Do Something!

August 1, 2008

Pharmaceutical Executive

Volume 0, Issue 0

Seven steps you never knew that could fix the sales force

"Don't Just Stand There, Do Something," has long been an axiom of American business, especially within the vitally active sales functions. Pharmaceutical companies have too much riding on the success of their sales efforts to become victims of the inactivity trap. A growing number of companies are looking beyond the performance charts to the underlying drivers of performance and then building an action plan based on disciplined analysis.

After all, what sales executive inside or outside pharmaceuticals hasn't puzzled over sales performance charts trying to divine a formula for raising revenue yield per sales rep? When it comes to raising overall performance, several stock answers come to mind: providing general sales training, having in place a robust on-boarding process, mentoring new hires, providing necessary resources, and so on. But how well do these techniques really work?

The chart below depicts the performance of the 100-person North American sales force of a global pharmaceutical company with yearly revenue just over $377 million. Sales reps in the top quartile posted average sales of over $5.5 million annually, compared to slightly over $2 million for the bottom-quartile performers. That's a fairly wide range. What accounts for such a variance in performance? What distinguishes the stars from the underachievers?

Looking at the performance curve raises several other questions. For one: How can a company increase the performance of every one of its sales reps? We know that a rising tide raises all boats. What "rising-tide" actions can be taken to raise performance across the board and within each of these quartiles?

In 20 years of research on driving up individual and company performance, Metrus Group has developed seven less obvious, more cost-effective recommendations for putting a company's sales force on that upward trajectory.

1. Set a Sales Strategy and Stick with It

If you examine what passes for sales strategy at most companies, you'll find that in many cases it's nothing more than a collection of time-and-territory management tactics. That's a big problem, because the last thing you want for a sales force headed in the wrong direction is for it to get there more efficiently.

Sales strategy begins with identifying the market, segmenting it, and deciding which segments are high priority. It includes deciding which products/services you will (and will not) offer each segment. It also requires identification and planning to develop the core competencies required to implement the strategy.

Sales strategies typically fail because they don't zone off what sales reps should not target. When William Crouse became CEO of Ortho Diagnostics Systems in the early 1990s, one of his biggest challenges was "deciding what we would not do and then sticking to it." He found that it was easy for sales reps to justify calling on a 200-bed hospital in the neighborhood, while avoiding the more difficult call on a 500-bed hospital that had been targeted. Crouse observes, "It's hard for salespeople to give up easy victories, even when they know those are not part of the sales strategy."

Difficult as it may be, setting a sales strategy, communicating it fully, and requiring reps to stick to it constitutes the bedrock for successful sales operations.

2. Reality-Test with Customers

Before setting sales strategy in stone, healthcare companies should head for the marketplace to test their customers' assumptions. Market research is a must, yet while many healthcare organizations conduct market research, they often fail to focus on customers' perceptions of the sales relationship. One East Coast physician expressed his frustration thus: "I don't understand why sales reps cannot get my concerns back to their marketing or management leaders."

One of the richest sources of information about customers' needs is sales reps, who, after all, are more likely to get up close with customers than are those who occupy the executive suite. In focus groups conducted for major pharmaceutical companies, Metrus has heard many comments such as this one from a Los Angeles sales rep: "I just listen to what they try to push down on us from above, and then I do everything I can to ignore it and deliver what the customer wants. I have the top sales numbers in my region."

However, Michael Burgett, former US vice president of operations for QIAGEN Sciences and former vice president and general manager of Ortho's Blood Bank business unit, cautions that overpromising or misinterpreting data can lead to disaster. "Ask yourself if your sales force is aligned with your customers and therefore committing your organization to the most important deliverables," he recommends

One caveat: When looking at data, ask whether or not reps' comments "mirror" those of customers. Members of the sales force are representatives of the brand—they influence service perceptions and play a major role in building relationships. One of the first tests of whether a sales strategy will be successful is how well aligned sales reps are with customers' needs.

3. Focus on Key Performance Drivers

Attempting to raise the performance of your entire sales force is an admirable but costly goal. Unless you're blessed with deep pockets, it's wiser to focus on managing and leveraging the current performance curve for greater sales growth. In every sales group, individual performance varies. Some of the reasons are obvious, as when performance varies by different products or territories, across different demographic groups, or in reps with shorter tenure or less experience. Some less obvious drivers of sales performance are related to "People Equity."

Research has demonstrated, over and over again, that star performers have a high degree of People Equity. That is, they possess three key performance drivers:

» They are in Alignment with the overall sales strategy.

» They possess the Capabilities—the knowledge, skills, information, and resources—that customers need and expect.

» They have a high degree of Engagement with their job, their function, and the company as a whole.

Strategic alignment is crucial in optimizing performance. Misalignment leads to higher costs and customer dissatisfaction. For example, one Metrus study found that by aligning company and sales strategy with sales reps' skills, process, and speed of execution, customer defections were cut in half and productivity increased dramatically. Being aligned freed up 25 percent of reps' time, allowing them to call on more target customers, use customer time more wisely, and conduct more effective follow-up calls.

Capabilities include not only the ability to close a sale, but the ability to access information and resources when the customer wants them. Pharmaceutical reps who possess good sales skills but lack the information that doctors want will fail at the moment of truth. Capabilities must all come together at the right time.

Henry Cohen, senior vice president of human resources for Orasure Technologies and former executive with Johnson & Johnson, looks for sales reps who have "a need to work and win, in addition to their strong capabilities." This is engagement—the vital energy that salespeople bring to the equation. Engaged employees are not quietly satisfied with their job; they think and act like ambassadors for the organizations they work for, expressing their enthusiasm to colleagues, customers, and anyone else who will listen.

A gap in alignment usually means "working hard" instead of "working smart." One VP of sales for an Asia-headquartered pharma says, "We always find time to redo things that haven't been done right the first time, but it's costly." At a time when many pharmaceuticals have restructured and made their sales forces leaner, the alignment dimension is absolutely critical.

Gaps in capabilities usually lead to market damage. Customers may detect these gaps, and such customers become low-hanging fruit for competitors. The degree to which sales reps are—or are not—informed and skilled has a profound effect because they represent the organization on multiple fronts: product knowledge, service, problem-solving, and information assistance.

Gaps in engagement can lead to lower productivity and higher levels of employee and customer turnover. According to Henry Cohen, "Sales managers must be monitors of engagement—they need to monitor disconnects, eliminate the underlying causes, and take action."

4. Address the Right Root Causes

Each of these performance drivers can propel or inhibit important business outcomes. By pinpointing the gaps in each sales dimension, it's possible to focus resources in that area: it is usually best to target the area in which scores are lowest as a starting point for improvement.

The key to eliminating problems is identifying the root cause(s) of low alignment, capabilities, or engagement. For example, frequent causes of low alignment are fuzzy goals, poor understanding of company or functional strategy, poor or no feedback on performance, lack of coaching, and misaligned values or rewards. In the area of capabilities, gaps are more often due to selection or training issues. And when it comes to engagement, a rep's immediate manager often causes him or her to disengage by failing to communicate, show respect and trust, or recognize the rep's accomplishments.

Linkage analysis, which statistically connects results with drivers, enables us to understand whether it's more important to improve coaching or training, rewards or recognition, communication of product priorities or communication with customers in order to bridge the gap in one of the ACE areas. For example, using linkage analysis, a key sales organization within GlaxoSmithKline found that three employee drivers were the largest contributors to growing market share: the immediate sales manager, employee engagement, and sales skills or capabilities. In terms of the sales managers, three activities proved to be major differentiators of high versus low market share within the geographies they operated: conveying company direction, helping reps build the right skills, and willingness to listen to reps (a key correlate of engagement). When the importance of the sales manager driver was recognized, manager training in the identified areas was actually increased despite major cuts in several other programs.

5. Keep the Best, Lose the Rest

At a recent speech, when audience members asked Richard Romer, former executive vice president of Sales for CIT Group, about the insights from his stellar career, he lamented the time he had wasted on poor performers. "They draw way too much of your time away from your top performers," explained Romer.

Smart executives know the importance of weeding out underperformers. In any sales force, there are likely to be sales growth opportunities in which the top quartile can grow revenue by 20 percent, while the lowest quartile will probably only be able to grow it by 5 percent, even after considerable exertion. As William Crouse, managing director of HealthCare Ventures, LLC and former leader of major healthcare businesses for Johnson & Johnson observes, "It has always been my philosophy to pare away the bottom quartile. If they are still around, management is not doing its job."

But getting rid of poor performers is just half of the equation. The real challenge is keeping your best people. One of the biggest killers of overall sales performance is the loss of top-quartile performers. The impact of such turnover can be demonstrated by taking another look at the 100-person sales organization profiled in Figure 1. If that organization lost one-fifth, or 20, of its reps annually, the company would probably lose more top performers than poor performers (since the latter generally have fewer options, and as a result stay put). If that company lost just five reps in each of the top two performance quartiles, that would put approximately $47 million in revenue at risk.

Average Annual Sales Performance per Pharmaceutical Rep

Why do top performers depart? One of the major weaknesses Metrus Group uncovered in research on sales force turnover is a lack of objective data on the causes of top performer departures. However, Allen Weisberg, former chief learning officer for Johnson & Johnson and vice president at Ethicon, has a theory: "One of the biggest factors is that many of the reps didn't know they were doing well. No one had bothered to tell them."

Organizations that are serious about preventing such losses employ a disciplined approach to identifying root causes. For starters, they do not trust the data from exit interviews. Most departing employees play it safe during exit interviews—better not to burn a bridge or risk a bad reference. Rarely do they cite bad supervisors, skill gaps, stress, product problems, or lack of recognition. Not surprisingly, 50 percent of the data from exit interviews turns out to be invalid.

To probe the real reasons for departure, it's often better to wait until former employees have settled into new jobs, and have an objective third party interview them. They're more likely to express greater candor and sharper insights. The interviewer may also discover that what the employee got was less than was promised. Many good reps have revealed that while the pay or benefits are better in the new job, they lost something else of importance—such as great technical support, a values-driven culture, or access to training. This is critical information that allows employers to place special emphasis on factors that may be undervalued and underpromoted, but are core strengths of a company.

6. Be Proactive

Smart organizations don't wait until their high performers are weighing a better deal. They take a proactive approach to retaining talent, identifying their best and assessing the risk of losing them. The most effective tool to carry out this proactive analysis is a "Sales-Force Productivity and Retention Survey," coupled with in-depth interviews or focus groups. These instruments allow management to identify the factors that are driving sale reps away, as well as the ones that cause them to stay with the organization.

When coupled with the findings from former employees and analyzed by performance levels, this process can identify retention (and productivity) risk factors. Finally, by pairing this data with a cost-benefit analysis, it is possible to make decisions on where and how to invest in staff.

After conducting such an analysis, one global pharmaceutical company discovered that neither of these factors had a significant impact on its staff; rather, departures were being fueled by a regional leadership problem, a product-breadth issue, and a training gap.

By integrating hiring and training costs, productivity, and customer impact into a cost model, the company averted a $2.3 million revenue loss. Approximately $250,000 was invested in fixes to training and product-knowledge issues, increasing the likelihood that both current employees and future hires would remain on board.

7. Rehire Top Performers

One of the practices seen among leaders in the healthcare arena is tracking their former stars' careers and, in many cases, enticing them to come back to the company. It may take some pride-swallowing, but smart sales executives recognize that reps often learn by doing—including doing something for someone else.

With little to lose and lots to gain, it may prove worthwhile to initiate a conversation. Former employees sometimes confess that they've found the grass not greener across the street, and may miss aspects of their former job. By opening that door, a company can reclaim reps who are already trained and knowledgeable, and who can contribute from day one.

William A. Schiemann is CEO and founder of Metrus Group (www.metrus.com), and co-author of Bullseye! Hitting Your Strategic Targets Through High Impact Measurement. He can be reached at wschiemann@metrus.com.