.  Even if his total factored forecast was below other reps, he rarely didn’t beat them.  It was a great example of the Law of Conservation:  time spent on less important deals cannot be reclaimed, it is just transmuted into less time to spend on the better deals.

The answer was easy to see, but hard to apply.  By ignoring many “good” deals and focusing solely on a few “great” deals, he was able to spend far more effort on the deals he pursued – and he won most of them.

This is hard to teach or to get most reps to do.  Any deal with a pulse often gets attention, which makes it less likely that other deals will get the attention necessary to win them.  We all feel we can cover lots of deals and make them work.  The simple fact is that the general rule against being spread to thinly is critical to sales success, but often overlooked.  Filling the pipeline with lots of crap gets your manager off your back – and it should be the opposite.  A big pipeline with lots of deals, where each is a complex sales environment, should be a red flag.  It’s a zero sum game because there are only so many hours in a day.  Time cannot be created – it can only be applied.  Applying time to crappy deals just leaves less time for better deals.

The Sales Law of Conservation:  time cannot be created or destroyed, only transferred between competing priorities.  Improving the quality of your pipeline by finding the best deals and working them more is preferrable to finding more deals and working them less.

A Superb Company Culture

A couple of years ago I went to a reunion celebrating the 20th anniversary of the founding of Object Design, Inc. (now part of Progress Software).  I joined ODI as an intern in 1991 while at Babson because a friend at The Weber Group (Larry Weber’s PR firm from the 90’s) told me I should take a job there scrubbing the toilets if I had to because it was such an amazing company.  I only had to work in the mail room, (no, I’m not joking – I literally stuffed and mailed out collateral) but I got my high-tech start there and left in 1996 after product managing the launch of the ObjectStore ODBMS for Windows.

ODI, as we called it, was a rare company.  The intellectual talent across the company was as good as you’ll ever find (and I’ve yet to find since).  Any one of the engineers at ODI would be the “guru” at 99.9% of other software companies out there.  The stuff they did was just mind-numbingly great.

More importantly, the culture there was just as amazing.  People would go out of their way to help each other be successful.  The sales people and engineers and marketers all worked together to build a great business.  While the management team was part of that, the culture at ODI was more from the bottom up than top down.  You saw it in the hallways, when people went into their colleagues’ offices (we all had offices – very few were in cubes and often just temporarily), and in the lunch room.  Nobody was disrespected, and very few honest disagreements turned acrimonious.

The culture stayed that way until just after ODI was named as #1 on the INC 500 list of fastest growing private companies.  Oracle offered $100M or so to buy the company, but the management team turned it down (I was not on the mgt team).  We were going to crush Oracle, certainly!  Oh, the arrogance.  You know what happened next… we started missing our quarterly numbers.  Eventually the investors took over and kicked out the old management team, cut salaries and let go a good portion of the company.  The culture was gone then, but not forgotten.

Looking around that night I saw many familiar faces.  Sure, we all looked a bit older, but most were still looking great after all this time.  Funny how all of our stories to each other last night were about all the good times… the big early deals, the technical breakthroughs, the demos at OOPSLA, etc.  A lot of people came out last night – more than I expected.  One of the ODI Germany sales guys even tried to find a flight in but couldn’t afford the 1,000 Euro airfare from Frankfurt.

The number one refrain I heard was how nobody had landed somewhere that special again in their careers.  Someday I hope to be in a situation where I’m surrounded by so many awesomely talented and truly great individuals.

The Yin of the Yang…

So Jerry Yang has stepped down as CEO of Yahoo! This is no surprise.  Yahoo! has been floundering for quite some time, and Jerry’s much-vaunted return did not have the same results as the Steve Jobs or Michael Dell Parts Deux.

In many ways Yang had a much easier job than either Jobs or Dell, but he still punted it.  Dell hasn’t lit the world on fire, but you don’t see him getting creamed by the press at every turn.  Yang went mano a mano against a carnivorous Steve Ballmer and made just about every wrong move in the book.  Now, I never really understood the MSFT/YHOO merger idea at all anyway.  MSFT really should be focused on the cloud thing as the future of the platform and apps business and let the ad business swirl around them.  Steve’s not listening to me anyway, but my gut tells me Microsoft should extend their value proposition along the lines of strenght.

So, here’s my recommendation for Yahoo!  Hire someone who doesn’t feel inferior about themselves.  Yahoo is arguably the most undervalued property on the web because they are too focused on competitors and not focused enough on customers.

Yahoo search is okay, pouring billions into competing with Google is just stupid.  Yahoo content – with their Sports, Finance and other great properties – is the crown jewel.  Partner for search if needed – and just keep sucking away at whatever value proposition is left in the newspaper business.  Who needs the Boston Globe if Yahoo can get better at local content.

Start with Yahoo! today, add a regional focus much like Craigslist ( anyone?), and hire local writers and editors to stoke the engine.  Sports, money (perhaps buy the businesses?), jobs, news, culture, etc.

Yahoo could pwn the Globe and all other regional properties.  They could even use some technology to allow people to create their own “morning paper” that can be assembled into a PDF and printed at home (for those who like to have the paper in their hands).

Okay, Yahoo – hire me for CEO!

The Great Talent Displacement Opportunity…

We all know that this economy really stinks (sorry John McCain, but the fundamentals are not strong).  As expected, layoffs are accelerating, with Sun, Fidelity, Citi and thousands of other companies shrinking their staffs.  In a booming economy, the people getting let go are often the ones with less value to add.  Marginal performers, no matter how people try to spin it, are the first to go in     any group.  Watch the next 10 days — a lot of layoffs are going to happen before Thanksgiving.  Then watch the first 2 weeks of December as more companies take headcount off the books.

Jobless_ap200When the economy falls off a cliff the cuts go deeper.  Goldman Sachs is projecting unemployment at 8.5% by the end of next year – and that number under-reports the real level of unemployment because a lot of people stop looking for work and don’t get counted.

Now you’re into muscle and bone – and even great talent starts finding themselves out of work.  Further, there are fewer great jobs for them to transition into.  Sure, really great people can almost always find a job.  But it might not be the kind of interesting, game-changing work that they had been doing previously.   Think about it — a whole lot more people will lose their jobs this year, and more still again in 2009.  So many of them will get frustrated in their searches and be looking for anything to keep them in the game.

This is when the creative ones start companies, or join others who are getting a new idea going.  If you can live without steady income for a few quarters while you build out your new thing – perhaps contracting (good luck finding projects) and doing the start-up in the evenings and on weekends – you might find that you both enjoy it more and potentially have a big payoff when the market recovers.

If  you  happen to be in a company that’s still growing and looking for people – raise your standards.  You no longer have to settle for someone else’s second best.  This is the time to build truly great teams.  In some cases you can even use the talent displacement to “upgrade” your team by letting go of the bottom tier of your company and hiring in the great ones looking for work.  It may sound harsh, but if you’re running a business, division or department, you have an obligation to make your team as strong as possible.  It’s getting a lot easier to make that change now and the window won’t last forever.

So, what can you do?  Get behind the wheel and drive if you have the the personality.   But fasten your seatbelts – it’s going to be a bumpy ride.


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