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.

Advertisements

2 thoughts on “The Sales Law Of Conservation

  1. Interesting stuff John.
    You echo goals of many sales organizations that are solely sales drive.
    But, to quote…”Instead, he focused on the biggest deals with 70% or better (in his mind) close probabilities. ” would tend to have all reps go for the cream and leave all other potential customers in the dust. If you are in a resistant sale environment that is time sensitive, I suppose you may have a point. But, for most B2B consultative selling opportunities your perceptions are fine for starting power but lack sustainability. Today’s sales are no longer about pipeline volume, but about how a company adds value to those in the pipeline (in various states of purchase readiness) in order to maximize the opportunities for closing sales. If it’s strictly a numbers in – numbers out game, you nowadays usually lose. Today it’s more about efficiency and conversion rates with the fewest resources, and that takes metrics designed to account for the entire value chain, not just the sales function.
    Enron and AIG went the “star performer route”, but they burned out in the short run. In today’s burned out economy, I advise clients to forgo the super nova in favor of the symbiotic relationships that are sustainable over time. Net net is more margin over longer term, and that tends to be the ever sought after win-win.
    –Bob

  2. Hi Bob –

    I understand your point but at the end of the day there are many of “those in the pipeline” that will never close. The good reps understand this and don’t waste their time chasing no-win deals. They have an instinct or nose for the time-wasters and stalking horse exercises. The result is a smaller quantity of higher quality opportunities where you can do just what you say – add value to the ones in the pipeline to maximize their close potential.

    The key point of the article is that there is and will always only be 24 hours in a day. Time you waste on low-probability deals that only look good on the surface cannot be reclaimed. It’s gone for ever – so make sure you hire reps who are good at not wasting it.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s