Pat’s Blog

“Don’t hire a person for what they can’t do; hire them for what they can do.” — Peter Drucker

I’ve been traveling a lot recently and it still surprises me how low performance standards seem to have dropped. Companies with an average production of 3 or 4 units a month per sales person is becoming the norm. When you dig deeper, the picture is even worse because on average, a significant amount of the production is done by the top 20 percent of producers. This means in reality, the average production is much less than the 3 or 4 units.

The big question facing managers then becomes, “Is it better to have a high number of sales people doing small numbers or a smaller number of sales people who can actually sell? In my opinion, the latter option is a smarter, more efficient way to go. It is less expensive dollar-wise especially when you take into account the high turnover costs and lost sales opportunities that come with hiring individuals not matched for the position.

“An organization can only perform to the capacity of its individual workers; thus, people decisions must be right.” — Peter Drucker

In our industry, one of the most common mistakes I see — at companies of all sizes — is management investing substantial resources in transforming C players into A players. This is a strategy that is doomed to fail. Why? Just as there are natural “athletes” in the world, there are also people who possess natural sales ability. Natural sales talent consists of specific innate personality characteristics formed early in life and you either have them or you don’t.

A 16-month longitudinal study examined the performance gap between A players and C players and concluded that no amount of knowledge, training, time or experience will enable an individual without sales talent to perform at the same level as someone with sales success character traits.

The smarter strategy for managers? Hire candidates who have the personality traits that correlate to sales success.

“If we didn’t spend four hours on placing a man and placing him right, we’d spend 400 hours on cleaning up after our mistake.” — Peter Drucker

Managers today have a choice: Hire smart or manage tough. What this means is that it is worth the effort to spend time upfront to select the right sales candidate than to hire the wrong person and spend countless hours trying to transform a C player into an A player. By making better hiring choices from the beginning, managers can get twice the sales performance from their sales teams.

Think about your most recent hiring decisions. Are your hiring smart or managing tough?

“Make decisions on people — selection, placement and evaluation — your top priority.” — Peter Drucker

In my recent travels, one issue I have noticed is companies that did not “right-size” because of last year’s hot market are just now coming to grips with the fact that 2010 will be challenging. One Top Ten lender is faced with a 50 percent reduction of sales staff. It is interesting how companies have not been more aggressive in their planning. In my view, the paradigm for the financial industry has already shifted to a “less is more” mentality. Executives are challenged to get more from better and fewer people.

Similar to sports teams who must determine if they have the right combination to compete for a Super Bowl or World Series, culling the talent pool will be a frequent activity for sales managers. What is the sales talent make-up of your current team? Do you have the sales talent in place to ensure that your team is a winner?

“Set objectives for attracting and retaining the best people, including goals for performance standards and employee attitudes and skills.” — Peter Drucker

One of the trends I’m seeing now is that top producers —A players — are staying with their current employers longer. That means that the available hiring pool is made up of more salespeople who are performing at a lower level. Fortunately, there are several steps managers can take to ensure they’re hiring better quality sales candidates:

1. Have a system in place to objectively determine whether candidates possess sales talent.
2. Increase the number of interviews you conduct. In the past, managers might have interviewed 10 people for an opening. Now, it may take 50 interviews to find the right sales talent.
3. Look for sales talent on a continuous basis vs. hiring sporadically

“People decisions are the ultimate — perhaps the only — control of an organization. People determine the performance capacity of an organization.” — Peter Drucker

Hiring the right sales person is undoubtedly a manager’s most important task. No other decision has a greater impact on a company’s current and future success. Yet, many managers put more time and effort into preparing for a sales call than preparing for an interview with a sales candidate.

What does your company’s hiring process look like? Is it systematic and standardized? Are you looking beyond prior production for candidates who possess the innate personality traits needed to succeed in consultative sales?

“There is only one valid definition of business purpose: to create a customer.” — Peter Drucker

Last week, I heard economist Doug Duncan speak on housing finance and the current marketplace. He believes that the “national financial crisis is over and like previous financial crises, this one has shifted from a national problem to a regionally-driven event.” Duncan said that there are currently 5 million loans that are 90-day delinquent or in foreclosure with 50% of the delinquency coming from the four “sand” states. He said that full recovery is 24 to 36 months out but that most states (with the exception of the “sand” states) will recover sooner.

It does appear that we have hit bottom which means the only way to go from here is up. While no one can predict the future, one thing is clear: Conducting business as usual is not going to cut it in a post-crisis market. Now is the time to take a good look at your sales processes. What’s working? What isn’t? Are you creating customer value with every sales activity? If not, it’s time to re-evaluate what activities matter most.

Important Update: We have just launched a new one-day training class, How to Interview for Integrity in Sales Reps. If you are interested in obtaining the agenda, just send me an email.

“Precisely because change is a constant, the foundations have to be extra strong.” — Peter Drucker

At a recent speaking engagement, I had two very different conversations that illustrate a growing problem in our industry: lowering our standards of excellence. One firm I spoke with said their average production per loan officer was $1 million which they felt was “pretty good” considering current marketplace conditions. Another company I spoke with averages $20 million per loan officer. When companies lower their standards and “settle for less,” the result is a mediocre sales culture. A tougher selling environment like the one we’re experiencing demands higher performance not lower to ensure success.

“`What is value to the customer?’ may be the most important question, yet the one least often asked.” — Peter Drucker

In my opinion, the most successful financial firms view sales as a process and have adopted a systematic approach to improvement. The first step in any process improvement is to identify how the customer defines value. The reason? The customer’s definition of value changes frequently. What was important yesterday may not be important today. Any potential process change must be held against the litmus test of “What does it mean to the customer?” Will the “improvement” make the customer’s life easier or harder?

“In an ecology, the ‘whole” has to be seen and understood and the ‘parts’ exist only in contemplation of the whole.” — Peter Drucker

When traveling for my consulting business, too often, I see financial firms still using the standard measurement of volume and units to evaluate results. This approach may have been fine 20 years ago, but it is not effective now. Volume and units are short-term measurements which is like looking at a daily stock price of a company which doesn’t really tell you the company’s value and long-term prospects.
Granted, volume and units are easy to deal with but the truth is that calculating profitability is more involved than merely looking at volume. Any sales process approach should be rooted in data to provide the context, in which a sales force gets information, discusses problems, makes their decisions and takes action. Any data collection should be anchored on understanding the parts of the process and how they interact. Parts of the process can be simplified into activities that the sales people perform and the decisions they make and the actions that the customer takes or declines to take.