When salespeople are performing poorly, sales managers are usually the first to know. If that's the case, however, then why do so many sales managers wait so long to send low performers on their way?
Kevin Higgins, CEO of sales effectiveness training firm Fusion Learning Inc. and author of Engage Me
, says that many sales managers focus almost exclusively on their overall quota number. Meanwhile, they ignore a metric that Fusion Learning Inc. calls participation rate
Participation rate is the percentage of sales team members who are at or above plan. For example, for a team of 10 people in which four people are above their sales plan (on a year-to-date basis), the participation rate is 40 percent.
Participation rate provides a good window into how your salespeople are developing (or not), but it tends to go unchecked by the sales manager who lives and dies by quota. Why? Because that sales manager is not concerned about individual performance; he or she is concerned about only the overall performance of the team. For example, if the quota is $100 million, the quota-driven sales manager's goal is to get each salesperson to deliver an average of $10 million. Some will produce $15 million, and others will produce $5 million, but it doesn't really matter how the numbers are divided. The sales manager just needs the final number to add up to the overall revenue target.
With these metrics in mind, it's easy to see how a sales manager is actually incented to keep below-average performers. Clearly a salesperson who delivers only 50 percent of quota is better for the sales manager than letting the rep go and losing out on any level of performance the salesperson might deliver.
Fusion Learning Inc.'s research reveals that a participation rate of 60 percent or less will give sales managers a 10 percent chance of making their revenue plan. Therefore, sales managers must aim for a high (70 percent) participation rate to have a good chance of making plan (although even that is not guaranteed).
Given this, why do sales managers tolerate poor performance? What stops them from having tough conversations? Sales managers want to be seen as nice. They do not want to rock the boat. Hope is their strategy – they cling to the idea that the sales rep will improve soon.
Here's one way to think about it. First, consider that salespeople generally fall into one of four performance categories: high performers, coachable performers, tough performers, and poor performers. Now look at the breakdown of how sales results and selling behaviors factor in each category:
- High Performers: Results are delivered and behavior is correct.
- Coachable Performers: Results are not yet 100 percent but behavior is correct.
- Tough Performers. Results are delivered and behavior is poor.
- Poor Performers. Results are poor and behavior is poor.
In an ideal world, a sales manager would have only high performers or a combination of high and coachable performers. The reality is that sales managers will have some tough performers and some poor performers.
Ongoing management of all performers involves monthly (at a minimum) one-on-ones, observational coaching with feedback, role plays, etc. These routines can help lift both behavior and results, move the needle on performance, and maintain good performance.
When these fail to work, it's time for the performance conversation, which includes five elements:
- Set for the salesperson a clear standard and performance milestones.
- Inform the salesperson where he or she is not meeting the standard, and set milestones.
- Give the salesperson the opportunity to meet the standard, and set milestones.
- Offer assistance to meet the standard, and set milestones.
- Advise the salesperson of the consequences of not meeting the standard, and set milestones.
Many sales managers know how to do this, but they defer these conversations. Sales managers must have the conversation as soon as needed. Conscientious sales reps will step it up and improve. Those who are not capable or not interested will demonstrate their inability or disinterest very quickly (within weeks, not months) after the performance conversation. If things still don't improve, the sales manager can move to the final warning and prepare to part ways. An uncomfortable or difficult conversation can sometimes be the best way to open up new opportunities for all parties.