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A Sales 2.0 Conference Q&A with Andy Zoltners

AndyZoltners_75x100At the recent Sales 2.0 Conference in San Francisco, Selling Power caught up with Andris (Andy) Zoltners, who was there to present “A Top 10: Insights that Lead to Sales Success.” In addition to being one of the founding directors of ZS Associates, Zoltners is a Frederic Esser Nemmers Distinguished Professor Emeritus of Marketing at the Kellogg School of Management at Northwestern University. He has personally consulted for more than 200 companies around the world and taught thousands of executive, MBA, and PhD students about sales force strategy; sales force size, structure, and deployment; sales force compensation; and total sales force effectiveness. For more insight based on ZS Associates’s research and expertise, download the first chapter of Building a Winning Sales Management Team, by Zoltners and coauthors Prabhakant Sinha and Sally E. Lorimer. (Note: This interview has been edited for style and clarity.)

Selling Power Editors (SP): At the Sales 2.0 Conference, you said there’s not a sales force in the world that doesn’t have topline revenue opportunity of at least 5 to 10 percent. How can companies tap into that?

Zoltners: First, they have to find where the opportunity exists. That’s different in every sales organization. You have to look at the drivers of success. You have to hire the right people, train them, and manage performance. You have to size and organize the sales force, get the right compensation plan in place, and align territories. The problem for most companies isn’t that opportunity doesn’t exist, it’s that they’re sometimes reluctant to do the things necessary to take advantage of it.

SP: Like what, for example?

Zoltners: This goes back to one of the questions I asked the audience: would you rather have a stable sales force or an adaptive sales force? With an adaptive sales force, I would come in and say, “We’re going to change account responsibility.” Will they ask salespeople to adapt? Are they open? 

SP: So you’re saying the culture has to be open to change. 

Zoltners: Yes. But the other side of this is that management has to make intelligent changes. Eighty-five percent of sales forces have changed their sales-comp plan in the last year. What does that tell you? Getting it right can be a struggle.

SP: Why is that?

Zoltners: Well, [ZS cofounder] Prabha Sinha, Sally Lorimer, and I wrote a book about this years ago [The Complete Guide to Sales Force Incentive Compensation: How to Design and Implement Plans That Work].  But it’s a big book, and some people have told us you need a PhD to read it. (Laughs.) [Incentive pay] is complicated. But if you want to design and implement a plan that really works, you need to get this right, and you need to have alignment among the entire organization. For example, if you have an aggressive finance team that sets unrealistic numbers, that’s going to reduce the effectiveness of your comp plan.

SP: You mentioned during your presentation that there is no magic number when it comes to setting quotas at the territory level. Why is that? 

Zoltners: Companies may set goals too high, too low, or they don’t allocate the numbers appropriately across the entire sales force. The secret is that the goal should not be a single number. A single number is too rigid. There should be a range.

SP: And why is that?

Zoltners: Flexibility. Think about it at an individual level: if a big account moves from Milwaukee to Atlanta, then the sales rep in Milwaukee is saying, “My VP of sales is telling me that 40 percent of my territory just went away, and he still wants me to make my number.” Meanwhile, the rep in the Atlanta territory gets free incentive money. If the goal number is meant to give reps something to strive for, then you’ve just made it meaningless.

SP: ZS Associates has been conducting research since 1983 on sales leadership. If you had to pick, which group is more important to a strong sales team, excellent reps or excellent managers?

Zoltners: You really need both, no question. The issue is that we’re generally more careful at selecting reps than [we are at selecting] managers. We see more training for reps, more coaching. It’s an issue of scale: if you have only five new managers, it’s difficult to put together a training course just for them. But an excellent manager is going to end up hiring excellent reps. That’s why the link between sales force productivity and the quality of frontline sales managers is so strong. Because the manager selects, develops, manages, and leads the team.

SP: What’s the definition of an excellent rep?

Zoltners: They know their products, [and] they have empathy for the customer. They execute the selling process well. To me, success in selling is not about the numbers or the hard metrics. It’s about the soft stuff – people. Revenue comes from people. Some of the best sales forces in the world haven’t had the best products. And some of the weakest sales forces I’ve seen have had great products. You might be making your numbers, but you have an average sales force.

SP: Can you elaborate?

Zoltners: Look at insurance companies. Many insurance companies make their numbers but have as much as 60 percent turnover among the sales force.

SP: Is turnover in this case a sign that there’s room for improvement?

Zoltners: High turnover is usually an indicator of a problem. In this case, existing salespeople do not share their accounts, and new people do not have enough opportunity to be successful.

SP: In your research, you’ve said that many companies tend to retain poor or under-performing managers for “too long." What constitutes "too long"?

Zoltners: One day is too long! Evaluate and replace sooner. 

SP: Sounds simple. Why is it so difficult?

Zoltners: Because they’re buddies. The company says, “He’s done so much for us. We should give him another chance.” They don’t want to make their valued employees sad.

SP: So what’s the solution?

Zoltners: You make ’em sad.

SP: What role does technology play in creating a successful sales culture?

Zoltners: I’m a meat and potatoes person. The precedent that sales can really sell better with all this technology needs to be established. You have to be smart about how you use technology. If you’re overzealous, it can end up costing you money.

SP: Would you say technology alone isn’t the answer? That it’s more about how people use technology?

Zoltners: It’s about getting the best people to engage in the right activities. You can’t ask for anything better than that.

For more insight based on ZS Associates’s research and expertise, download the first chapter of Building a Winning Sales Management Team, by Zoltners and coauthors Prabhakant Sinha and Sally E. Lorimer.

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