Why everything you ever thought about commissions and the things that motivate salespeople to perform is probably wrong.
Sales Management by Joe Capillo
If the article “The Cost Of Not Managing Sales Performance” in the March/April issue of FURNITURE WORLD Magazine didn’t make you think about where the real opportunities for more sales and more profits are, then consider this: Sales managers in furniture stores usually have many different kinds of jobs all at once. There’s the “technician” job where they handle all the computer issues, make sure all the orders are written and entered correctly, fix any problems, handle incoming phone calls from customers with service or delivery issues, makes sure all the price tags are prepared and attached to everything, answer endless questions from salespeople and others in the company, deal with the warehouse and delivery people, deal with countless manufacturers’ reps, and do anything else except the one thing they really should be doing. That is, leading, directing and conducting business on the sales floor where your salespeople meet all your customers and, for traditional furniture stores, generate all their sales revenue.
Make no mistake about my position; sales management is performance management. It’s about doing the right things with every customer, every time to ensure that customer problems are solved and every sale that can be closed is closed. Nothing else matters as much to the success of your store, your employees, or your customers.
Performance management means coaching in-the-game, and that is the core idea of this article. David McMahon wrote a terrific article in the last issue on how to ensure your break-even point is as low as it can be given your level of sales revenue. Once the cost side of your business is under control, you need to make sure your revenue is as high as it can and should be. The surprising reality is, if you are like most furniture retailers, you don’t need any more customers, any more advertising, or any greater selection of products to achieve this. You just need better performance from your salespeople. But you will not achieve it without performance management.
Mediocrity is carefully, if unintentionally, cultivated in many stores. Setting minimum performance standards is one example of a deceptively appealing activity that many stores use to ensure that revenue is at least at break-even levels to ensure that no losses are incurred. The consequence is, of course, that now no profits are generated either. The problem with this is the unproven belief that minimum standards of performance will motivate salespeople to perform better. This is the same thinking that lies behind the belief that commission compensation plans motivate people to perform better. I have seen no evidence that this is true. In fact, the thinking that money is a motivator is patently false and wrong at every level.
Money is not a motivator, but it surely is a de-motivator. Don’t believe this? Then think about this: does paying people more make them smarter? When you give someone a raise in pay, do they think you’re rewarding them or merely finally paying them what you always should have been paying them? Just watch what happens to attitudes when commissions don’t match expectations, when people can’t pay their bills, afford vacations, or save money.
Watch people’s demeanor crash when your minimum performance standards don’t come close to getting them to their goals and needs for money. If commissions are a motivator, how come everyone doesn’t perform at the level of the best performers? It’s because they don’t know how. They don’t have certain important skills that the top people have. They don’t do the right things consistently. One completely ridiculous view of commission compensation programs is that “if they don’t sell, it doesn’t cost me anything.” How does that thinking stack up against the lost opportunity figures we showed you in the last article?
You have to control and improve three factors in the selling equation: the number and quality of opportunities (customers), your conversion ratio (close rate), and your average sale. Salespeople and managers should be doing something every day to maximize and improve each of these three factors. Any selling training that doesn’t specifically target at least one of these three factors is off base. I exclude product knowledge from this because it is so fundamental to performance as to be a given requirement, and one common characteristic of top performing people is great product knowledge. They know their “stuff.”
It’s the people part of selling where the weakness lies – in simple human interactions. It’s how you approach, greet, and welcome people, how you touch them personally, and how you respond to their natural reticence to interact with salespeople and to intelligent, warm, personal, and customer-focused interactions. You can’t close a sale you don’t open. I believe we don’t lose as many sales because our salespeople can’t close, as we do because they can’t effectively open the customer and deal with their real issues.
Sales managers should be charged with bringing people to their own goals, leaving “minimums” in the dust. Yes, it’s a one-to-one coaching job – just as selling in our business is a one-to-one issue. OK, maybe it’s a one-to-two issue when dealing with couples, but the point is that it’s personal. But, to be a sales performance coach you have to have all the right measures of success at your fingertips. There is a maxim in scientific study which states that what is not measured, cannot be changed. Then there’s this: what’s the point of knowing all the metrics if you don’t use them to help people do better? Baseball teams do it. Golfers do it. Football teams do it – and they all have managers and coaches to ensure it gets done. How many different specialty coaches does the average NFL or MLB team have? What do you think would happen if they fired all the coaches and the head coach or manager spent every game in his office making sure the transportation to the next game was in order, or that all the equipment is where it needs to be? How do you think players improve, or overcome performance issues? They get coaching, that’s how.
I’ve seen too many companies use minimum standards of performance, disciplinary action, and warning notices to, allegedly, drive performance when what’s really needed is help. Poor performing salespeople don’t need disciplinary actions or warnings, they need help, and they need coaching. To coach you have to have a game plan, a strategy, a plan, just like sports teams have, so people can know what is expected of them in terms of behaviors and actions they need to take to get there. You have to tie it to their compensation - to their personal goals for earnings and achievement. That’s how professionals are managed and coached. And if you don’t think of your salespeople as professionals, then the way you think about the problem, is the problem.
It’s about time coaching became a real imperative in the retail furniture business among owners and managers instead of just among consultants and trainers.