May 29, 2013
Big news for soccer fans these last few weeks: Sir Alex Ferguson retired as the most successful manager in English (and possibly world?) football. David Moyes replaces him at Manchester United. And at the club I support – the magnificent West Ham United – manager Sam Allardyce signed a new contract to stay a few more years.
These three managers have something in common – they consistently generate superior performance relative to the wages paid to the players. Simply put: they compare the league table of performance against the “league table” of wages. If the actual placing is higher than the wage ranking – that’s over-performance. That’s hugely meaningful, particularly in this era of enormous wage inflation for professional footballers.
Let’s think about this in the context of B2B commercial activities. I would challenge readers to think about how you measure your sales and marketing people. What is the indicator of over-performance that you use?
By the way, “total revenue” is sub-optimal answer. Have I ever mentioned the organization at which the top performing salesperson three years running – a rockstar, a hero, a veritable god – was found to be wholly negative margin for his book of business?
Perhaps I’m being unfair; deliberately contrary to make a point. Revenue could be a starting point – it’s wage table in the analogy above. But don’t stop there. Build a comparison “league table” of margin performance – and use it to identify the rockstars.
The next step is to understand why someone ranked at 13 in revenue is in the top three for margin. Can it just be territory, or end-use industry? Ask them! Do they even know how good they are?
Intertwined with this line of reasoning is whether and how salespeople are given access to margin information. Historically they weren’t, but we’re seeing that change now. And if even if there’s organizational pressure to maintain that screen, there are proxies for the actual number – a simple color-coding to steer people from the low-end products towards high-margin items with the same or adjacent form-fit-function for the customer. Still not keen? How about a straight-swap list: “instead of selling item A, please try to sell item B”.
None of this matters, unless it’s meaningful for the salesperson. As they themselves are fond of saying: they are coin-operated. It doesn’t have to be a fully-baked, complex new comp structure involving margin targets, stratified by history and normalized for product mix variation. I’ve talked to hundreds of companies about how they pay commercial teams, and the number one reason for not paying with at least an element of margin is quite disappointing; it’s that it’s difficult to do. Well of course it is! Everything worth doing always is!
Set up some visibility of the performance figures, perhaps introducing some healthy competition. And give a prize for the top of the league. You don’t need a comprehensive and sophisticated pricing tool like Vendavo to make improvements. If you’re not at that stage yet, feel free to give me a call and I’ll give you some free advice.
I hope to hear from you; it will help pass the time until the start of the new premier league season. I wonder who West Ham will have on opening day…