On an average, people with profiles on the revenue side of the organization have more importance within the system than others. Simple rule is the more revenue the department brings into the system, the more its relative importance.
But the next question comes to mind is whether Revenue contribution is equal to performance and should employees be evaluated or promoted based on their revenue contribution or Performance.
One cannot rule out the possibility that certain profiles have an inherent advantage in contributing growth as well as revenue to their organization, primarily due to external circumstances (industry growth, city, policy change etc) rather than the talent of those employees. So, if revenue led promotion is the norm which according to me is in most cases, than talent assessment itself is a myth.
Partly the reason for Revenue Led promotion is the norm is due to the extremely difficult nature of measuring performance. For e.g., unless the understanding and application of Statistical Variation (special and common causes) is not there, one cannot judge two salespersons in different markets/regions based on revenue contribution and pass a decision on their performance without factoring things such as client base, purchasing power of clients, etc. etc.
So is there a way out and more importantly what is Performance. I have come across the closest definition of performance proposed by the legendary cybernetician – Stafford Beer. The explanation in terms of ratios is as below
ACTUALITY/CAPABILITY = PRODUCTIVITY
CAPABILITY/POTENTIALITY = LATENCY
PRODUCTIVITY*LATENCY=PERFORMANCE
(Note: 1) Capability stands for given the constraints, what is the ability of the system?
2) Potentiality stands for, if certain processes/constraints are addressed, what would be the ability of the system? )
The closer the answer for performance is to 1 the more effective the individual, department is.
I admit the fact that determining the capability, potentiality is a itself a complicated task, but the above ratios gives us a framework to measure performance and have a fair evaluation for individual/departments.(as sated above, statistical variation can be good start for measuring sales performance across regions and determining capability)
Perhaps than talent assessment and Performance Measurement systems would lead to a fairer performance led growth.
Monday, June 9, 2008
Sunday, May 25, 2008
Absolute Surety And Sales
Carlos Castaneda has beautifully described that every individual who seeks knowledge has to approach it as a warrior. He mentions 4 conditions that have to be satisfied for the same viz.
1) High Alertness
2) Fear
3) Respect
4) Absolute surety
The interesting point to notice is the 4th point which mentions that if an individual does not believe, he is going to win, he/she will surely loose. One cannot have the time to entertain thoughts of loss et al when you are in the firing zone.
The question is, do all the conditionalities mentioned above apply while approaching Sales Targets? To a large extent, my answer is Yes. There has to be alertness to Sales opportunities, Fear of no knowing where it’s going to come from, Respect – Well not sure how this applies, But definitely, without the belief and surety that Sales targets are going to be met, it is difficult to consistently meet expectations (The role of target setting and shaping of belief/surety can be debated but perhaps in a later blog)
1) High Alertness
2) Fear
3) Respect
4) Absolute surety
The interesting point to notice is the 4th point which mentions that if an individual does not believe, he is going to win, he/she will surely loose. One cannot have the time to entertain thoughts of loss et al when you are in the firing zone.
The question is, do all the conditionalities mentioned above apply while approaching Sales Targets? To a large extent, my answer is Yes. There has to be alertness to Sales opportunities, Fear of no knowing where it’s going to come from, Respect – Well not sure how this applies, But definitely, without the belief and surety that Sales targets are going to be met, it is difficult to consistently meet expectations (The role of target setting and shaping of belief/surety can be debated but perhaps in a later blog)
Saturday, April 26, 2008
On Models Reality and Models
Since any business is too complex to comprehend, each and every employee has a model of the realities of business in his head. Most conflicts or solutions are a clash or agreement of the models we hold.
I believe there are two broad ways every manager comes to a decision of the model he holds.
The first types are those who bring their personalities, values, taste, background etc into the model of the business they operate in. This model in their head bears their imprint very sharply. Typically these managers would keep harping the same point and same solutions as they face their day to day difficulties. E.g. I come across sales managers saying we need to increase pressure if sales are not happening. The model here being that pressure is everything and there can be no other complexities of the business that can be addressed.
The second types are those who wrestle with the realities and likewise go through the stage of developing, modifying re-developing and solidifying the models in their head. Their model factors the realities faced on ground and role of their belief system is to a large extent minimized in the formation of the model. The second type acknowledges that there is more to business than what meets the eye and hence would bring the same out in the open.
My take is that the second approach has a capacity to deal and hence direct energies in more productive manner bearing better results. In the first case, the manager can impinge on the solutions without the critical issue being taken care of.
I believe there are two broad ways every manager comes to a decision of the model he holds.
The first types are those who bring their personalities, values, taste, background etc into the model of the business they operate in. This model in their head bears their imprint very sharply. Typically these managers would keep harping the same point and same solutions as they face their day to day difficulties. E.g. I come across sales managers saying we need to increase pressure if sales are not happening. The model here being that pressure is everything and there can be no other complexities of the business that can be addressed.
The second types are those who wrestle with the realities and likewise go through the stage of developing, modifying re-developing and solidifying the models in their head. Their model factors the realities faced on ground and role of their belief system is to a large extent minimized in the formation of the model. The second type acknowledges that there is more to business than what meets the eye and hence would bring the same out in the open.
My take is that the second approach has a capacity to deal and hence direct energies in more productive manner bearing better results. In the first case, the manager can impinge on the solutions without the critical issue being taken care of.
Sunday, February 17, 2008
SALARY TRAP AND ATTRITION
In every organization, revenue is generated by the most frontline Sales staff. Hence these soldiers of organizations are subjected to more stress and accountability than any other personnel’s in the entire organization. A level up and everything is an exercise in creative vocabulary. (Except in cases where managerial talent is well rounded)
In a recent article I read in economic time, it was mentioned that 90% of financial jobs are comprised of Sales function. We also see a very high attrition amongst the same group. Since demand exceeds supply for these jobs in financial sector, there has been an explosion in salary offered to the sales employees.
Here comes the interesting part. Being revenue generators, every sales staff has not only to justify his salary but also justify the salary of his seniors and higher ups. With rising salaries, there has been an exponential increase in targets set for this group. My take on retail sales is that there are limitations in the extent of target that can be achieved since the there is hardly any scope for innovation in sales function. It is an exercise in discipline rather than mental agility (such as creating new channels or product innovations leading to windfall earnings). The job of a frontline sales staff is to run and his running is limited by the time available to him. Since his targets are huge, he has to keep running till the time he is completely exhausted. Yet the salary offered is not justified. This leads to frustrations leading to these employees looking for change.
Of course the employee will change provide he gets a better package? Profile change is not that easy (90% jobs comprised of sales). Organisations are left with little choice but offer higher salaries or else struggle to cope with lack of personnel’s. Which means the cycle of higher salaries and proportionate targets for the personnel is again reinforced leading to same events being repeated. It appears a never ending cycle till industry stabilizes.
In a recent article I read in economic time, it was mentioned that 90% of financial jobs are comprised of Sales function. We also see a very high attrition amongst the same group. Since demand exceeds supply for these jobs in financial sector, there has been an explosion in salary offered to the sales employees.
Here comes the interesting part. Being revenue generators, every sales staff has not only to justify his salary but also justify the salary of his seniors and higher ups. With rising salaries, there has been an exponential increase in targets set for this group. My take on retail sales is that there are limitations in the extent of target that can be achieved since the there is hardly any scope for innovation in sales function. It is an exercise in discipline rather than mental agility (such as creating new channels or product innovations leading to windfall earnings). The job of a frontline sales staff is to run and his running is limited by the time available to him. Since his targets are huge, he has to keep running till the time he is completely exhausted. Yet the salary offered is not justified. This leads to frustrations leading to these employees looking for change.
Of course the employee will change provide he gets a better package? Profile change is not that easy (90% jobs comprised of sales). Organisations are left with little choice but offer higher salaries or else struggle to cope with lack of personnel’s. Which means the cycle of higher salaries and proportionate targets for the personnel is again reinforced leading to same events being repeated. It appears a never ending cycle till industry stabilizes.
Sunday, December 16, 2007
Evolving nature of financial sales
I have observed that selling retail financial services is getting tougher with the passage of time.
My feel is the way in which financial industry has evolved has led to these difficulties
On one hand the sheer number of financial companies with their equally larger product/services offering has made this industry highly competitive.
On the other, customers are more savvy about the choices available to them. They are also wary about the financial salesmen showing them the moon and delivering very little on them. Hence customers go with the assumption that the salesman is lying until proven otherwise, keeping other factors in check for the moment.
From a sales personnel’s point of view, the sheer pressure from top management to sell leaves them no option but to promise stars and hope the customer falls in the trap.
Since customers have become very choosy, the only option left for them is to keep meeting more and more client with the objective that a larger sample size would help them in achieving their targets.
Now for every financial company, the effort to reward ratio (for salesman) would vary based on brand image, size, sector etc. Hence an ICICI would be a lot easier to sell than a DCB product.
So for every salesman, his sample size for achieving his targets would vary based on above parameters. E.g. Keeping things same (sales skill, target audience etc), An LIC salesman would have to meet 10 customers to achieve 1 closure, The salesman from Bharati AXA would have to meet 30 customers for achieving the same.
Hence it is important for each prospective employee to know the effort to reward ratio of the company he is joining. After all just as he would promise the stars, the company might just be doing the same to him at the time of joining.
My feel is the way in which financial industry has evolved has led to these difficulties
On one hand the sheer number of financial companies with their equally larger product/services offering has made this industry highly competitive.
On the other, customers are more savvy about the choices available to them. They are also wary about the financial salesmen showing them the moon and delivering very little on them. Hence customers go with the assumption that the salesman is lying until proven otherwise, keeping other factors in check for the moment.
From a sales personnel’s point of view, the sheer pressure from top management to sell leaves them no option but to promise stars and hope the customer falls in the trap.
Since customers have become very choosy, the only option left for them is to keep meeting more and more client with the objective that a larger sample size would help them in achieving their targets.
Now for every financial company, the effort to reward ratio (for salesman) would vary based on brand image, size, sector etc. Hence an ICICI would be a lot easier to sell than a DCB product.
So for every salesman, his sample size for achieving his targets would vary based on above parameters. E.g. Keeping things same (sales skill, target audience etc), An LIC salesman would have to meet 10 customers to achieve 1 closure, The salesman from Bharati AXA would have to meet 30 customers for achieving the same.
Hence it is important for each prospective employee to know the effort to reward ratio of the company he is joining. After all just as he would promise the stars, the company might just be doing the same to him at the time of joining.
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