Up or Out: A Tactical Approach to Managing Sales Performance

The old “80/20 Rule” states that 80% of results come from the top 20% of our performers. Unfortunately this is also true when it comes to our sales force. What is also interesting is that too often the sales of the bottom 10% of a sales force do not cover the cost of their base pay, perks and benefit cost.  If this bottom 10% were playing professional baseball, they would be quickly released from the team. In pro sports, as in sales, it is all about what you have done for me lately. If the answer is, “not much” an established process to improve the sales reps performance must be consistently initiated. But remember to always start with the worst first and be consistent.  If the sales rep’s performance does not return to an established acceptable level in a predetermined period of time, this same documented process will be required to discharge the underperforming sales rep.

Managing a sales force is like “herding cats”. Top performing sales reps are high energy, high chargers, high maintenance and highly successful.  The poor performing sales reps are low energy, slow charging, high maintenance and seldom successful. These poor performers represent about 10% of a sales force but take up 90% of a sales manager’s time. Dealing with these people is drudgery. It is no fun confronting poor performers and their array of personal problems along with all the other excuses they have for not selling.

For this reason these performance people problems are continually pushed down our “things to do list” until the next thing we know we are telling ourselves we should have done something about them months ago. But the worst is yet to come and that is when the CEO starts asking questions. The best way to avoid hearing those dreaded words from the big boss, “why is this guy still here” is to simply have the right tools and a tactical approach to managing sales performance.

Sales Performance Expectations

To begin with sales performance expectations (sales activity and quota achievement) should be defined during the interview process and made part of the sales representative’s written and signed performance requirements along with their commission and compensation plan. This document should also be included as part of the new employee’s offer letter packet.

Corrective Action Guidelines for Sales Representatives

1. If a sales representative’s rolling month average falls below 80% of their quota, or he/she has two consecutive months of not achieving 80% of their quota, the manager should conduct a formal counseling session with a follow-up email or written memo to the employee that documents the verbal counseling.

At this point you may be asking why not 100% achievement of quota? In this example 80% was chosen to make the point that the optimum minimum threshold of performance should be based on a level that represents financial justification for keeping a sale representative employed. Not all sales people are created equal.  A few are capable of consistently performing at 100% of quota while most will consistently perform at a lesser yet acceptable level.  
Defining the minimum performance threshold is a simple process. After determining the cost of a sales rep to the company, add the minimum profit contribution you will accept to reach the minimum percent of quota a sales representative must sustain month to month to keep their job. Anything less is unacceptable.

2. If the sales rep does not make at least 80% of quota for the month following the Verbal Counseling, he/she should be placed on a Sales Performance Improvement Plan (PIP) which begins with a Written Warning.

3.  If an employee does not make 80% of quota for a 3rd consecutive month, further disciplinary action should be taken that will normally consist of a Final Written Warning.  Should the employee make no reasonable attempt to improve their sales performance the Manager may chose to discharge the employee any time during the PIP process.
Once an employee has been placed on a verbal warning or a PIP, they will not be removed from the warning until they have 3 consecutive months of at/above an 80% quota performance.

4. Once removed from a PIP, if an employee’s performance becomes unsatisfactory again, you should not go through each step to affect discipline, but you can intervene at a level appropriate for the situation.

Sales - Performance Improvement Plan

Our Sales Management team is committed to setting clear and specific performance goals and sales quotas, provide ongoing and meaningful feedback to help develop appropriate sales skills and to address performance issues on a timely basis.  In turn, we expect our sales representatives to meet and/or exceed their goals and sales quotas and to operate with the highest degree of integrity. Additionally, all sales representatives are expected to conduct themselves in a manner that contributes to an effective team sales philosophy of achieving maximum operational effectiveness, productivity, safety and a harmonious working environment. 

(Check one of the following levels of Performance Management)

___ Written Warning -
___ Final Written Warning

TO:  

FROM: 

DATE: 

RE: Recap of Sales Performance Management Discussion 

At our meeting on _____________________, we discussed your sales performance over the past __________________ months (include specific months) has been unsatisfactory in the following one or more areas (please check and provide a description for one or more of the following):

___ I. Sales Activity Level – As we have discussed during our one-on-one meetings, I am concerned about your level of sales activity.  The average number of customer contacts per day (____ number of contacts) is not up to the criteria for success set for your position.
Comments:

___ II. Number of Appointments – In the last month you have only been on _____ new appointments, which is well below the standard of _____ new appointments per day.  In addition, based on your __ /__ / 2010 Forecast, I do not see an acceptable improvement.
Comments:

___ III. Failure to meet quota - You have failed to meet your minimum monthly sales quota for the following month(s) of ________, __________, __________.
Comments:

IV. Other-

Based on my observations, I am placing you on a __written warning __Final Written Warning and want to see immediate positive improvements in the following areas:

1. Maintain an average of _____ calls per day.
2. Make _____ cold calls per day.
3. Set a minimum of _____ new appointments per day and/or an average of _____ per week.
4. Sell a minimum of $_______ for the months of ________, ________, ________.
5. Other:

We will meet weekly to review your compliance to these performance requirements and to determine if further corrective action is necessary.  A meeting to further discuss your performance will take place no later than, ___/ ___/ 2010 (indicate the date of the follow-up review; should be no later than 30 days from the date of this warning).  However, further discussion and corrective action may occur prior to that date if you do not take immediate corrective action. 

If you do not take immediate corrective action necessary to meet the performance requirements as described above, the next step in this Sales - Performance Management process will be:
___ Final Writing Warning (final step prier to discharge)
___  Discharge

Reinstatement of a Sales Performance Management Plan
Once you have met or exceeded the requirements of your monthly quota for three (3) consecutive months this document will be deemed inactive but will remain as part of your employment record. If at any time in the six (6) month period following your successful release form this plan you fall below your minimum monthly sales quota for two (2) consecutive months you will be placed back on a Sales Performance Management beginning at the second level with a Written Warning.

I believe that you have the talent and skills to be a valuable member of our team and I will assist you in any way possible to help you achieve the goal outlined above.

________________________________________
Sales Manager’s Signature           Date

I have received a copy of this notice, and understand the specific requirements explained above.

________________________________________  
Employee’s Signature Date

CC:
President/ CEO
VP Sales
Director of Human Resources

CONGRATULATIONS - Closure of Sales Performance Improvement Plan

To:  [NAME: EMPLOYEE]     CC: President/ CEO
VP Sales
         Director of HR
      
From: [NAME: MANAGER] 

Date: [DATE: DATE PRESENTING TO EMPLOYEE]
____________________________________________________________

Congratulations on your improved performance! You have met or exceeded your quota for the past three months.  As a result of your meeting and sustaining the specific objectives outlined in your Performance Improvement Plan, dated [DATE OF LAST PIP], I am removing you from Performance Improvement status, effective [DATE]. 

Your removal from Performance Improvement status is with the clear understanding that you will continue to meet or exceed the performance objectives outlined in the Performance Improvement Plan referenced above, other Company documents, or as stated by your manager. If, in the future, you fail to meet the acceptable performance levels, the Company may place you on an additional Performance Improvement Plan or apply additional corrective action, up to and including termination of employment.

I look forward to your continued progress and sustained quality work performance.

M. Jonathan Hackett has a BS in Business Administration from Christian Brothers University in Memphis Tennessee and MS from Auburn University. Hackett has five years experience in business to business sales and sales management.

By M. Jonathan Hackett Michael E. Hackett